Product portfolio management

One of the most famous citations in management literature comes from Henry Ford, who reputedly claimed that customers of his Model T could have it "in any colour, as long as it was black". Apart from the weak historical evidence that the 'father' of mass production ever did use these words, this situation did not last long. After a few years, Ford ran into problems when forced to chase the strategy of Alfred P. Sloan, who had restructured General Motors around a divisional organisation and successfully started selling differentiated motor cars. With Sloan's objective of providing a car for every taste and for every budget, product portfolio management entered the modern industrial world. The problem of product portfolio management can be found in virtually any firm and is indeed a complex matter (Figure 17.1). If you side with marketing, their ideal would be to fit a product to each individual customer. If you listen to product development, they would talk about the nightmare of having to manage more projects simultaneously than one can even remember. If you talk to manufacturing, they would probably remind you of a technique called 'variety reduction program' that was quite successful a few years ago. In response to the implications of different organisational functions, this survey on product portfolio management has been based on contributions from different fields, including economics, marketing and operations management. I hope that this heterogeneity will not disrupt the thread of the discussion, which is structured as follows: the next section will discuss the 'front-end' of product portfolio management or, in other words, the marketing perspective.The second section will discuss the 'back-end', which is concerned with the design and development of multiple products.The third section will present portfolio management tools that may help bring the two perspectives together. Conclusions and open issues that ought to be matter for further research will be briefly discussed in the final section. © Springer-Verlag London Limited 2005