Mark Blackwell, Arkaro
As S&OP evolved into IBP, with greater involvement from the Executive Team and an increased focus on finance, the Product Review became a part of the monthly management process.
Given that the Product Review is not as time-critical as other steps in the monthly cadence of an S&OP or IBP process, its importance can easily be downplayed. Indeed, if viewed merely as a communication process for new product introductions, some may question its necessity for businesses or product lines with limited product range or innovation.
Let’s address these perceptions and explore how the Product Review can bring value to a business, even if the product line is limited in range.
Setting the Tone for the Planning Horizon
Consider the Product Review as the immediate decision-making process following the Executive Meeting (may be known as the “Management Business Review”), designed to guide the execution of strategy over the entire planning horizon. In a well-developed process, at least 70% of discussions should focus on the 4 to 24-month planning horizon. Starting the cycle with the product review helps to ensure focus across the planning horizon and prevents the process from degenerating into merely meeting quarterly targets.
Decisions should aim at executing and refining the strategy to maximize the profitability of the product portfolio over the 24-month planning horizon. Even if there is only one product line in the portfolio, decisions on optimizing its profitability are still essential.
Think of product line strategy as the guiding principles that maximize profitability by balancing the following
1. What does the market want, and what is it willing to pay for? – Marketing strategy developed from Demand
2. What can we make and sell profitably? – Supply Chain & Operations Strategy developed from Supply
From this perspective, it is evident that Product Line Strategy is not independent or parallel to Marketing or Supply Chain Strategy but is shaped by key inputs from these strategies. and vice versa. Likewise, as we shall see, the innovation strategy and product line strategy are linked to each other.
Moreover, the successful design and execution of Product Line Strategy is crucial to a business and must be led by highly capable individuals, including business development people.
No strategy - No product review
Often people mistakenly regard maximizing profitability as the strategy itself. Maximizing profitability is an objective, not a strategy, as it lacks guidance on how to achieve it.
An iterative monthly process may help develop a product line strategy through increased learning, but decision-making without a foundational strategy is ad hoc and far from optimal. A product review without an underlying strategy is, therefore, questionable.
1. The Demand Side Tension - What does the market want and what is it willing to pay for?
– Different customers in various regions and industries value your offer against the competition in terms of:
- Product supply, including lead times, reliability, minimum order size, and packaging
- Product quality
- Sustainability, including the sum of scope 1, 2, and 3 emissions
– Macroeconomic factors:
- The different environment customers might find themselves in and how their customers might influence demand
- How this picture might evolve over the planning horizon and what opportunities it might present?
2. The Supply Side Tension - What can be made and sold profitably?
- Understand the cost drivers of complexity due to product line proliferation
- Apply the correct measures of profitability to maximize return on invested capital through an understanding of the Theory of Constraints.
For a company with a single product line, it is crucial to understand the dynamics of the demand side to establish policies on “where to play and how to win,” including pricing strategies. However, important cost-to-serve trade-off issues on the supply side also need to be addressed. These challenges become even more complex with multiple product lines.
It should now be clear that as decisions are needed to be made attendees should include representation from the demand and supply side
The Product Life Cycle & Strategy Development
There are components of the product life cycle which inform the product strategy process.
Introduction
The New Product Development (NPD) process should be integrated with the S&OP-IBP process through the Product Review. Product introduction costs are high and impact profitability, and not all products will succeed. Policies must be in place to determine when to discontinue support for inevitable failures.
Of course, to improve the profitability of the product portfolio, new products must offer more value and/or lower costs than existing ones. To ensure the timely and adequate introduction of new products, the Product Review should be closely connected with the NPD Process, such as Stage-Gate™. It is surprising how many businesses believe that innovation should be separate from the core operations. The Product Portfolio strategy should inform the Innovation strategy, which encompasses more than just R&D. Which markets, industries, and applications should be prioritized for innovation projects? – and what are the jobs-to-be done that can best be addressed with the organisation’s capabilities?
Growth
The New Product Development (NPD) process should be integrated with the S&OP-IBP process through the Product Review. Product introduction costs are high and impact profitability, and not all products will succeed. Policies must be in place to determine when to discontinue support for inevitable failures.
Of course, to improve the profitability of the product portfolio, new products must offer more value and/or lower costs than existing ones. To ensure the timely and adequate introduction of new products, the Product Review should be closely connected with the NPD Process, such as Stage-Gate™. It is surprising how many businesses believe that innovation should be separate from the core operations. The Product Portfolio strategy should inform the Innovation strategy, which encompasses more than just R&D. Which markets, industries, and applications should be prioritised for innovation projects? – and what are the jobs-to-be done that can best be addressed with the organisation’s capabilities?
Maturity and Decline
Applying the right measures of product line profitability for decision making during the maturity and decline phases can yield significant returns—profitability should be key factors. Complexity is not necessarily a negative aspect; if you can be compensated for complexity. Building and supporting a complex product line might be a rational. However, compare this with alternative strategies that might offer cost-saving advantages with product line simplification. Price is important – but there are other levers to improve portfolio profitability which is why having a cross-function decision making team including the needed expertise from Demand and Supply can be key.
… and decline is not inevitable. Changing market conditions and needs may enable a relaunch.
Summary - Decisions and Outputs
A good Product Review should encompass much more than indicating which products are entering or exiting the portfolio, including:
- Emphasizes the necessity of executing and evolving strategy through iteration.
- Establishes focus across the 24-month time horizon for the monthly cycle.
- Informs the NPD (New Product Development) strategy and project portfolio management.
- Provides pricing policy for the portfolio throughout the planning horizon.
- Adds another input to the demand plan, extending beyond just new product introductions.
Arkaro is a consultancy specialising in Strategy, Innovation Process, Product Management, Commercial Excellence & Business Development, and Integrated Business Management. With industry expertise across Agriculture, Food, and Chemicals, Arkaro’s team combines practical business experience with formal consultancy training to deliver impactful solutions.
You may have the ability to lead these transformations with your team but time constraints can often be a challenge. Arkaro takes a collaborative ‘do it with you’ approach, working closely with clients to leave behind sustainable, value-generating solutions—not just a slide deck. To learn more, follow Arkaro on LinkedIn.
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