Innoramblings #11: Focusing Your Product Portfolio for Maximum Impact

In the fast-paced world of innovation and product development, it's easy to get overwhelmed by the sheer number of products in your portfolio. As an R&D or innovation leader, focusing your efforts on the products that truly drive growth and profitability is essential. One powerful tool I've used to achieve this focus is a bubble chart that plots the performance of each product. Here's how it works:

The Bubble Chart: Visualizing Product Performance

To create this bubble chart, you'll need to plot three key metrics for each product in your portfolio:

1. X-Axis: Number of Units Sold - This represents the volume of each product.
2. Y-Axis: Gross Profit Margin - This shows the profitability of each product.
3. Bubble Size: Total Sales - This illustrates the overall revenue generated by each product.

Once you've plotted these metrics, draw a vertical line at the average volume per product and a horizontal line at the average gross margin. This will split your graph into four quadrants:

The Four Quadrants: Prioritizing Your Efforts

1. Top Right Quadrant: Star Products: These are your top performers—products that sell in high volumes and generate high profit margins. These star products are the backbone of your portfolio. They need to be pampered and kept in ship shape. Ensure they receive the necessary resources to maintain their performance and delight customers.
2. Top Left Quadrant: Promising Products: Products in this quadrant have high profit margins but lower sales volumes. These promising products have growth potential. Focus your efforts on these by investing in marketing, improving distribution channels, and enhancing product features. With the right push, they can become star products.
3. Bottom Right Quadrant: Efficiency Products: These products sell in high volumes but have lower profit margins. They are crucial for your revenue but require efficiency improvements. Look for ways to increase prices and lower costs without compromising quality. Avoid offering discounts on these products, as they need to maintain their volume to be profitable.
4. Bottom Left Quadrant: Evaluate Products: Products in this quadrant have low sales volumes and low profit margins. They are the least impactful on your overall performance. Unless you have a clear strategy to improve their position, these products should not receive significant resources. Don't be afraid to increase prices to test their market resilience. If they don't move the needle, consider phasing them out.

Real-World Application: A Lifesaving Tool

I once worked in a company with thousands of SKUs and a very small team. The bubble chart tool was instrumental in focusing our growth, operations, and product development efforts, where they offered the biggest returns. It saved us from wasting precious resources on products that didn't significantly impact our bottom line.

By using this tool, you can prioritize your efforts effectively and ensure that your team's hard work translates into tangible growth and profitability. What methods do you use to focus your product portfolio? Share your thoughts—I’d love to hear them!