Every innovative product begins as a concept in the mind of someone or some group of people. These concepts are the seeds of your company’s future growth. How is your company cultivating these seeds? How do companies manage this asset, the portfolio of product concepts, even before they enter the pipeline?
In our experience, product portfolio management is a missing or sub-optimal skillset for too many tech companies. They fail to de-mystify the fuzzy front-end, which makes product selection hazardous, and tends to kill off innovative products before they’re realized. Fortunately, tech companies can harness the power of product portfolio management through systems that enable decision-makers to converge on the best opportunities for creating successful products.
One of the first changes required to master product portfolio management is in the mental models with which product developers approach their work. Think of your early stage product concepts as an asset, as a portfolio that your team needs to manage. These assets represent as-yet unrealized potential. The aim of a strategic product planning process is to realize the best and most innovative products in a way that aligns with the vision and overall strategy. The outputs from this yearly process become the inputs for a system that then manages products to completion and launches them into the marketplace.
An effective strategic planning process for the front end of innovation has two facets:
1) a relatively lightweight process that manages the daily decisions that impact product concepts as they make their way toward the pipeline and
2) an annual product strategy and planning process for innovation.
A Long-Term Product Plan
This annual strategic innovation planning process is a portion of the larger strategic plan for your company. A strategic plan for the whole company accounts for the deployment all of a firm’s capital and assets. How does product planning fit into this broader strategic planning activity?
An effective system for product planning connects long-term goals to the everyday management of product concepts. It links vision, strategy, and roadmaps, and results in budgets that will realize them. It provides the “plan of record” for investments in new product activities on an annual basis.
Typically, the company’s vision spans a three to five-year time horizon, with the strategic steps, over a one to two-year horizon, required to realize that vision. A strategic planning process for innovation then connects the strategy to product and technology roadmaps. These roadmaps are graphical images that allow decision-makers to see the progression of products and technologies, and their changing relationships over time. Then these roadmaps need to connect to the yearly budgeting process to make sure that projects are prioritized and have the required resources for this early concept stage.
Steps for Creating a Strategic Product Planning System
If your company does not have process for managing product concepts, then the first step is to take your existing, annual budgeting process and determine how planning for product innovation fits into it. The strategic product planning process comes after you formulate the annual strategic plan, but before the budgeting process is completed.
Map out a yearly process that ties the vision to the strategy, the strategy to roadmaps, and the roadmaps to the budget. Then create detailed swim lanes that show how the different groups involved feed each into one another.
— The budgeting process frames the starting and ending point for this planning activity
— The strategy is not created anew each year, but is updated on an annual basis
— The budgeting portion of the process puts in place the goal posts, which connects Finance with new product development activities
Next, select a governance body and create criteria for the decision points around product concepts. The decision-making body should include those with oversight of the key functions in product innovation and strategy (such as Engineering, Marketing, etc.). This body needs to consider how the different groups and business units in the company will interact to turn these early-stage concepts into fully-functioning products. The governance body should also create criteria for evaluating product concepts. These criteria should be analogous to the questions venture capitalists ask entrepreneurs.
A Basis for Ongoing Management of Product Innovation
The aim of the longer-term, annual strategic planning process is to set priorities and budgets that drive the organization to realize its goals, from year to year. It is best practice to connect the annual strategic product planning system to a related, shorter-term front-end management system that handles the day-to-day decisions around your portfolio of product concepts.
Winning companies take control of their future by creating a tight link between their strategic direction, their product concepts, and budgets. What is at stake is the future of your company’s growth from new product introductions. If you’re a tech company, which means you’re in a highly competitive environment, getting product portfolio management right is not optional – it’s essential.
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John Carter has been a widely respected adviser to technology firms over his career. John is the author of Innovate Products Faster: Graphical Tools for Accelerating Product Development. As Founder and Principal of TCGen Inc., he has advised some of the most revered technology firms in the world.