Portfolio Management Part 0: An Introduction to the Issues

I've been re-reading Kathryn Best's book 'Design Management', an extensive and inspirational read.  The book broadly covers almost everything from design strategy, through design process, to design implementation.  However, the book is about generic consumer product design, and perhaps as a result, one area of design management that has particular importance for sportswear design isn't touched on a great deal.  This area is portfolio management.  I intend to write about portfolio management over the next few days to help clarify my own ideas on the subject and provide an introduction to the subject for my friends studying on the Performance Sportswear Design course at Falmouth.

I'll be honest, some industry terminology can be very confusing.  In particular, the grey area that might be Product Line Management, Product Life-cycle Management, Product Portfolio Management, Product and Portfolio Management, or New Product Portfolio Management!  I won't try to impose a specific interpretation of these terms, instead I'll just stick to using portfolio management and use it as a generic term.  

I will start off describing the concept of a 'product portfolio' and then get on with explaining how the product portfolio can be managed for competitive advantage within the constraints of an SME.  Gaining competitive advantage is the underlying objective to portfolio management and is therefore an important issue for SME's in the sportswear business.

A Venn Diagram showing how PLM/PLcM/PILM/PPM/P&PM/NPPM/etc. intersect!

(Thanks to Tarquin and Wikimedia Commons for this image.)

what is a product portfolio?

A product portfolio is the complete range of products that a company sells.  This can be divided into 'product lines' and 'product ranges'.  There are various definitions for these two terms, but I think a logical way of delineating between product lines and product ranges is to define product lines as a company's internal organisation of teams, resources, projects, processes, activities, manufacturing, etc. around product categories, whereas product ranges are product groupings, for different markets or for different marketing purposes.

Any individual product will be produced in one product line, but can be sold in several product ranges.  A company may operate several brands.  Product lines may encompass products in any number of brands owned by the same company, but product ranges won't be shared between brands (unless there is an unusual co-branding set-up!)

The way products are grouped between lines and between ranges will vary between companies.  The set of examples I've used in my diagrams below are; by fabric, by production, by product type, and by segment / end-use.  These are some of the more obvious suggestions I could make, but within reason, all-sorts of criteria could be used.  For example, product value positioning, or size and fit, or even product colour!

In some circumstances a product line may be entirely devoted to a product range (see the second diagram below,) but often they do not.  Inside a company, people working on the production side of things will tend to be working on particular product lines while sales and marketing people will tend to be focused on particular product ranges.  The design team has to work on products all the way across the portfolio and in doing so manage the product line/product range matrix - this is portfolio management.

Examples are shown of how product lines and product ranges are used to conveniently group teams, resources, projects, processes, activities, manufacturing, etc. around defined product categories.  Meanwhile, product ranges are used to conveniently locate products within sell-able product groups for the purpose of clear marketing, especially in presenting products to different market segments.  I've suggested four ways of grouping products which can be applied to either product lines or product ranges.

There is often a natural alignment of Product lines with product ranges.  In this example there are no product lines or product ranges defined by any criteria of production.
(N.B. I've chosen a random selection of products just to represent how product types may be scattered across the matrix.)

However, product lines will sometimes differ from product ranges, in this example only the expedition line matches an expedition range.

A 'line plan' document is created (using product data management software or, more typically for SME's, MS Excel) for the product management and buying teams to manage product statuses and associated fabric inventories.  This lists all the products in the portfolio, organised by product line.  To help design team visualise the product line a 'visual line plan' may be produced (I've sketched up a diagram below).

Likewise, there will be sales and marketing documents corresponding to the different ranges, and for the complete product portfolio of an individual brand the 'work book'.

portfolio management

Arguably, the ultimate goal of the business is to maximise competitive advantage across your product ranges throughout your various market segments, while trying to optimise your production processes across your various product lines.  As I've suggested before, the design team have to reconcile these two objectives.  This is the essence of good portfolio management.

In a set of articles across the next few posts I will be addressing key issues in portfolio management.  These are as follows:

1. Which products in your portfolio should be updated?
2. When should products be dropped?
3. Introducing a new range and the split sales dilemma... 
4. How and when should you launch innovative products? (I will write about investing in design innovation in a separate article soon!)
5. How can you manage colour throughout the portfolio?
6. What influences might require a change in your product-line/product-range matrix?
7. How can we maintain consistency and freshness across the portfolio while making rapid proactive and reactive changes to individual products?