Adopting the Investor Mindset: Strategies for Product Portfolio Management that Drive Value and Minimize Risk
Invest in Your Products Like You Would Your Portfolio: A Strategic Roadmap for Product Leaders
Consider your product's heart—its users and stakeholders. They're your investors. As a product leader, you aim to deliver outstanding value (or returns) while adeptly minimizing risk. Does this sound familiar? That's because you've stepped into the shoes of a fund manager, and your portfolio is the ensemble of your products.
Here are the three strategies for applying the investor mindset to your product portfolio management.
Core Business Bets (Passive investing):
According to the web, "Passive investing is a long-term investment strategy that involves gradually buying and holding investments to build wealth over time. The goal is to match the market's performance rather than trying to outperform it.
Like passive investing, your primary focus should be ensuring that the core business can sustain and endure so it can help foster other risk-seeking bets. What does that mean in the product sense? This may involve optimizing current features for better performance, fixing bugs, improving user experience, and addressing pressing customer needs while continuing to drive growth and margins. These actions ensure your product consistently offers value, retains present users, and lures in new ones. Â
Incremental Innovation Bets (Value investing):Â
According to the web, "Value investing is an investment strategy that involves buying assets, such as stocks, bonds, or real estate, at a price lower than their intrinsic value. Value investors use fundamental analysis to identify and purchase underpriced securities.
Like value investing, your focus here is to make calculated bets on underexploited opportunities, such as entering adjacent markets. Incremental bets could be new features or product extensions that tap into identified yet underutilized market opportunities.
Moonshot Bets (Venture investing):Â
According to the web, "Venture capital is a type of investment that provides financial support and expertise to early-stage companies with high growth potential. Venture capitalists invest in these companies by buying minority equity stakes and helping them grow and succeed.
Like venture investing, your strategic bets could be transformative, innovative product ideas that have the potential to disrupt the market and create incredible revenue streams but have yet to be proven. While high-risk, they also offer substantial rewards. Making these bets necessitates understanding market direction, technology trends, and shifting user behaviors. It also demands crafting compelling visions of the future and aligning stakeholders toward these visions.
Portfolio Management Principles:
Meaningful Diversification: Just as investors diversify their portfolios to mitigate risk and enhance potential returns, your product portfolio should span various stages of the product lifecycle and different market segments.
Thoughtful Resource Allocation: Consider the potential return of each investment category, the company's risk tolerance, and strategic direction—a 70:20:10 resource split is a good rule of thumb for allocating resources across the portfolio of bets.
Relentless Focus and Prioritization: Measure the performance of each category of bets and evaluate whether to continue investing or sunset products. Taking an investor mindset can equip you and your organization to be tough and avoid falling for the sunk cost fallacy when deciding whether to keep the poor-performing products in support or sunset them.
What approaches or measures do you take when managing a portfolio of products?Â