Before company management begins to develop any strategy, it is worth starting with a thorough self-assessment, i.e. reviewing and evaluating the company's current product and service portfolio. To do this, two basic criteria must be distinguished and the elements of the portfolio must be graphically represented along these lines. One aspect is profit, i.e. how attractive the market is and how much growth potential it has. The other aspect is market risk, for example in the form of a new competitor or substitute product/service. A company that competes primarily on the quality or pricing of its products and services is easier to disrupt and defeat than a company with a unique and therefore competitive business model. Even the strongest business models can be disrupted by external factors, which can come from a number of different areas. Such disruptive forces can include changes in markets, technological, social, environmental and regulatory changes, supply chains and macroeconomic conditions. Market-type risk is highest when a business is still in its early, startup phase and vulnerable, or when a mature business is threatened by disruptions caused by technological developments, the emergence of new competitors, regulatory changes or other trends.

 

Ideally, the products and services that make up a company's portfolio generate increasing revenues in the early stages of their life cycle, which then begin to decline after a while with the emergence of substitute or radically new products and services launched by competitors. In such a situation, the goal of company management is to prevent the decline of existing business models by continuously protecting, developing and reinventing them (Figure 25).

 

 

Possible development actions related to the company's existing product and service portfolio may include the following:

 

Launch and scale

The first growth phase, when a real business or venture is built on a proven and promising opportunity. Key activities include customer acquisition, customer retention and scaling product/service delivery. The entire team focuses on expansion on all fronts, including infrastructure and human resources.

 

Momentum

It boosts and sustains the growth of a proven business model through continuous innovation. It strengthens its business model with new solutions related to existing products and services, new sales channels and the exploration of new markets in order to become a robust and significant revenue generator.

 

Retention and defence

It focuses on maintaining the strong position of its business by continuously increasing its efficiency and defending itself against competition. At this stage, the business is a significant market player and highly profitable, but its growth is stagnating and it typically focuses on efficiency innovations.

 

Threat of breakthroughs

At this stage, your business is still large and profitable, but it is at risk because changes in the external environment make it vulnerable. Disruptions can come from technological, social, environmental or regulatory changes; the transformation of supply chains; new entrants; or a changing macroeconomic environment.

 

Crisis

External forces disrupt the company's markets, and technological breakthroughs bring more efficient solutions to the market at competitive prices, causing the company's revenues to decline rapidly. The outdated business model needs significant changes to avoid the company's markets shrinking or possibly going out of business.

 

Change and resurgence

Successful innovation leads to a shift from an outdated business model to a renewed one. The new business model ushers in a new era of growth.

 

This is the theory, but how can the above possible directions and trajectories be managed effectively? Following a product and service portfolio analysis, the company's management/owner(s) can decide on a number of different actions related to the management of their current business models and alignment with the corporate identity. These actions may include divesting products and services that are no longer relevant, making minor or radical changes to existing business models, launching new ventures, and selling or liquidating business lines or ventures that no longer fit into the portfolio.

 

The above actions can be freely combined and tailored to the needs of management and owners. However, it is important to emphasise that portfolio mapping should precede actions and not the other way around, i.e. portfolio visualisation should not be used to justify predetermined actions. Furthermore, the preparation of decision options should ideally go hand in hand with the exploration of different types of innovation opportunities that go far beyond efficiency measures and minor changes to the product or service portfolio. These typically take the form of new products and services, new sales channels, new manufacturing technologies or international expansion. The literature considers the exploration of opportunities outside a company's traditional sphere of activity to be radical or transformative innovation. This type of innovation usually requires a radical change or expansion of the company's business model. This includes opportunities that help the company expand and grow, but also opportunities that completely disrupt existing business lines.