Portfolio Management Part 1: Updating Products

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which products in your portfolio should be updated?

SME sportswear brands in relatively niche markets like 'Outdoor' may not have the resources to seasonally or even annually update all of their portfolio. In fact, perhaps with the exception of colour-way changes, it's unlikely that any single technical product will be revised each and every season.  Fortunately for these small brands consumers don't expect or demand seasonal change in niche and performance sports products, in the way that is expected of fashion-following product markets.  So for the SME, the inevitable question arises "which of our products should be updated over the forthcoming development season?"

Product updates (in red) and new additions (in blue) are added to the visual line plan at the start of the development season. 

determining product success

In one in-house job I had, the decision to update products was invariably made by scanning through our sales figures and taking aim at products with flagging sales.  This made me a little uneasy because I felt that sales figures shouldn't be one's only guide to the merits and failings of a product.  Sales figures need to be seen in context, and only in that context can they be properly interpreted.

Of course, unless you're selling direct-to-market, sales figures (which reflect the stocking of your product by retailers) don't necessarily correlate with sell-through (consumer purchases of those products from the retailers).  There's going to be an interesting interplay going on behind the figures on the shop floor and in the buying department at the retailer.

Failing product sales should be distinguished between those of relatively new products whose sales haven't reached the expected levels and those of established products whose sales have fallen below an acceptable level.

In the former case, perhaps buyers have warmed to the product quicker than the public and so after initial enthusiasm at the sales launch, poorer than expected first-season sell-through may result in short term loss of confidence by retail buyers.  It may be that retail staff are failing to sell the advantages of the product.

In the latter case, when a product is well established, failing sales may merely be a result of the sales team having switched focus to selling the newer or more recently updated pieces in the portfolio.  Perhaps sales have been "stolen" by newer products in the portfolio?  This wouldn't reflect a failure in the overall design and/or marketing of that product, but may represent an instance where you may wish to discontinue it in favour of the better selling product that has stolen its sales (this topic will be covered at greater length in Portfolio Management Parts 2 and 3.)

The sales team are likely to know when product sales have been stolen by other products in the range.  They will also be well placed to find out if sales dropped due to new competition bursting on to the market, splitting sales amongst a greater number of competitors.*

This last point brings us on to possibly the most pertinent objection to focusing on your own sales figures, one which was recently reiterated by Ian Cheshire on The Bottom Line program on BBC Radio 4**.  Ian warns us that we should look at how the market did overall in our sector or product group before passing judgement.  Without knowing your product's relative market share, a drop of 20% in sales might actually be a really good thing if the rest of the market dropped by 40% on average.   Vice versa, if your sales went up 10%, but everyone else improved by 20%, then a product that at first glance seemed successful, actually is a relative failure.

Sales figures must be seen in context - their relative market share is more important than their net size.

So product success may appear as failure, and vice-versa, product failure may appear as success.  Gaining the data to determine your product's relative market success would be very beneficial to gain a more objective evaluation of sales performance.

Having said all that, I need to add a few provisos here.  Don't waste your efforts in trying to gather a heap of information about a product when you already know enough to make a good call.  If a product feels 'old-hat' to you it will almost certainly benefit from updating.  It can be difficult and/or costly to get sales information from your retailers and obtain wider market statistics.  Efforts to research market share should reflect the importance to the brand of the product or product line in question (and beware the law of diminishing returns!)

Please keep in mind:

• The search for knowledge and understanding is a never-ending one.
• Information is a double edged sword - with too much of it you can be hit by 'analysis paralysis'.
• Searching for reasons behind statistical events can be fruitless if there are none.

The optimal quantity of information before analysis paralysis will be in inverse proportion to the complexity of the decision making process (or analysis).  Less information will ease the process of making a more complex decision. 

be proactive

Updating products isn't all about rectifying weaknesses.  It should also be about pro-actively looking for new opportunities (more on innovation in Portfolio Management Part 4.)  It's complacent to just 'up keep' the portfolio.  Whether they are cosmetic or profound innovations, making changes to the portfolio shows that a brand has life and energy and this is something that will captivate people's interest and imagination.

but...

Don't upset retailers by updating products too regularly - it will ultimately disappoint their existing customers if they find that their relatively new garment has just been superseded by a superior product so soon after their purchase.  (For more discussion on this subject, see Portfolio Management Part 4.)

The question that naturally leads on from this topic is "how do you best go about updating products?"  This isn't strictly a question about portfolio management so I'll try answering it in a future post.

*It occurs to me that it may be a very eye-opening exercise to get the design team to shadow a sales rep for one day to see how they go about selling different products in the portfolio.


** 24/02/2011 http://www.bbc.co.uk/programmes/b006sz6t

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?

Teamwork and creativity

"we stay in our companies because we love working in a team" Professor Lynda Gratton

The In Business program on BBC Radio 4 this week talked about building good teams. Creativity, it seems, can be something built into the structure of corporations, thanks to the types of teams that they employ.

Mark Squires, director of Social Communications, Nokia, told how he had been set free to meet everyone in the whole company in his first two weeks of employment there, before settling in whichever department he felt most comfortable in. This extraordinary personality driven system of employment has some distinct advantages.

Although in the first two weeks he felt a bit lost, subsequently communication was made a lot easier for Squires as he would communicate to people he had got to know personally, throughout the corporation. And he didn't need to pluck up courage to speak to head management because from the start they were on first name terms. After the two weeks he had decided to make his home in one department because he found he fitted in well there.

Fitting in well isn't always the best strategy for creativity. Think tanks are best inpersonal affairs. You might be asked whether socialising over tea and buscuits prior to deliberations is best. But the answer would be no - people will have started making character judgements of each other and this clouds rational problemsolving and genuinely independent thought, as people may start siding with one person or siding against another. Obviously with corporations you are dealing with a different time span and such strategy to avoid people developing preconceptions and couldn't possibly work in a team over any great length of time.

The next interesting fact came from Lynda Gratton, Professor of Management Practise at the London Business School. Apparently research has shown that mixed sex teams are more creative and productive than single sex teams, though I guess this shouldn't come as a surprise.

Gratton has studied Goldman Sacks and Google to see how they get the best out of team work. All strong corporate teams, she found, had three things in common amongst members. Firstly all members were willing to cooperate together, all had differing ideas, and all shared a common mission - a problem that all members were excited to solve. Google alow their employees 20% of their time outside of their own teams, working on other projects inside the company that spark their interest. This way they get some extra-motivated team members coming along 1 day a week to add some fresh ideas that may have been born in completly different parts of the company.

Cooperative mode!

Gratton says; "people are naturally co-operative, and what's happened in organisations is we've put an overlay of competition that completely destroys the humanness of being in a team and the pleasure of working...  We stay in our companies because we love working in a team, and we leave them because we hate working in that team."

Talking about Nokia's success in the massive Chinese market, Gratton says that they employed an international team of passionate users, rather than a chinese team because they would bring the greatest diversity of ideas and mind sets ideas to the table, which encouraged the most creative thinking and creative thinking creates the best product.

Innovation doesn't come from the experts, says Gratton. It is when you have a clash of ideas.  When someone from another part of the company comes along and has a completely different way of thinking about a problem and can suggest a different solution.  In this light, one can see that the way Mark Squire was introduced to the company makes a huge amount of sense.