Beyond Projects: Creating A Winning Product Portfolio

Transcription

1 4 May 2011 Beyond Projects: Creating A Winning Product Portfolio PREPARED FOR SVPMA Management Consultants Where Innovation Operates

2 Agenda Introductions Portfolio Management Overview Key Elements of Effective Portfolio Management Common Implementation Challenges Benefits of Portfolio Management Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 2

3 Cumulative Experience PRTM Overview Over 35 years of operational strategy and innovation Product Innovation Thought Leadership 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 1,400 1,200 1, ,250 innovation transformations worldwide Electronics, Computing, and Software Communications and Media '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 3

4 Portfolio Management A Process For Prioritizing Across Broad Range Of Competing Opportunities Maximize long-term portfolio value deliver near-term commitments Product strategy Align to strategic vision Characterize markets Portfolio management Maximize value Achieve balance Maintain strategic fit Pipeline management Assign resources Manage bottlenecks Product development Drive from concept to market Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 4

5 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? Do you have gaps relative to strategic priorities; unmet revenue plans? Do you have resource overload and skill set shortages? Are there project slippages and delayed product launches? Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 5

6 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 Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 6

7 Six Key Elements of Effective Portfolio Management Each element must be carefully considered and implemented 1. Governance 2. Portfolio Architecture 3. Decision-Making Framework 4. Process and Linkages 5. Resource Balancing and Pipeline Loading 6. Decision Data and Systems Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 7

8 Portfolio investment decisions 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 Example: Business Group Investment Enterprise Business Group BU BU BU Investment Investment Business Group Accountability for portfolio performance Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 8

9 2. Portfolio Architecture Different portfolio segments are generally driven by different priorities; therefore, a structure of sub-portfolios is used to allocate investments Example: Portfolio Sub-Portfolio 1 New products Sub-Portfolio 2 Enhancements Sub-Portfolio 3 Maintenance Prioritization based on the overall strategy, and expressed in relative investment levels across sub-portfolios Criteria ROI/NPV/expected share Initial investment Technology readiness Execution risk Criteria Revenue/market share opportunity Competitive position Opportunity cost Criteria Key customer satisfaction Open defects by level Compliance/regulatory risk and exposure Individual Programs Individual Programs Individual Programs Criteria-driven prioritization Criteria-driven prioritization Criteria-driven prioritization Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 9

10 Composite Risk Attractiveness/Fit Risk-Adjusted NPV Net Revenue Launch 3. Decision Making Framework Effective portfolio analysis relies on three complimentary techniques PURPOSE EXAMPLES Strategic Buckets Ensures strategic alignment Strategy Total R&D Investment Strategy Total R&D Investment Market A Market B Market C New Markets Incremental Break- Through Radical Portfolio Views Ensures investment balance High Composite Risk Low Remaining TTM Months 0 Weights Category Criteria Market Segment Size Scoring Models Maximizes value through prioritization 2x 1.5x 1x Opportunity Attractiveness Strategic Fit Probability of Technical Success Market Segment Growth Revenue Impact or Cost Reduction Potential Gross Margins Development Cost Alignment with Strategic Initiative and Priorities Market Impact Capability Leverage Competitive Advantage Proprietary Position Technical Change Program Complexity Availability of Skills/Resources Platform/Product Leverage 1x Probability of Commercial Success Business Model Change Market Maturity Competitive Intensity Commercial Assumptions Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 10

11 4. Process and Linkages Integrate the portfolio management process with other key business processes and establish a regular cadence of portfolio reviews Strategic priorities Product/technology roadmaps Value drivers Project priorities, selection, and staging Project scope and charters Plan change requests Strategy Development Portfolio Management Pipeline/Project Execution Strategic priorities Current operating plan Revenue Planning and Budgeting Need for change in plans/roadmaps Master project list Performance to target Performance to target Master project list Investment targets by strategic bucket Return targets Project priorities Headcount needs Resource supply Release roadmaps Project attractiveness Resource needs Project timing and progress Resource assignments Functional Resource Management Resource needs Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 11

12 5. Resource Balancing and Pipeline Loading Resource balancing and pipeline management picks up where portfolio prioritization leaves off Strategic Priorities Resource Supply/Demand Throughput Align programs in the portfolio with strategic priorities Manage overall resource needs versus availability Manage critical bottlenecks to optimize flow of programs Portfolio Management Strategic Resource Management Tactical Resource Supply-Demand Balancing Pipeline Management Know your program priorities and investment allocation Know what resources you need to do the programs Know what resources you have available to do the programs Identify, assign, monitor, and adjust program resources effectively Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 12

13 Resource Level Test Status Regressi on Testing Results XML HTML Revenue (000s) 6. Decision Data and Systems Project and Portfolio Management (PPM) systems key elements Real-time support for phase review decisions Decision Teams Portfolio mix and what-if analysis Major Products 15% Product Improvement 5% Product Support 5% New Platforms 75% Executives Strategic investment of resources, visibility to the entire pipeline $40,000 $30,000 $20,000 $10,000 $0 New Product Revenue Original Revised Year Commitments based on actual resource availability, project, and pipeline status Pipeline management Stakeholders from Other Functions Greater visibility for downstream functions Resource planning, allocation, and assignment tracking Resource Profile Period Resource Managers Better use of resource pool, bottleneck management Resource Portfolio + Financials Integrated Data Projects Process management ensures alignment between systems and process Simplified tracking of progress and issues i. Introduction ii. Product Overview iii. Product Requirements iv. Voice of Customer Analysis v. Technical Documentation vi. Product Configuration vii. Training Requirements Product Specification Templates for project plans and deliverables Project Teams Less time spent tracking and communicating progress Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 13

14 More technical More behavioral Common Implementation Challenges Discipline Organizations don t agree or follow through on tough portfolio decisions Politics Ownership Point-of-view Data Complexity Bandwidth Portfolio decisions cut across managerial responsibilities, threatening power and control A lack of ownership of process at required levels of organization impedes resolution of portfolio gaps No one agrees on how to estimate the value of projects Inconsistent views on platform, product, program, project terminology to structure the portfolio Product and roadmap interdependencies render simple risk-reward analyses inadequate Without a good tool, bringing the data and analysis together takes too much time and effort Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 14

15 Benefits of Portfolio Management PRTM s benchmarking show that improvements in product development practices drive top- and bottom-line growth PRTM Product Development Maturity Model and Benchmarking Stage 0 Informal Management Informal practices based on individual experience Stage 1 Functional Excellence Excellence within functions, but not across functions Managing Across Functions Stage 2 Project and Product Excellence Functions aligned for effective execution from concept to market Managing Across Projects 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 leverage Managing Across Portfolios and Partners * Data for companies representing the top 20% of development practices scores Revenue Growth* 19% 19% 32% EBIT Growth* 8% 23% 54% Source: PRTM s Global Product Innovation Benchmark Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 15

16 PRTM Contacts Walter Sun Principal T F M wsun@prtm.com 444 Castro Street Suite 400 Mountain View, CA USA Beyond Projects: Creating A Winning Product Portfolio 4 May PRTM Proprietary CONFIDENTIAL 16