Strategic alignment of a product portfolio

Having a plethora of software products or prototypes in the developer's portfolio is almost never an ideal condition. The situation can be a result of mergers & acquisitions or an outcome of project-based development.

A wide selection of non-coherent products drains resources. Each product needs a certain amount of support and development in order to be operational. Every product has a customer base that has expectations and requirements.

At some point the company has to decide how many and what products it wants to maintain. Making that decision product by product is possible, but it can lead you astray. The other way is to look at the product base as a portfolio and start to manage the portfolio.

The portfolio must be weighed against the strategy of the company. Some of the key questions when considering the strategic alignment are:

1. Which products are our target customers using?
2. How well does the portfolio reflect the future needs of our target customers?
3. What is the net cash flow from each product today?
4. Which products have most future potential in terms of growth and profitability?
5. Which products are clearly underperforming and why?

Laying out the actual portfolio requires a set of criteria for:

• Strategic alignment
• Financial performance
• User performance
• Technical performance
• Development effort
• Life cycle

The next step is to analyze the portfolio using the criteria. An exemplary analysis of two dimensions can be based on the strategic value and the financial performance (see image).



The analysis serves as a basis for decision-making. Examples of possible strategies:

• Strategic products: Maintain competitive edge; expand markets
• Potential products: Expand customer base; increase sales
• Cash generators: Use resellers; consider transferring the functionality to strategic products
• Problems: Find a buyer; discontinue

The implementation of the portfolio decisions can take time. It is advisable to define a life-cycle plan to each product in order to manage the necessary transitions.