When your portfolio becomes a museum: Why product innovation needs space

You're successful. And that's exactly why it's worth taking an honest look at what's on the shelf now.

Many decision makers in mechanical engineering, plant engineering and automation technology have built up extraordinary things in recent decades. Sturdy products. Reliable delivery capacity. Customer relationships that don't end with the next quarter. That is a real achievement.

However, it is precisely this success that can have an invisible side effect. The portfolio grows over the years, not according to plan, but according to the occasion. A special version for a major customer. A feature that sales promise “even faster.” An old series that you don't discontinue because there is still a market attached to it somewhere. That feels like being close to the customer. In sum, however, something completely different is often created. A portfolio that doesn't support innovation, but manages it.

A scene from my practice shows this very clearly. A component supplier had products that had been developed for a major customer. These products were still sold years later, only in irrelevant quantities. For relationship reasons, the sales manager insisted on continuing to receive these products. He did not want to offer replacement products from the existing portfolio. The costs of maintaining and procuring the parts were high. Nevertheless, action was taken against economic sanity here. That is rarely bad faith. It is more of a pattern. And it is a typical entry into the portfolio trap.

At the end of this article, you can separate three things cleanly:

• Portfolio diversity that differentiates strategically from diversity that creates complexity without yield
• Portfolio adjustment as a lever for innovation, not as an austerity program
• A pragmatic approach for a strategic portfolio check that gives you fresh air for product innovation

The portfolio trap: When success turns into a threat

Portfolios rarely become too large on purpose. They get big because the organization delivers reliably, and because “yes” initially seems like a virtue in sales and development.

In reality, typical growth drivers often look like this:

• A key customer wants a special version. You make it possible.
• A system needs a specific interface because otherwise it does not fit into the line environment. You add to them.
• A sensor or drive gets another variant because a segment is “so used to it.” You let them go with you.
• An old system remains on offer because you don't want to annoy anyone. You postpone the decision.

The consequences are gradual. They don't see it as a big problem, but as “everything takes longer”:

• Coordination takes time because every variant has an impact on purchasing, production, quality and service.
• Tests are getting more, documentation is getting more, approvals are getting tougher.
• Spare parts inventory and supplier management are growing.
• The sales department sells what they know. Innovation stays on paper.

Technical literature describes this “variety-induced complexity” as a cost and performance trap, because variants not only multiply material, but also processes and coordination.

Why this hurts especially in mechanical engineering, plant engineering and automation

In your industries, diversity is often part of the business. Customer processes are different. Plant concepts vary. Integration into existing production environments is rarely plug and play.

The problem is not diversity per se. The problem is undirected diversity.

In practice, I see three typical “complexity accelerators”:

• Project business and special solutions, which later disguise themselves as permanent product variants
• Technology transitions, for example from purely mechanical solutions to mechatronic and software-heavy systems
• Service realitybecause every variant has to be serviced, documented and serviced later in the field

If you don't control this, the portfolio grows like a warehouse that no one systematically sorts into anymore. And then something paradoxical happens. They have many products but too little capacity for new products and innovations.

A strategic portfolio check: The big picture instead of variant debates

You've decided that you want to approach the issue strategically. That is exactly right. Portfolio management and PLM (product life cycle management) are not an Excel (or ERP) discipline, but a strategic task. The implementation of PLM workshops is important, but they must follow a clear goal.

A portfolio check at management level should deliver three results in just a few weeks:

• Transparency on which parts of the portfolio earn money, which merely show a turnover and eat up which capacity
• Decision logic, for reducing retiring or modularizing variants
• Unlocked resources that consciously flow into product innovation, not into the next daily business fire

To ensure that this does not end in discussions, clear questions are needed.

Three questions that provide clarity

From my experience, there are essentially free questions that you want to address:

1. ‍What are customers really paying for today?
   ‍Not “customer wants that.” But “the customer pays for it reliably and on a scale that justifies the complexity.”‍
2. What ties up a disproportionate amount of effort?
   Don't just look at quantities. Look at change costs, testing costs, documentation costs, service costs.‍
3. What would you no longer develop today if the product did not already exist?
   That is the most honest mirror. And it separates relationship maintenance from portfolio management.

If you answer these three questions consistently, you usually quickly get a list of variants that no one can seriously defend anymore, except with history.

Effective in practice: The third axis called “complexity burden”

Many portfolios are only managed in two dimensions. Sales and margin. These are good KPIs but that alone is not enough.

Add a third axis, the complexity load. You don't have to measure them perfectly. All you have to do is make them visible.

Pragmatic indicators that work well in your industries:

• Number of active variants per product line
• Number of technical changes per quarter
• Test and approval costs for each variant
• Complaint rate and service cases per variant
• Variety of spare parts and supplier risks

Why this works: Because complexity costs are often not clearly visible in accordance with the cause. The scientific discussion shows that variants can increase complexity in components and processes and distort profitability if these costs are not allocated transparently.

Customer relationships matter. But they must not replace the product strategy.

Back to my practical example with the component provider. The conflict was not technical. He was psychological. Relationship logic versus economic logic. This often happens when there is no clean decision-making rule. Decisions are then made “from the gut”, usually with the best intentions.

A viable rule in B2B industrial environments is:

• When a variant is strategic, it gets a clear pricing model, a clear roadmap and clear responsibilities.
• If it is not strategic, then it needs a backup path and discontinuation logic.

Communication is important. Customers accept alternatives if they can be planned, are at least cost-neutral and the replacement product is easy to integrate. Customers accept little when decisions come as a surprise or when no one can explain what gets better instead.

Reducing variants without a bloodbath: Four building blocks that significantly reduce conflicts

When you reduce complexity without losing trust, these four building blocks work in practice:

• Define replacement paths: Which standard products replace which special products, technically and commercially. Prepare a migration path
• Set timelines: Dismissal is a process. With clear deadlines, transition periods and service commitments after last-time buy.
• Regulate service cleanly: Spare parts supply and maintenance for old variants must be predictable, otherwise they will block your service organization later. And spare parts are always “inventory”, i.e. tied up capital, if necessary.
• Deliberately price exceptions: If you allow exceptions, then not for free. Special variants are premium, not habitual. And longer terms are associated with costs (see above), so that price adjustments certainly have to be argued

In this context, BCG describes the advantage of a health check, which combines a market and supply chain perspective to reduce complexity where it hurts and to preserve diversity where it benefits.

Product innovation is easier when you treat “less at the same time” as a strategy

A common mistake in thinking is to solve product innovation through additional projects. In reality, companies often win by consistently stopping, not by starting. If you run too many initiatives in parallel, there will be a project backlog. Resources are crushed, decisions are postponed, and in the end, you have many half-finished projects.

Harvard Business Review describes exactly this dynamic as project overload that blurs priorities and slows down implementation, and cites practical habits to consciously focus.

Transferred to product innovation, this means that a streamlined portfolio is not just a cost lever. It is a focus machine and relieves your R&D resources.

How to ensure freed-up resources actually flow into innovation

The decisive step comes after the portfolio decision has been made. What do you do with the freed up capacity? If you don't consciously steer here, the capacity immediately returns to day-to-day business. It's human. But it's taking away the space you've just freed up for innovation.

An effective set-up in SMEs often looks like this:

• A clear focus on innovation per half-year, few initiatives and these financed and equipped with sufficient personnel
• A defined portion of development time that is protected for innovation projects
• A steering that makes decisions in terms of the effectiveness and progress of innovation initiatives

And yes, this includes workshops with development, purchasing, production, sales and service. Only then do they come on the basis of a clear strategic vision, and less as a search movement within the company.

Data, PLM and AI: The short cut to portfolio transparency

A treasure is often already available in mechanical engineering, plant engineering and automation. Data from PLM, change management, service reports, complaints, spare parts movements, offer data.

The bottleneck is usually not the lack of data, but the structure in which it is available.

McKinsey describes how generative AI can speed up portfolio work because it condenses information from many sources more quickly, accelerates portfolio analyses and prepares decisions.

It is important to have the right requirements. AI doesn't make a strategy. However, it can help to move the discussion from gut feeling to factual basis. And that saves time, which you can better invest in product innovation.

The target state: What you have after a strategic portfolio check

A portfolio check is successful when you not only have insights at the end, but also decide on your strategy on the basis of this. A clean result image includes:

• a prioritized list of variants that are expiring, consolidated or transferred to construction kits as a target image for product managers
• a clear roadmap of which platforms and product lines will be renewed
• A resource image that shows how much capacity is being diverted into innovation
• a line of communication for sales and service so that customers are not unsettled

That sounds obvious. But it is rare. Because many organizations have been trying to please everyone for too long.

Conclusion: Portfolio work is product innovation - explicitly

The portfolio trap is tricky because it feels like stability. In reality, it makes your business slow. And slowness is an expensive situation in technology and capital goods industries.

If you reduce complexity in a targeted manner, you gain twice:

• They reduce hidden costs and reduce operational friction.
• They create capacity to consistently develop new products, platforms and digital expansions.

The core idea in one sentence:
Product innovation requires space and resources. These are created through strategic portfolio analysis and decisions.

Let's get in touch

If you want to check whether your portfolio is currently strengthening or slowing you down, let's talk. In a compact strategic portfolio check, we identify the biggest complexity drivers and the fastest levers to consistently bring product innovation forward again.

Five key questions

Ask yourself the following five questions to give you an initial overview:

1. Which products and variants create complexity today without customers paying adequately for it?
2. Which special solutions do we keep alive for relationship reasons, and how much does that actually cost us in development, purchasing, production and service?
3. Where are we missing a clear alternative path even though the portfolio has long been clear?
4. Which innovation initiatives are really prioritized, with budget, time frame and responsibility?
5. What two capabilities do we need to build up over the next 12 months so that new products are ready for the market faster?

Sources

• Myrodia, Anna; Hvam, Lars; Sandrin, Enrico; Forza, Cipriano; Haug, Anders (2021): Identifying variety-induced complexity cost factors in manufacturing companies and their impact on product profitability, Journal of Manufacturing Systems.
• Boston Consulting Group (2014): Less Can Be More for Product Portfolios, [online] https://www.bcg.com/publications/2014/lean-manufacturing-consumers-products-less-can-be-more-for-product-portfolio-attacking-complexity-while-enhancing-the-value-of-diversity [retrieved 04.02.2026].
• Boston Consulting Group (2014): Less Can Be More for Product Portfolios (PDF), [online] https://web-assets.bcg.com/img-src/Less_Can_Be_More_for_Production_Porfolios_Aug_2014_tcm9-73475.pdf [retrieved 06/02/2026].
• Aumayr, Klaus (2024), Successful Product Management, Springer Gabler, 6th edition
• Krieg, Alexander; Westinner, Rafael; Distel, Dominic; Schonenberg, Lars (2024): Supercharging product portfolio performance with generative AI, [online] https://www.mckinsey.com/capabilities/operations/our-insights/supercharging-product-portfolio-performance-with-generative-ai [retrieved on 08.02.2026].
• Harvard Business Review Editors (2025): Your Company Needs to Focus on Fewer Projects. Here's How, [online] https://hbr.org/2025/08/your-company-needs-to-focus-on-fewer-projects-heres-how [retrieved 09.02.2026].

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