beyond projects: creating a winning product portfolio · beyond projects: creating a winning...

Beyond Projects: Creating

A Winning Product

Portfolio

PREPARED FOR SVPMA

4 May 2011

Where Innovation Operates

Management

Consultants

Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 2

Agenda

Introductions

Portfolio Management Overview

Key Elements of Effective Portfolio Management

Common Implementation Challenges

Benefits of Portfolio Management


PRTM Overview

Over 35 years of operational strategy

and innovation

600+ consultants worldwide

19 offices worldwide

Major commercial and government

sectors:

Aerospace and Defense, Automotive

Chemicals and Process Industries

Consumer Goods

Financial Services

Government

Life Sciences and Healthcare

Private Equity

Energy

Electronics, Computing, and Software

Communications and Media

0

200

400

600

800

1,000

1,200

1,400

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Cu

mu

lati

ve

Exp

eri

en

ce

Product Innovation Thought Leadership

1,250 innovation

transformations worldwide


Portfolio Management – A Process For Prioritizing

Across Broad Range Of Competing Opportunities

Portfolio

management

Maximize value

Achieve balance

Maintain strategic fit

Product strategyAlign to strategic vision

Characterize markets

Pipeline managementAssign resources

Manage bottlenecks

Product development Drive from concept to market

Maximize long-term portfolio value—deliver near-term commitments


Poor Portfolio Management Can Lead To Chronic

Problems In Product Development

Are your projects predominantly short-term & reactive?

Do weak projects persist in

your portfolio; are there few

project cancellations?

Are there project slippages

and delayed product

launches?

Do you have gaps relative to strategic priorities; unmetrevenue plans?

Do you have resource

overload and skill set

shortages?


What Does Portfolio Management Accomplish?

Identifying high-priority product development opportunities

Aligning product pipeline with business strategy

Assessing the impact of product launches on revenue and profits

Managing the R&D investment mix

Assessing the revenue impacts of changing the R&D investment mix

Making shifts in strategic allocations of funding across markets and/or

businesses


Six Key Elements of Effective Portfolio Management

Each element must be carefully considered and implemented

6. Decision Data

and Systems

5. Resource Balancing

and Pipeline Loading

4. Process and

Linkages

1. Governance 2. Portfolio

Architecture

3. Decision-Making

Framework


1. Governance

What is Portfolio Governance?

Agreement on the roles and responsibilities of various participants in the portfolio

management process to execute objectives and optimize outcomes

Effective Portfolio Governance is characterized by the following attributes:

Multi-level cascading decision-making

Organizationally aligned with P&L

accountability and/or decision authorities

Clearly defined decision points

Tops-down portfolio investment decisions

Bottoms-up management of portfolio

performance

Bi-directional interactions to inform decisions

Enterprise

Business

Group

Business

Group

Business

Group

BU BU BU

InvestmentP

ort

folio

inve

stm

en

t

de

cis

ion

s

Acco

un

tab

ility fo

r

po

rtfolio

pe

rform

an

ce

Investment Investment

Example:


2. Portfolio Architecture

Different portfolio segments are generally driven by different priorities;

therefore, a structure of sub-portfolios is used to allocate investments

Criteria

ROI/NPV/expected share

Initial investment

Technology readiness

Execution risk

Criteria

Key customer satisfaction

Open defects by level

Compliance/regulatory risk

and exposure

Criteria

Revenue/market share

opportunity

Competitive position

Opportunity cost

Criteria-driven

prioritization

Criteria-driven

prioritization

Criteria-driven

prioritization

Prioritization based on the overall strategy,

and expressed in relative investment levels across sub-portfolios

Individual Programs Individual Programs Individual Programs

Portfolio

Sub-Portfolio 1

New products

Sub-Portfolio 2

Enhancements

Sub-Portfolio 3

Maintenance

Example:


3. Decision Making Framework

Effective portfolio analysis relies on three complimentary techniques

Portfolio Views

Strategic Buckets

Scoring Models

PURPOSE

Ensures

investment

balance

Ensures

strategic

alignment

Maximizes value

through

prioritization

EXAMPLES

Criteria

Opportunity

Attractiveness

Category

Capability Leverage

Competitive Advantage

Alignment with Strategic Initiative and Priorities

Strategic Fit

Program Complexity

Availability of Skills/Resources

Technical Change

Probability of

Technical

Success

Market Maturity

Competitive Intensity

Business Model Change

Probability of

Commercial

Success

Co

mp

os

ite

Ris

kA

ttra

cti

ve

ne

ss

/Fit

Platform/Product Leverage

Commercial Assumptions

Proprietary Position

Market Impact

Revenue Impact or Cost Reduction

Potential Gross Margins

Market Segment Size

Development Cost

Market Segment Growth

2x

1.5x

1x

1x

Weights

Strategy

Radical

Break-

ThroughIncre-

mental

Total R&D Investment

Strategy

Total R&D Investment

New Markets

Market

C

Market

BMarket

A

Ris

k-A

dju

ste

d N

PV

Composite RiskHigh Low

La

un

ch

03Remaining TTM—Months

15 6912182127 2430

Net

Rev

en

ue


4. Process and Linkages

Integrate the portfolio management process with other key business

processes and establish a regular cadence of portfolio reviews

Release roadmaps

Project attractiveness

Resource needs

Project timing and

progress

Project priorities, selection,

and staging

Project scope and charters

Plan change requests

Resource

assignments

Headcount needs

Resource supply

Project

priorities

Resource

needs

Need for change in

plans/roadmaps

Master project list

Performance to target

Investment targets by

strategic bucket

Return targets

Performance to target

Master project list

Strategic priorities

Product/technology

roadmaps

Value drivers

Strategic

priorities

Current

operating

plan

Strategy

Development

Pipeline/Project

Execution

Functional

Resource

Management

Revenue Planning

and Budgeting

Portfolio

Management


Resource balancing and pipeline management picks up where portfolio

prioritization leaves off

Strategic Resource

Management Tactical Resource

Supply-Demand Balancing

Portfolio

Management

Pipeline

Management

Align programs

in the portfolio

with strategic priorities

1

Know your

program priorities

and investment

allocation

Strategic Priorities

Manage critical

bottlenecks to optimize

flow of programs

4

Identify, assign,

monitor, and adjust

program resources

effectively

Throughput

Manage overall resource

needs versus availability

2

Know what

resources you

need to do

the programs

3

Know what

resources you

have available to

do the programs

Resource Supply/Demand

5. Resource Balancing and Pipeline Loading


6. Decision Data and Systems

Project and Portfolio Management (PPM) systems—key elements

Project Teams

Simplified tracking of progress and issues

Pro

duct S

pecific

atio

n

i. Intro

ductio

n

ii. Pro

duct O

vervie

w

iii. Pro

duct R

eq

uire

ments

iv. Voic

e o

f Custo

mer

Analys

is

v. Technic

al

Docum

enta

tion

vi. Pro

duct

Config

ura

tion

vii. Tra

inin

g R

eq

uire

ments

Test

Sta

tus

Reg

ressi

on

Testing

Results

XM

LH

TM

L

Templates forproject plans and deliverables

Resource Managers

Resource Profile

0

200

400

600

800

1000

1200

1400

1 2 3 4 5 6 7 8 9 10 11 12

Period

Resourc

e L

evel

Resource planning, allocation, and

assignment tracking

Process managementensures alignment between

systems and process

Portfolio +

Financials

Resource Projects

Integrated

Data

Portfolio mix and what-if analysis

Executives

Strategic investment of

resources, visibility to the entire pipelineNew

Platforms

75%

Major

Products

15%

Product

Improvement

5%

Product

Support

5%

Real-time support for phase review decisions

New Product Revenue

Original

Revised

$0

$10,000

$20,000

$30,000

$40,000

+1 +3 +5 +7 +9

Year

Re

ve

nu

e (

00

0s

)

Decision Teams

Commitments based on actual

resource availability, project, and

pipeline status

Stakeholders from Other Functions

Pipeline management

Greater visibility for

downstream functions

Better use of resource pool,

bottleneck management

Less time spent tracking

and communicating

progress


Common Implementation Challenges

DisciplineOrganizations don’t agree or follow through on

tough portfolio decisions

PoliticsPortfolio decisions cut across managerial

responsibilities, threatening power and control

OwnershipA lack of ownership of process at required levels of

organization impedes resolution of portfolio gaps

Point-of-viewNo one agrees on how to estimate the value of

projects

DataInconsistent views on platform, product, program,

project terminology to structure the portfolio

ComplexityProduct and roadmap interdependencies render

simple risk-reward analyses inadequate

BandwidthWithout a good tool, bringing the data and analysis

together takes too much time and effort

Mo

re b

eh

avio

ral

Mo

re t

ec

hn

ica

l


PRTM’s benchmarking show that improvements in product development

practices drive top- and bottom-line growth

Benefits of Portfolio Management

Stage 1

Functional

Excellence

Excellence within

functions, but not

across functions

Stage 2

Project and

Product

Excellence

Functions aligned

for effective

execution from

concept to market

Stage 3

Portfolio

Excellence

Processes aligned

to achieve platform

leverage, portfolio

balance, and

excellence in

project selection

and execution

Stage 4

Extended

Enterprise

Excellence

Core processes

linked across

internal and

external business

partners for

maximum leverageStage 0

Informal Management

Informal practicesbased on individual experience

Revenue Growth* 19% 19% 32%

EBIT Growth* 8% 23% 54%

Managing Across Functions

Managing Across Projects

Managing Across Portfolios and

Partners

* Data for companies

representing the top 20% of

development practices

scores

Source: PRTM’s Global Product Innovation Benchmark

PRTM Product Development Maturity Model

and Benchmarking


PRTM Contacts

Walter SunPrincipal

T +1 650.864.3545

F +1 650.967.6367

M +1 510.366.1151

[email protected]

444 Castro Street

Suite 400

Mountain View, CA 94041

USA

www.prtm.com

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