Maximizing Your Product Portfolio: Selecting the Right Architecture for Your Business

Our recent product development project involved the challenge of creating a customizable product line with types and sizing variations that could be tailored to each individual customer’s order. To address this demand, we implemented a product portfolio architecture approach to meet the goals of standardization, inventory management, quick lead time, cost improvement, and rapid customization.

In the highly customized product market, effective product portfolio architecture is crucial for managing the development and delivery of customized products. A product portfolio architecture is a strategic approach to organizing and managing a company's portfolio of products and services, and it can involve creating product lines, defining target markets, and determining the resources and investments needed to support each product or service.

Types of Product Portfolio Architectures:

There are several different types of product portfolio architecture that companies may use to organize and manage their products and services. These approaches can be classified in various ways but I would prefer to put this classification as given below. Each of these approaches has its own unique benefits and drawbacks, and the most appropriate type will depend on the specific needs and goals of the company.

1. Product line architecture: In this approach, products are organized into distinct lines, each with its own target market and set of resources. This can be useful for companies that offer a wide range of products and want to focus on specific markets or customer segments.
2. Market segment architecture: In this approach, products are organized by target market segment, rather than by product line. This can be useful for companies that offer a limited number of products but want to target multiple market segments.
3. Resource-based architecture: In this approach, products are organized based on the resources needed to support them. This can be useful for companies that want to allocate resources efficiently and ensure that each product has the support it needs to succeed.
4. Customer-based architecture: In this approach, products are organized based on the needs and preferences of specific customers or customer segments. This can be useful for companies that offer highly customized products and want to tailor their offerings to the specific needs of their customers.

Selecting the right approach:

It is important to select the right type of product portfolio architecture because it can have a significant impact on a company's ability to meet the needs of its target markets and drive long-term growth. The right product portfolio architecture can help a company to optimize its product mix, allocate resources efficiently, and respond to changing market conditions. In contrast, an ineffective product portfolio architecture can lead to confusion, inefficiency, and customer dissatisfaction.

Considering our requirements we chose the resource-based architecture as it was a proper fit for our needs.

Let’s have a look at some key characteristics of resource-based architecture before we discuss the specific case. And they are as below…

1. Common components: By using common components across multiple products, companies can create economies of scale and reduce development and production costs. This can be particularly useful for companies that offer a wide range of products, as it allows them to leverage shared resources and expertise to streamline the development process.
2. Inventory management: By organizing products based on the resources needed to support them, companies can more effectively manage their inventory and reduce waste. This can help to optimize the product mix and reduce costs, which can be especially important in the highly customized product market.
3. Production efficiency: By streamlining the product mix and reducing the number of unique components and processes, companies can improve production efficiency and reduce costs. This can help to drive long-term competitiveness and profitability.
4. Resource allocation: Resource-based architecture can help companies to allocate resources more efficiently, by focusing on the products and processes that will provide the greatest return on investment. This can help companies to optimize their product mix and allocate resources

The targeted product line included various components that are similar in shape and construction. Hence, it became clear to us to target those components for standardization across the product line to achieve the benefits of streamlining inventory management and production processes, leading to improved efficiency and cost-effectiveness. By reducing variations in components that are similar in shape and construction, we expected to see quicker turnaround times and improved profitability. Standardizing these components will also allow us to take advantage of the economies of scale and shared resources that are possible with this approach.

By implementing resource-based product portfolio architecture, we were able to significantly streamline the sourcing and machining process for our product line. Without this approach, we would have had more than 4500 different assembly-level components to manage, which would have greatly impacted our lead time. However, by adopting a resource-based architecture, we were able to achieve it with less than 2000 components. This demonstrates the effectiveness of this approach in optimizing our product mix and improving efficiency in the production process.

The approach:

One important aspect of resource-based product portfolio architecture for highly customized products is the use of common components across multiple products. A company can create economies of scale and reduce development and production costs by using a single component in multiple products. This can be especially useful for companies that offer a wide range of customization options, as it allows them to leverage commonalities among products to streamline the development process and allocate resources more efficiently.

However, it is important for companies to carefully consider the trade-offs associated with using common components in multiple products. While it can provide cost savings and simplify the development process, it can also limit the ability to customize products for specific customers. This can be especially challenging for companies that offer highly customized products, as they may need to balance the need for customization with the benefits of using common components.

To effectively manage the use of common components for a highly customized product, companies can use a variety of strategies, such as:

• Identifying core components that are common to multiple products and focusing resources on optimizing their performance and cost-effectiveness
• Offering a range of customization options that can be built on top of a common component platform, while still allowing customers to tailor the product to their specific needs
• Using modular design techniques to allow customers to easily mix and match different customization options, while still leveraging common components

The example:

The good one…

One good example of a company that has successfully implemented resource-based product portfolio architecture is Ford Motors. Ford has implemented a resource-based approach that focuses on leveraging common platforms and components across multiple vehicle models, including cars, trucks, and SUVs.

One key aspect of Ford's resource-based product portfolio architecture is the use of common platforms. By using common platforms, Ford can reduce development and production costs by leveraging shared resources and expertise. For example, the company has implemented a common platform strategy for its global small car line, which includes the Ford Focus, Fiesta, and EcoSport. By using a common platform, Ford can reduce the number of unique components and processes needed to develop and produce these vehicles, which can improve efficiency and reduce costs.

In addition to using common platforms, Ford has also implemented a resource-based approach to component standardization. By standardizing components across multiple vehicle models, the company can create economies of scale and reduce production costs. For example, Ford has implemented a global engine strategy that involves using common engines across multiple vehicle models, which has allowed the company to reduce development and production costs and improve efficiency.

And the Bad one...

One example of a company that made a wrong selection of product portfolio type is Kodak. Kodak was a leader in the film and photography industry for many years, and it had a well-established product line architecture that focused on film products. However, as digital photography began to emerge as a dominant technology, Kodak failed to adapt its product portfolio to meet this changing market.

Instead of shifting to a customer-based or market segment architecture that would have allowed the company to target the growing market for digital cameras and other digital photography products, Kodak continued to focus on its traditional film products. As a result, the company missed out on significant growth opportunities and eventually filed for bankruptcy in 2012.

An example of Kodak illustrates the importance of selecting the right product portfolio architecture to meet the needs of changing markets and customer preferences. By failing to adapt its product portfolio to the shift to digital photography, Kodak ultimately lost its market leadership and suffered significant financial losses.

Product portfolio architecture is a crucial element of managing a company's products and services, and it can have a significant impact on the company's ability to meet the needs of its target markets and drive long-term growth. It is important for companies to carefully consider their business strategy and target markets when selecting a product portfolio architecture, as selecting the wrong method can lead to a range of problems that can negatively impact the business.

However, when implemented effectively, product portfolio architecture can play a key role in product portfolio strategy and support the development of highly customized products. It can help companies to optimize their product mix, allocate resources efficiently, and improve the customer experience. By carefully balancing the benefits and drawbacks of using common components, companies can create a strong foundation for success in the highly customized product market.

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