Most medium to large companies have product lines that for one reason or another have become non-strategic. These “orphans” are not always recognized as such and are typically the result of both successful and unsuccessful attempts at innovation.
When a company successfully innovates in one area, it is often the case that some of its prior product lines may become less strategic to them as the successful innovation creates more promising opportunities in a different direction. It is also common that an innovation effort results in a product that is commercialized before the realization that the market opportunity is insufficient to justify any additional investment required to fully achieve its value proposition.
In either case, it is important to recognize and deal with such orphan product lines as they can present a drag on future innovation if not handled appropriately.
How do you recognize these underperforming product lines?
A non-strategic product line is most easily recognized as the product for which you wouldn’t consider further investment in comparison to others in your portfolio. If this was the only issue and the product was profitable, you could happily “milk” it or consider a sale of the product while it still had value to another company. If there were no other complications and the product was not sufficiently profitable, you could discontinue it. However, profitable or not, the orphan usually presents more complexity than this.
The profitable product line may be too small to attract a buyer and it may also be considered too important to key customers (even if not profitable) to discontinue. To further add to the complication, because of concerns about key customer satisfaction to some, if not many, in your organization it is not sufficient to simply harvest the product line. There are likely to be continual arguments about additional investment in channel or product development to grow sales and/or demonstrate to your customers that the company still cares about their needs.
No one likes to be responsible for upsetting customers or giving up revenue, so the default solution for such a product line is a limbo state alternating between harvesting the product and sporadic inefficient investment in an attempt to keep it relevant.
What are the best strategies for addressing non-strategic product lines?
If any of this sounds familiar, you are caretaker for an orphan. There are really three potentially sound solutions for such an orphan when you are convinced that your investment dollars are best spent elsewhere; divest, discontinue or harvest.
To sustain an innovative culture you will inevitably create some orphans and, once recognized, must decisively execute one of these three options. If not, you will expose your organization to an inefficient use of limited capital and a drain of organizational energy while engaging in on-going debates of efforts that would lead to marginal value creation at best. These activities will suck the capacity for innovation right out of an organization.
Since these non-strategic orphans are often the consequence of innovation, effectively managing them is critical to an innovative culture. If these orphans are not effectively managed, you risk killing the culture and investment capacity that created the new opportunities that now demand your team’s time and attention.