Effectively Manage Product and Portfolio Complexity

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How good is your company at defining and managing product and portfolio complexity? If you are like many companies, it’s a serious challenge to do this well. At a time when global complexity seems to grow every day, getting your arms around product and portfolio complexity is essential to business health and survival. The first step to managing complexity is to quantify it.

Seth Lloyd, a professor at MIT, offers three questions that researchers in many different fields ask themselves when seeking to quantify the complexity of a problem:

  1. How hard is it to describe?
  2. How hard is it to create?
  3. What is its degree of organization?

Here are some ideas to help answer these questions and give you a starting point to build a roadmap to harness complexity.

How hard is Product and Portfolio Management (PPM) to describe?

It’s very hard to describe these disciplines to people. Even people engaged in these activities struggle to describe what they do when a parent or friend asks, “What’s your job again?”

A good, albeit technical, answer to this question is multi-tiered. Gartner describes PPM as the discipline of supporting the continuous cultivation of product sets by prioritizing and managing product developments and retirements. The decisions about how to cultivate a portfolio manifest through the numerous product life cycle management (PLM) decisions made at the individual product (SKU) or product family level. Our description for PLM is as a discipline for guiding products and product portfolios from ideas to retirement to create the most value for businesses, their partners and their customers.

You may be asking, “So, which comes first, PPM or PLM?” There is no one answer for all companies, but at a fundamental level, there are always at least two moving parts: a portfolio life cycle and life cycles of each of the individual products within those portfolios. The gears between the two disciplines mesh (ideally) to deliver a set of products that fulfill the portfolio’s, business unit’s and/or company’s strategic goals.

How hard are PPM and PLM to create?

Every company has a portfolio of products, even if it’s a portfolio of one. And every company makes decisions about portfolios and products: when to launch, how to sell, how to price and when to retire them. It’s the quality of these decisions and the decision-making processes that vary from company to company. Companies should focus on creating resilient and aligned decision-making processes. This will lead to decisions that enable a product or portfolio to generate the quality of results companies desire.

It’s hard work to create PPM and PLM disciplines that optimize the benefits returned to a company, its partners and its customers. At the disciplines’ cores is the ability and the willingness to make both the easy and the hard trade-off decisions among the myriad options for creating and delivering value. The company’s strategy provides the most fundamental guardrail for guiding decisions.

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Without strategic context, PPM and PLM decisions tend to focus on hitting short-term business targets. While this is useful for meeting financial goals, in the long run financial goals don’t fully replace a company’s strategy. “Achieving 10% growth this year” is not a strategy. It by itself is an outcome of fulfilling a strategy that’s aligned up and down the decision-making process.

What are the degrees of organization in PPM and PLM?

We get asked regularly to describe what PPM or PLM organizations “should look like.” Taking this question literally, we surveyed nearly 300 manufacturing companies in 2019 to learn about some of the fundamentals of how life cycle management activities are organized.

Two things jumped out of the data:

  • There is not a lot of consensus about which role should champion PLM initiatives and improvements. Chief product or innovation roles, chief supply chain officers and PLM excellence leaders were named as the most frequent champions, but together these roles only accounted for 46% of roles leading PLM initiatives.
  • A huge variety of roles can take part in PLM activities. However, only five appear to take part at more than 50% of the respondent base: Product management (69%), manufacturing (62%), supply planning (56%), research and development (56%) and sales and operations planning (51%).

Zooming out from this close-up view, it’s important to remember that PLM and PPM are disciplines, not organizations. The noun “discipline” is broadly defined as a code of behavior that bounds an activity or regimen meant to deliver a targeted outcome over a period of time. The “organization” aspects for PPM and PLM are the groupings of business activities, and how they interact with one another, to create the targeted business outcomes. Companies may choose to change how they group activities such as product management, planning and execution, but those choices will come with other trade-offs, usually related to efficiency and cost management. Choosing among these trade-offs ties to a shared understanding of the corporate strategic framework and the ultimate goals of the business.

In short, it’s safe to say that there is enormous complexity associated with defining and managing product and portfolios well. However, companies are growing their comfort levels in dealing with this form of complexity, and are building or rebuilding robust and aligned PPM and PLM frameworks. If your company is not yet doing so, you have a very real risk of falling behind.

Janet Suleski,
Director Analyst,
Gartner Supply Chain
[email protected]

 

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