Product mix or product portfolio is one of the important parameters impacting successful business transformation.
If you run a company that is facing a challenge to thrive in these difficult times, I would suggest that you please revisit your product portfolio in order to bring a quick turnaround.
Simply put, a profitable product portfolio is built on four pillars-
- Company’s definition of a new product.
- Portfolio project management technique employed.
- Product development pathway.
- Marketing & Sales processes ability to gain market share.
Note that the above four parameters are inter-dependent, meaning any change in one parameter will have a direct synchronistic impact on the other three, which in turn directly impacts revenue gains.
So, without further ado, let us delve into them one-by-one…
1. Company’s definition of a new product:
The meaning of ‘new’ product is different for different organizations. Even within the same industry sector, what comprises a new product is different for different companies. Therefore, to build a profitable product portfolio, it is vital that each company clearly mentions what comprises a ‘new’ product for that company.
The path to building a successful product portfolio commences with defining what constitutes a ‘new’ product for the organization.
Broadly stating (regardless of industry sector), companies classify a new product into following nine categories-
- The product has at least one unique selling point (USP) such as- new technology, new use, un-met customer need, better shelf-life etc.
- Product is handled by a new SKU or has a new bar code.
- Product is new to the world.
- Product is new to the company.
- Product is new to the company’s market.
- Repositioned product viz. new applications for existing product or re-targeting an old product to a new market.
- Cost-reduced (existing) product.
- Improvements & modifications to existing product, including line extensions.
- Patentable product.
Categories 1 to 8 are pretty much self-explanatory, so I shall head straight to category 9- Patentable product.
A patentable product as the name suggests, is an item that can be patented, where the item can be a product, process or a design.
A likely question is- What’s so special about patentable products? Well, it is special because a patent offers monopoly to the patent owner. The patent term is usually up to 20 years. Also, patented products can get marketing exclusivity from 3 to 20 years depending on product type, industry sector etc.
So, if the marketing exclusivity tenure is same as the patent term, it means that there will be no competitor to worry about for twenty years!
Having said that, it must be noted that once exclusivity term ends, generic competitors can pitch-in. Hence stronger the originator patent, difficult it will be for the generics to enter the market. Further, note that all new products cannot be patented, because patentability is established when a product, process or design meets patent eligibility criteria set out by the Patent Act of the country in which the product is sold.
Therefore, more the number of patented products in your product portfolio, faster & higher will be the ROI.
Moreover, the product portfolio is always a mix, meaning products belonging to two or more of above- referred categories are present in the portfolio. Depending on the category of the ‘new’ product, it will require resource inputs such as- budget, talent pool, development time etc.
Hence, a strategic selection and right mix of new products will determine a business’s resilience to thrive through difficult times. It will also determine the extent of success with business transformation of struggling companies.
Note that, the goal of portfolio management is to reduce complexity and identify product differentiation characteristic which offers ‘value’ to the customer. This is more so when organizations face crisis conditions such as material shortages, delays due to supply chain disruptions, pandemics etc.
By adding the right transformation tools and processes, companies can actively shape a simple, value-based and profitable product portfolio that can both reduce the burden of risk management now and better serve customers once the crisis eases.
In the upcoming parts of this article, I shall discuss on the remaining three portfolio parameters impacting successful business transformations and how to go about positively transforming your business.
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