by Anupam Kundu
Couple of years back, I was engaged with a team involved in migration of an e-commerce platform. Based on budget, cost of ownership and implementation deadline the executive team selected a medium level e-commerce platform provider over other premium vendors and custom coding. Soon we realized that each and every implementation of the chosen vendor’s e-commerce platform was basically a customized version of their core product and framework.
For some enterprise clients, the custom version will have additional features and/or extra modules (different types of billing channels, promotional engine, analytic and what have you) that are not present in the core product while for others (mostly smaller) the vendor did a scaled back implementation of the core product feature set. This process of having multiple different versions of a single product running simultaneously (based on client needs) usually works well if you have a limited set of versions and/or a limited set of customers and users. However this strategy becomes increasingly difficult to manage and scale with multiple different product versions having disparate feature sets running at different client locations. New version upgrades, new feature introductions – basically any change under conditions as above becomes a nightmare. The Product Management team, looking forward, may think of creating multiple different product flavors (Silver, Gold and Platinum say) for different customer base however custom implementation of each of these versions ruin their potential to scale and manage a stable portfolio.
I have seen similar scenarios happen over and over across the industry spectrum: medium and large telecom billing and customer care (BaCC) product implementations, large scale educational software products as well as in major operating systems (MS Windows is a classic example where significant time is spent by the product group just in consolidating feature sets from existing versions resulting in delays in major version launches). Based on such experiences over the decade or so, I tried to isolate some patterns (or anti-patterns) about why product managers and product teams have a hard time in managing their portfolio. I expect few of the traits to be familiar to the readers while others may be not that apparent.
Look Under The Hood
Inaction on under-performing Products/ Projects:
A lot of product managers (specially in large companies) are more concerned about new products and well performing products rather than ones which are doing not-so-well; the expectation is that those poorly performing products will die a natural death and no one will need worry about them. The inaction on part of the portfolio managers to deal with such products affects the portfolio bottom-line.
Large banks (or any other multi-billion dollar enterprises) have predetermined life span for most IT products and applications. However, due to organizational bureaucracy, age-old budgeting process and consistent lack of sufficient and accurate data (2) the life span is always twice as large the pre-set limit (IE6 is still a preferred browser for some US based financial organizations).
Surprisingly enough, smart, market-responsive digital media companies suffer from the same symptoms, albeit for different reasons. The product divisions of such market savvy organizations end up carpet-bombing the market with multiple products and product lines and can’t figure out when is the right time to pull the plug on any one of them and focus on just the strategic few (classic core competency issue). For example, digital division of one large publishing company that I worked with managed an annual portfolio of 30 or more market facing apps and sites and had a hard time in identifying the ones that actually made strategic sense.
Tendency of product teams to avoid financial messiness
Surprisingly a lot of Portfolio Managers do not like to get into financial messiness and rely on lot of hand waving with respect to ROI calculations for any given product. Besides there is always the risk of mis-calculating NPVs for new innovative products that are not yet launched based on insufficient and unreliable data. Even for more stable, established product lines need financial wizardry to calculate true Total Cost of Ownership (TCO) and the Product Owners do not have enough time of the day to focus on that. So the Product Managers often take the shortcut – match the Net Present Value (NPV) to the internal limit required to get the development and marketing budget approved. Behavioral scientists frequently use the term Ostrich Effect to highlight the human tendency of avoiding apparently risky financial situations by pretending they do not exist.
For any given product, business model is critical to success. And a key part of the business model is financial calculations. Lack of financial prudence can lead to unstructured decision making in terms of portfolio management which can result in utter disasters. US Department of Energy (DoE), in 2010, provided $535 million loan guarantee to thin-film solar cell manufacturer Solyndra to built a new 28,000 square meter plant without properly investigating the true cost of producing the innovative cylindrical solar panels. The DoE expected Solyndra’s fabrication plant to produce almost 7 gigawatts worth of these solar cells in its lifetime, producing roughly 110 megawatts per year.Instead, Solyndra produced only 500,000 panels before closing down. It so happened that the cost of producing a solar panel by Solyandra was estimated at more than $3 per watt (as per SEC filings) while competitors were producing similar grade panels for $1.20 per watt due to fall in prices of the key raw materials.
Insufficiency of Available Data
Sometime back, Babson Executive Education did a study of innovation team leaders at 21 science and engineering-based companies. Only six respondents reported that their innovation teams make decisions in a structured and data-driven way, while 18 reported that their organization-wide innovation process — a stage gate or a drug pipeline, for example — tends to be much more disciplined and data-driven. Though the sample size is remarkably small, this shows that most small teams and start-ups do not always have sufficient data to make structured decisions.
Portfolio Managers are taught in schools to spend an inordinate amount of valuable time collecting and maintaining data before they delve into scope analysis or calculation of ROI. However, with the high frequency of new technologies, new products and new competitors hitting the market, there is always a case where enough data points are not available to make intelligent decisions. The lack of relevant data substitutes fact-based decision making with gut fueled instincts that may often lead to imbalance in the portfolio.
Unreliability of available Data:
This is another paramount cause of error in Portfolio Planning. Lack of quality data metric (clear, crisp analytic) forces the PMs to make high risk decisions that do not always pay off. For example marketing and sales submit Win and Loss reports for products to Product Managers without providing a detail analysis of the whys and hows. This forces the Product Managers to rely on their own judgment rather than solid metric and factual feedback.
Lack of Road-map for Critical Themes
Creating a road-map, however short, is critical. Specially more so for market-focused products. Lot of organizations just do not have the rigor to create and maintain one. Without the road-map, the stakeholders are in no position to prioritize and decide on parallel vs. sequential streams of work to address multiple market demands and business goals. Lack of road-map also prevents engineering divisions to plan for capacity leading to sloppy, shoddy, risk-laden execution and potential launch delays.
Google infamously closed few of its new products like Google Health, Google Gears, Google Buzz, Google Wave, Google Pack etc. Lot of individuals and companies who were using these products were taken by surprise as the overall Google App road-map was never created or shared. This has forced many enterprise businesses to take a close look at Google overall roadmap with new products – they are questioning the reliability of Google as an enterprise platform partner, specially for socially relevant sectors like education – when Google can decide to kill any of its products based on overall adoption numbers.
Most large enterprises are divided into silos thereby resulting in separation of duties and responsibilities. The Product Management divisions have no or limited power and influence in determining the staffing and resourcing. This results in sloppy planning of infrastructure, technology and skill-set needed for maintaining and extending the current portfolio.
Very recently I got a chance to work with the digital marketing division of a large financial company that wanted to create a rich-media-driven, Web 2.0-enabled website to reach out to its customers. While the product owner team from the marketing division had good intentions for the product and worked hard to prepare a road-map, the same team had no power to influence key factors needed to define, design, build, and test the product. The tools used for the product development and testing were not appropriate for the product development work, and the people identified to do the work didn’t have the right set of skills resulting in inordinate delays in launch.
Lack of objective prioritization of Product / Product Lines
The keyword here is Objective. Prioritization is a critical element to align the portfolio with organizational strategy and divisional goals. However, more often than all, specially in large enterprises, the prioritization depends on which stakeholder shouts the loudest rather than alignment of the product with organizational goals.
Here is a sample set of questions to ask while prioritizing a product or project in a portfolio
- What is the business value for the product?
- Will the new product allow the stakeholders to reach and exploit new marketing geographies?
- Does the new product provide a distinct competitive advantage in the marketplace?
- Is the new product going to help launch or promote new or emerging lines of business?
- Is this a new product a catch-up with rest of the players in the market?
- Is the new feature considered a legal obligation for the market?
- Is there a partner obligation for the product launch schedule?
- How much can the proposed product leverage the newly created infrastructure?
- Does this product address the most demanding stakeholder group in the company?
Resourcing and Cost:
- Are all necessary resources available for the product to be implemented?
- How much will it cost to launch the new product?
- Is there a need to build follow-up modules to the product?
While it’s easy to point out how your portfolio planning is screwed and why you will not reach the success you are aiming for, it’s harder to do course correction and put it back on the right direction. That requires courage and conviction. More on that later.