Imagine that at the board meeting CFO asks CPO: how much money will we make on this new product? CPO answers: it may be 1M USD but also just 1K , I am not sure ….

1. Even the best market research/product discovery won’t give you a guarantee that people will buy your product at the volumes you estimated. It happened to me when building my first startup.

 2. Your product may require some improvements, you can also get into some technical issues that you discover only when you pilot your MVP at a larger scale. It can postpone GoLive and leave you with few quarters with no revenue while you bleed out spending money on engineering.

 3. Your business model may need updating, after a pilot GoToMarket you learn that the product can serve another persona better than the original one, you end up taking your excel PnL and updating it.

4. The pricing may be a bit off too. You update your Excel sheet again and your CFO is going bananas as she makes sure we have money to pay salaries every month and you keep changing the numbers.

 5. You may underestimate what a change product delivers to the users and you end up spending months on educating your clients. A result? Less or no revenue! 

This is why so many companies avoid creating truly new products which is not bad thing for the short terms goals. It may be even great as you can focus one product alone. But it may harm your competitive position in a long run. I’ve seen companies who were super successful with one product but behind the scene they had a list of mostly failed projects and some “dogs” – products that were barely making money. 

Firstly, be aware of the difference: making a truly new to-the-company product is like building a startup –with its pivots, uncertainty and focus on discovery. Things won’t get better if you shout at people.This was nicely visualized by Alex Osterwalder at the below picture

Figure 1 – Business Model Portfolio by A.Osterwalder

Whenever possible ask client for a cash advance or a pre-payment even if the product is not yet there – the best way to check if someone is serious about spending money is to simply ask for it. If the product is risky ask clients to participate financially in R&D so we can reap the fruits later together. You can be surprised that in many companies there are true innovators willing to improve their business when given chance and inspiration.

 Use special forecasting techniques like Bass diffusion or Atar (Awareness-Trial-Availability-Repeat) models – they take into consideration how new products get adopted in a population. You can read about them in PDMA Body of Knowledge. I wish I have known them when I took responsibility over the portfolio for the first time.

You can simple create a contingency reserve in your budget. Newer to the company and market the product, larger the reserve.

Finally, use portfolio management techniques like BCG Matrix to distribute the risk. Accept that some of your new products will fail but if you make then 5-10% of your portfolio they shouldn’t harm your financial situation too much. 

Figure 2 – Product portfolio structure in PDMA NPDP Program

Building company’s process of risk distribution, allocating resources to the right NPD projects will be a subject of Product Portfolio Management class that is held online on 26-27 September.  

If you want join the group of Certified Product Portfolio Managers, check the details here

Thank you for your time. Written and edited 100% by a human being – with no AI:)