Platt Perspective on Business and Technology

Building for an effective portfolio of marketable offerings 2: building an analytical tool set 1

Posted in macroeconomics, startups by Timothy Platt on October 14, 2014

This is the second posting to a series on the factors and considerations that would help a business to more effectively determine its best range and selection of offerings that it would bring to its market, focusing here on manufacturers (see Part 1.)

I began this discussion in Part 1 by conceptually dividing tools and approaches for managing manufacturer product and service portfolios into two general, broadly defined categories, which I identified as being internal to or external to the offering portfolio itself in how they organize and analyze data. I will at least begin to focus on externally oriented tools and approaches in a next installment Part 3 and will delve into the issues of internal-to-the-portfolio tools here in this one. And to being that I repeat with some rephrasing, the definition of this analytical approach that I initially offered in Part 1:

Tools that utilize an internal to the portfolio focus in determining an effective offerings portfolio: When a business develops and offers a suite of products and/or services, its overall goal is generally to assemble a set of offerings that complement each other and in ways that make all of what they offer more competitively attractive in their marketplace. This often means offering combinations of products, or of products and supportive services that work together and that collectively increase perceived value for the purchasing consumer, and from their perspective.
• Think of this approach as analyzing a core business development problem from the perspective of end user sales, and from a marketing and viral marketing perspective and from how the full set of marketable offerings provided fit together in those outwardly connecting contexts.
• But at the same time this approach calls for effective focus on that manufacturer’s core business and its needs.

To put this in perspective, and as a point of comparison I begin by at least briefly considering the retail inventory problem. What types and combinations of purchases are their customers more likely to make together? Where would you as a retail store owner and manager expect to see marked statistically significant correlations between the sales of some product offering A, and a second item B? That can mean a store offering the convenience of one stop shopping where for example a customer can walk into one business and purchase essentially everything there, at one time that they would need for grilling a meal on a backyard barbecue grill. This can mean making it easier for that customer to find compatible products where brand name and model compatibility are important. So for example, a home center store might sell a particular brand and line of outdoor grills, and also offer the disposable aluminum foil drip pans that would be used with them for easier cleanup after cooking. And this same store would also, of course sell charcoal and products like hickory and mesquite chips that could be used to imbue smoke flavors into grilled food, and gas grill propane tanks and tank refills for people who use that approach to backyard cooking. What do real world customers want to have and use together, and of those product combinations what would it make the most sense for a store to coordinately offer? Most backyard barbecuers would hope to never have to use one but most safety conscious backyard cooks would want to have an appropriate fire extinguisher handy too just in case, and one that would be compact and easy to use if they did face a grill fire that needed extinguishing. So this home center store would probably offer these too and it might even explicitly position them in the same general area of the store as their “grill center”.

Now let’s reframe this same scenario from the manufacturer’s perspective where direct costs and ongoing infrastructure expenses that would be called for to produce these items have to be accounted for too. A retail store that can competitively select from possible wholesale and direct-from-manufacturer options in building its inventory, does not face those issues but an original source producer and manufacturer would. They have to build and maintain the specialized production and assembly, and related infrastructure systems needed to manufacture, and if they are to remain competitive in their industries and markets they need to focus their resources on their core marketable strengths and not dilute their efforts in extraneous directions. So to stay with my backyard cooking supplies and equipment example, a manufacturer would probably find it much more cost-effective to produce a line of propane gas fueled grills, or even separate lines of gas and charcoal fueled grills, plus disposable supplies that these grills would all need and that would have to be specifically compatible for fit and function with them (e.g. those disposable drip pans.) But it is less likely that they would also seek to produce their own grilling rubs or barbecue marinades for use on the food that would be cooked on those grills too. That would fall outside of their core business.

But even there, simply producing those disposable drip pans might fall too far out of their effective range if they are to remain focused on their core business strengths and on offering a unified cost-effective source of value to their markets. So they would either design and build their grills to be compatible with standard aluminum foil drip pans that work on other manufacturer’s grills too, or they would negotiate a contract with another more-specialist company to produce these drip pans specifically for their line of grill products. Then this becomes more of a supply chain issue. And coordinately ensuring that both their grills and any necessary disposables that would be used with them are going to be readily available, and both to those retail stores and to their end-user customers, would be more like outsourcing production of specialized parts or subassemblies for their own grills where that would be more cost-effective.

• The points that I raise here are in fact crucially important for any manufacturer, and certainly if they actively seek to be as competitively effective as possible in their industry and marketplace by assiduously focusing on their core strengths and by offering defining sources of value there.

I am going to continue this discussion in a next series installment where I will consider a wider range of analytical tools besides just correlation analysis of sales made, or here of product offerings that might cost-effectively be produced and sold together – which in and of itself is a primarily reactive, after the fact tool. I will then as noted above turn to consider analytical approaches and issues that are more external to the offering portfolio itself. And then I will at least begin to explore the issues of vertical integration and of width and depth of products and services offered, and both as this creates business strength and competitive position and for how ill-considered diffusion here can lead to problems. Meanwhile, you can find this and related material at Macroeconomics and Business and also at Startups and Early Stage Businesses. And also see Business Strategy and Operations and Page 2 and Page 3 of that directory.

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