Portfolio Optimization
Portfolio optimization doesn't decide which product is best. It decides which product deserves the next euro of commercial budget, and which must stop receiving one.
“The product that founded the company doesn't automatically have a right to this year's commercial budget.”
Otto GTM ObservatoryThe hidden cost of an unoptimized portfolio
Every product line competes for the same sales team time, the same marketing budget, the same management attention. Without an explicit analysis of margin, growth, and cost to sell per line, budget tends to be distributed by habit or internal political pressure, not expected return.
Honest portfolio optimization requires treating even historical products with the same analytical rigor reserved for new initiatives, accepting that some must receive fewer commercial resources regardless of their symbolic importance to the company.
Anti-patterns
Common mistake: continuing to fund the sales team dedicated to the company's historical product for symbolic or political reasons, even when growth and margin data indicate a lower marginal return than other lines.
Second mistake: evaluating the portfolio only on absolute revenue generated by each line, without normalizing for cost to sell: a product with lower revenue but a much lower acquisition cost can generate more net margin per euro invested.
Practical Application
A company with three product lines discovers the historical line generates 52% of revenue but only 18% of net margin, due to a longer sales cycle and structurally higher discounts. Reallocating 30% of commercial budget from the historical line to the higher-margin one, overall net margin grows 22% the following year, with almost unchanged total revenue.