Managing a portfolio of products

If you are a senior leader in a software organization that has been around for a few years, you most likely find yourself in a position where you are managing a portfolio of products. The products may specialize in certain facets of a broad area like ERP, HCM, CRM, etc. The products are often a mixture of ones that are developed in house, and ones that are acquired. They very often have different technology bases, and different customer target sets even if they are in the same space (e.g. SMB versus Enterprise). They may even be targeted to specific geographies. The way one optimizes business outcomes from a collection of products is distinct from managing a single product.

All software products go through a natural lifecycle. Initially for several years, maybe over ten years, they are unprofitable. Investment in developing and marketing the product far outstrips the returns. As customers grow on a relatively fixed cost base, the product turns profitable. The relative investment in the product compared to revenue decreases over time.

Over time, a profitable product matures. Sometimes, the demands on the product reach a steady state, customers are satisfied, and don’t want many things to change. Managing change in a product well-penetrated into an organization becomes difficult. Sometimes, customers are looking for a next generation product, a completely new and different way of doing things, and their expectations shift dramatically. In such cases, the existing product is too expensive to change to meet the new demands. In any case, the investment in the product reduces dramatically and the product becomes sustainably profitable for several years, often more than ten years.

Roughly, successful products that last go through these four phases: [a] growing [b] scaling [c] scaled [d] cash-cow. As a product leader who may have several of these product types in the portfolio it is crucial to understand how to plan, staff, market, and manage these products. How to set customer expectations, how to migrate customers as needed.?

For a product that is growing and has demonstrated adequate product-market fit, a disproportionate amount of investment should be allocated so that the product can get more fully functional and acquire more customers at speed. Often this involves allocating the more ambitious, risk-taking, fast-learning resources in developing growing products. Speed-to-market is often traded off with scale and performance for a small enough but promising customer base.

For a product that is scaling, let's say has several hundred customers, investment must go into the product to make it more complete and better than category competitors. It becomes critical to have mid-level and senior engineers and architects on the product who ensure that the product continues to scale. High quality, scale, and performance become equal focus compared to speed-to-market of new capabilities.

For a scaled product, the customer set is already fairly large, maybe thousands. Adoption of change becomes a challenge. With a larger code base and customer base, innovation slows down, but that is not necessarily bad. Customer net-promoter-score is typically high and they renew their commitment to the product. The product still needs care and feeding and some investment in forward development. However, it is profitable, dependable, and often a “flagship” for the company. Until, it is disrupted by some change, and progresses toward the cash-cow stage.

A cash-cow product is typically past its prime but with maximum “earnings potential”. This type of product typically has a large but slowly shrinking customer base or decreasing revenue per customer. The product is in maintenance mode. A product could be in this mode for over ten years and continues to return a disproportionate amount of profit to the company. Having a few products in maintenance mode in any portfolio is a good thing!

As a product leader managing a portfolio of products in various stages of their lifecycle, there are several things to consider. First, investment. How much of available resources should be relatively allocated to a product in a particular stage of its lifecycle. One should not necessarily over-invest in innovating a scaled product. Second, talent. What type of teams should work on which product. Is there room for rotation within the teams such that people learn different products and they are not “boxed” into working on one type of product? What development methodology is best suited? Agile, scaled agile, or a simple kanban board for defect management in a cash-cow product? How could one derive further efficiency from a cash-cow product so the cash freed up can be re-invested in a growing product?

Often, the most difficult decision you may need to take is to accept that a growing product will not scale. Sometimes, there is traction in some initial customer set generating a false impression of ‘growing’ but you may find that the customer set is hard to extend and generalize. In such cases, a growing product needs to be “killed” because there is no forward path for it to complete a lifecycle. Another difficult and quite challenging decision is to announce the sunset of a cash-cow product. One may need to do this when the number of customers have dwindled to a point where the product is no longer a real cash-cow. Sunset often involves managing customers carefully so that they have a path with other products within the company.

Like humans, software products age. They have a lifecycle which is not very dissimilar to our own.

If you enjoyed reading this feel free to simply repost in your feed. If you have colleagues who you think will enjoy regularly reading the newsletter encourage them to connect with?Apratim Purakayastha?and subscribe to this newsletter.