Role of New Products in the Portfolio
New products bring greater risk to the product portfolio but also greater potential reward. The goal of portfolio management is to balance risk in order to create strong performance today and in the future. Though new products can drain resources in the short run, they are positioned to generate new sales in the long run—and to take off when other products are entering stages of maturity and decline.
The early investment in multiple new iPod models that were not growing quickly created a future base for the growth of the iPod. That, in turn, generated returns and positioned the Apple brand for the development and release of the iPhone. Johnson & Johnson’s medical products division has aggressively invested in new products that can spur growth and divested from products with declining sales. Still, in the first three quarters of 2015, overall growth for the division is down. It is not yet clear whether the new products will generate enough growth to replace the growth of their predecessors.[1]