Unlocking the Competitive Edge: The Value of Strategic Product Portfolio Reviews
Organisations can unlock resilience and growth through strategic product portfolio reviews. Aligning offerings with market demands and balancing innovation with efficiency transforms risk management into a proactive driver of opportunity.
Building a resilient business means staying ahead of risk while capturing opportunity. A well-structured product portfolio review supports this by keeping product lineups responsive to both immediate demands and emerging market shifts.
A product portfolio review is an annual or biannual strategic process that aligns an organisation’s offerings with evolving customer needs, phases out underperforming products and creates space for new growth.
Unlike tactical reviews, which focus on execution, a strategic product portfolio review takes a broader perspective. It evaluates product performance economically while anticipating market shifts, lifecycle stages and innovation opportunities.
Organisations that embed these regular strategic reviews into their processes will be better positioned to mitigate risks and capitalise on emerging opportunities.
The art and science of product portfolio management
For many organisations, balancing the introduction of new products without unsettling the existing lineup is as much an art as it is a science.
On one hand, unchecked growth in the product range can lead to a bloated portfolio that is misaligned with overall strategic goals. Outdated products that remain in stock take up warehouse space, tie up capital, increase the risk of obsolescence and divert resources from stock with more opportunity attached to them.
The cost of missing out on launching new, promising products – or not adequately forecasting their inventory needs – can lead to missed sales, declining market share and lost revenue opportunities.
However, introducing new product lines comes with its own set of challenges. Without historical sales data, it can be difficult to predict demand accurately, often leading to overstock or shortages. New products can also cannibalise sales of existing items (and vice versa), impacting overall portfolio performance.
A well-executed product portfolio review can manage these risks and opportunities by providing a structured process to evaluate which products to phase out, invest in or scale back, aligning the portfolio more closely with both market demands and strategic goals.
Key considerations for a product portfolio review
An effective product portfolio review is about more than counting stock. It also demands a close analysis across three critical dimensions: economics, supply chain complexity and brand positioning.
To start with, an economic analysis needs to drill down to the SKU level and product family level, assessing how each item contributes to revenue and cost structures. This involves considering gross margins, inventory turnover, customer segment profitability and overall market potential. For instance, some products may be highly profitable with certain customer segments but less so with others. A detailed profitability analysis that considers product, customer and location will guide data-driven decisions about which products to prioritise, adjust or phase out.
Secondly, every product has its own impact on the supply chain. High minimum order quantities, long production lead times, offshore vendors and specific manufacturing requirements add layers of complexity. For instance, if a product needs to be ordered in large quantities but has sporadic demand, it can result in inefficiencies and higher carrying costs. Products that are costly to manufacture or source may need a reassessment of their place in the portfolio.
The final dimension, brand, is perhaps the least quantifiable – yet no less critical. Some products may not be particularly profitable but hold strategic value for brand positioning. For instance, a retailer might offer high-demand, low-margin items that draw in customers, creating opportunities to upsell profitable accessories, subscriptions or related products.
Similarly, certain products might enhance the brand’s reputation for reliability by being readily available over time, even if they don’t generate high margins. This consideration ensures that inventory aligns with brand image and customer loyalty, especially for products that reinforce a company’s core value proposition, such as reliability or a broad selection.
Best practices for an effective product portfolio review
A successful product portfolio review process hinges on three essential principles:
1) A people-focused, process-driven approach
Bringing together a cross-functional team with representatives from finance, marketing, sales supply chain, and operations fosters a balanced view and ensures the review is thorough and aligned with organisational goals.
Diverse perspectives not only enhance decision-making but also help address sensitivities across the organisation. Once the right people and processes are in place, technology can amplify the process – but getting these foundations right is critical.
2) Selecting the right metrics
The right metrics are essential for assessing product performance holistically. These metrics should be mapped to the three key dimensions of economics, supply chain complexity and brand value.
Metrics must reflect what matters most to your organisation – such as profitability, operational impact and strategic positioning – and resonate across all the functional areas participating in the review.
3) Let the data speak
Ensuring a team agrees that there are “no sacred cows” is crucial to an objective – and therefore, effective – review. Allowing the data to drive decisions ensures the portfolio is assessed on its actual performance rather than internal biases.
Engaging an external partner can further support this neutrality, providing fresh insights and countering potential blind spots within the organisation.
From inventory control to strategic asset
When elevated to a strategic level, a regular product portfolio review becomes much more than inventory management – it becomes a powerful tool that aligns product offerings with customer needs, maximises resource efficiency and strengthens the brand’s competitive edge.
For leaders, this perspective shifts managing the product portfolio from a routine operational task to a vital part of the company’s growth strategy. Instead of seeing product management as simply functional, it can be recognised as a key driver of profitability and brand strength – empowering the organisation to not only manage risk but also lead with agility and outpace competitors in a market that never stands still.
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