Product innovation is the key to win customers. Analyze your product portfolio, and find business growth opportunities.

1. Analyze Your Product Portfolio
&
Find Growth Opportunities
Prepared by Kevin Huang
September 10, 2015

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Why Analyze Your Product Portfolio?
 The markets/competitions/technologies/consumers are
changing rapidly.
 Encourage management to evaluate each of the organization's
businesses individually and to set objectives and allocate
resources for each.
 Stimulate the use of externally oriented data to supplement
management's intuitive judgment.
 Raise the issue of cash flow availability for use in expansion
and growth.
 Evaluate the market risks, growth opportunities or find ways to
improve the profitability.

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Key Tools to Analyze Your Product Portfolio

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BCG Matrix
 Developed by Bruce Henderson of
the Boston Consulting Group in
the early 1970's.
 Based on the product life cycle
theory that can be used to
determine what priorities should
be given in the product portfolio
of a business unit.
 A company's business units can be
classified into four categories
based on combinations of market
growth and market share relative
to the largest competitor.
 Market growth serves as a proxy
for industry attractivenessindustry attractiveness, and
relative market share serves as a
proxy for competitive advantagecompetitive advantage.

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The Four Categories Are:
DOGS - Dogs have low market share and a low growth rate and thus neither
generate nor consume a large amount of cash. However, dogs are cash traps
because of the money tied up in a business that has little potential. Such businesses
are candidates for divestiture.
Managing Dogs
Get rid of them (poor dogs!)
Differentiate for a niche market

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QUESTION MARKS - Question marks are growing rapidly and thus consume
certain amounts of cash, but because they have low market shares they do not generate much
cash. The result is a large net cash consumption. A question mark (also known as a "problem
child") has the potential to gain market share and become a star, and eventually a cash cow
when the market growth slows. If the question mark does not succeed in becoming the
market leader, then after perhaps years of cash consumption it will degenerate into a dog
when the market growth declines. Question marks must be analyzed carefully in order to
determine whether they are worth the investment required to grow market share.
Managing Question Marks
Divest
Invest more resources in
winning market share

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STARS- Stars generate large amounts of cash because of their strong relative market
share, but also consume large amounts of cash because of their high growth rate; therefore
the cash in each direction approximately nets out. If a star can maintain its large market
share, it will become a cash cow when the market growth rate declines. The portfolio of a
diversified company always should have stars that will become the next cash cows and
ensure future cash generation.
Managing Stars
Invest substantially to
sustain growth
Increase sales
New markets
New channels of distribution

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CASH COWS - As leaders in a mature market, cash cows exhibit a return on assets
that is greater than the market growth rate, and thus generate more cash than they
consume. Such business units should be "milked", extracting the profits and investing as
little cash as possible. Cash cows provide the cash required to turn question marks into
market leaders, to cover the administrative costs of the company, to fund research and
development, to service the corporate debt, and to pay dividends to shareholders. Because
the cash cow generates a relatively stable cash flow, its value can be determined with
reasonable accuracy by calculating the present value of its cash stream using a discounted
cash flow analysis.
Managing Cash Cows
Maintain market share
Invest in quality
Customer loyalty
Maximize cash flow
Increase usage rate
Replacement rate
Raise Prices

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The BCG matrix once was used widely, but has since faded from popularity as more
comprehensive models have been developed. Some of its weaknesses are:
 The framework assumes that each business unit is
independent of the others. In some cases, a business unit that is a
"dog" may be helping other business units gain a competitive
advantage.
 The matrix depends heavily upon the breadth of the definition
of the market. A business unit may dominate its small niche, but have
very low market share in the overall industry. In such a case, the
definition of the market can make the difference between a dog and a
cash cow.
While its importance has diminished, the BCG matrix still can serve as a simple tool for
viewing a corporation's business portfolio at a glance, and may serve as a starting point
for discussing resource allocation among strategic business units.
BCG Matrix Limitations
 The BCG matrix overlooks many other factors in these two important
determinants of profitability. Market growth rate is only one factor in
industry attractiveness, and relative market share is only one factor in
competitive advantage.

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Another Portfolio Mapping/Planning Tool (Better Too!)
McKinsey/General Electric Matrix uses market attractiveness rather than
market growth as the y axis and competitive strength rather than market share as the x axis.
 The size of the pie represents the total market size and the slice size indicates the market
share captured by the SBU. Arrows are added to indicate the projected direction of
movement of the SBU's over time.
 Multiple indicators are
used to assess market
attractiveness, including
 Multiple factors are used
to assess competitive
strength, such as
 The process for locating the SBU's within the matrix involves identifying drivers for each
dimension, scoring the SBU's against the drivers, weighting the drivers, and multiplying
weights times the scores.
 Current market share
 Brand image
 Production capacity
 Profit margins relative to
competitors
 R&D performance
 Promotional effectiveness
 Annual market growth rate
 Overall market size
 Historical profit margin
 Current size of market
 Market structure
 Market rivalry
 Demand variability
 Global opportunities

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McKinsey-GE 9-Box Matrix
High
Medium
Low
Market
Attractiveness
Competitive Strength of Business Unit
Amazon Devices Business Unit
70%
2.3%
1%
8%

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High
Medium
Low
Market
Attractiveness
Competitive Strength of Business Unit
McKinsey-GE 9-Box Matrix
Identify the Priority for Investment /Attractiveness

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Questions to Ask Yourself
 Are the markets and market segments you serve conducive to
continued profitable growth for your business?
 Are your current customers the right ones to drive new sales
and profitable growth?
 Have you identified and focused on current unmet customer
“want and need” opportunities that could help you grow your
business?
 Are your competitors reacting to your approach to the
market?
So how well are your products and services positioned?
A “No” answer to just one of the following questions indicates it’s time
to leverage current market knowledge in your favor and enhance your
product portfolio management:

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Be Effective in Your Product Portfolio Management
Using a simple 4 Step Market Analysis Process can help you
make your product portfolio management more effective.
Step 1 — Are You Where You Need To Be? What changes/adjustments are
needed?
Step 2 — In-depth 3-C Analysis
• Your customers
• Your competition
• Your company
Step 3 — Develop Positioning/Differentiation Strategies That Win Business
Step 4 — Implementation. Writing a Strategic Product Plan That Wins
Business

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Product Portfolio Management tools are
good to evaluate your “CURRENT”
products/projects, but they don’t really help
to generate “INNOVATIVE” product ideas!

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Case Study: Apple

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Apple has already radically
altered a few different
markets in its time. The
company changed the way music is
sold and distributed, for instance,
and few could argue that Apple was
not the driving force behind the
tablet (Apple completely changed
the netbook market by completely
killing it off with the iPad) and
smartphone markets as they are
today.

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Apple’s Revenue Mix by Region & Product

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Apple Revenue Growth

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What Market Could Apple Revolutionize Next?

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Change how
people pay
Change people’s driving
experience?
Apple Continues to Disrupt Industries

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Apple’s WWDC 2015 Announcements

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New Apple Products Announced on Sept 9, 2015
They don't like disruptive innovation, don't like huge changes, they like
minor improvements. At Apple, Innovation Has Finally Left The Building?
iPad Pro: A big iPad with
more sensitive touch. Concept
of Microsoft Surface Pro?
Apple Watch is simply
a smaller iPhone?
What are they adding
to Apple TV to make it
so innovative? Games.
Let’s pump up the
processor a bit, add the
force 3D tech and one
more color, and roll out
a new set of phones.

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Apple has seldom been a company keen on
being ‘first’. Rather, the company remains
laser focused on being the best.
Their breakthrough
innovation came with the
iPhone. Everything else is
simply an extension or an
expansion (or in the case of the
Apple Watch, a reduction).

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So, can you still call Apple
the most innovative company
in the world?
 or the “best incremental
improvement company” in
the world?
 or the "best marketing company" in the
world, but innovative?

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What Could Be Apple’s Next Disruptive Innovation?
For WORKFor LIFE
For PLAY
Travel?
Shopping?
Health &
Wellness?
Wireless
charging?
Virtual-Reality?
Drone?
Robot? IOT
Platform/
Appliances?
Change how people work “together”?