Selecting Projects:
Maximize Productivity in Your
Development Portfolio
Portfolio Management
ECO WORLD STYRIA – Graz, Austria
with: Dr. Robert G. Cooper
Product Development Institute Inc.
& McMaster University, Canada
E-mail: robertcooper@cogeco.ca
Contact in Germany, Austria, Switzerland:
five i`s innovation consulting gmbh
Dr. Angelika Dreher
a.dreher@five-is-innovation.com
www.five-is-innovation.com
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34 Stone Church Road, Suite 111
Ancaster, Ontario, Canada, L9K 1P4
P: 905-304-8797 F: 905-304-8799
Topics in This Session: Portfolio Management
‰ Maximizing the value of your portfolio – seeking maximum
productivity
‰ Doing the right projects – a focus on value-to-the-company
and profitability
‰ Scorecards & the Productivity Index for better project
prioritization
‰ Getting balance in your mix of projects
‰ Balancing projects with resource availabilities – not
overloading the pipeline
‰ Pruning the portfolio to eliminate waiting time – doing
fewer projects but higher value ones
Recall LRP NPD Principle #6:
Focused and effective portfolio management
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1
A Dramatic Trend
‰ From 1995 to 2004, cycle
times have decreased from
41.7 months to 24 months
¾ An astounding 42% decrease
in time-to-market in 10 years!
‰ How? What’s going on here?
‰ Have we really become that
much more efficient at NPD
‰ Or is some other factor at
play here?
‰ Look what’s happened to our
NPD portfolios over the same
10 years
We are picking the
low hanging fruit
‰ A trivialization of NPD
Source: Adams, M. & Boike, D., “PDMA foundation CPAS study reveals new trends”, Visions, XXVIII: 3, July 2004,
26-29; and: The PDMA Foundation's 2004 Comparative Performance Assessment Study (CPAS). For mid 1990s data,
see: Griffin, A., Drivers of NPD Success: The 1997 PDMA Report. PDMA 1997. See also ref [1].
3
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Breakdown of the Portfolio by Project Types –
Then and Now
% of Projects in the Development Portfolio
Development Project
Type
1990
2004
New to world, new to
market – innovations
20.4%
11.5%
43.7% decrease
New product lines to the
company
38.8%
27.1%
30.1% decrease
Additions to existing
product line in company
20.4%
24.7%
20.8% increase
20.4%
36.7%
80.1% increase
100.0%
100.0%
% Change
Improvements and
modifications to existing
company products
Total
-60% -40% -20%
0%
20%
40%
60%
80% 100%
Sources: APQC study, and Visions article, ref [1]
4
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2
Some More Provocative Facts:
Portfolio has
‰ Not only are portfolios
19.4%
excellent balance in
project
types
unbalanced
31.0%
‰ Portfolios contain too many Portfolio contains 0.0%
high value-to-the21.2%
low value-to-the-company
business projects
37.9%
projects
12.0%
Good job of
‰ And far too many projects
25.0%
ranking/prioritizing
projects
for the limited resources
41.4%
available
4.0%
Good balance
24.0%
between number of
‰ A small minority of
projects & resources
37.9%
businesses have a
3.8%
Formal & systematic
systematic & formal
21.2%
portfolio management
portfolio management
process in place
31.0%
process in place
0%
10%
20%
30%
40%
Percentage of Businesses
‰ But hi-productivity
Low-Productivity Businesses
businesses suffer much
Average Business
less from these deficiencies
0.0%
50%
High-Productivity Businesses
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The Answer: Portfolio Management
Fundamental to Improving Productivity in NPD
¾
¾
HIGH
Technology Impact to Business
‰ How shall we invest our R&D or
Development funds and people?
‰ What is our investment portfolio?
‰ Portfolio Management:
Is about resource allocation
And balance in the portfolio
And about which NP projects shall the
firm fund from among many opportunities (Go / Kill)?
LOW
LOW
¾
Likelihood of Commercialization
Within Next 5 Years
HIGH
‰ Key to maximizing NPD Productivity
Productivity = Output
Input
Portfolio Management helps effectively allocate scarce resources
6
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3
Three Ways to Increase Productivity in the
Portfolio
1. Strategic Portfolio Management
¾
¾
¾
Shift the balance of projects in terms of …
•
Markets or business sectors
•
Product lines or categories
•
Technologies
Away from small low-value areas & projects
To areas that promise higher productivity
2. Tactical Portfolio Management – project selection and
prioritization
¾
¾
¾
Selecting the best projects within each area
Prioritizing projects – highest value projects at the top of the list
To maximize the Productivity Index overall
3. Putting a limit on the number of projects
¾
¾
To avoid pipeline gridlock
And to accelerate projects to market – reduce time
7
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Strategic and Tactical Portfolio Management –
Both Are Used to Increase Portfolio Productivity
Business Strategy and
Product Innovation
Strategy
1.
Strategic Portfolio
Decisions:
Product Roadmap
Extensions into Chemical Mixers
Original Agitator Platform - Extension
Strategic Buckets
Chemical Mixers: Basic Line
Strategic Buckets and
Product Roadmap
Plan
extensions
& new
platforms
Chemical Mixers: Special Impellers
Chemical Mixers: Hi-Power
Extensions into Petroleum Blenders
Platform
Projects
New Product
Projects
Platform Extension
Petroleum Blenders : Low Power Range
(change the basis of
competition)
Petroleum Blenders : High Power
New Product Platform: Aerators
Aerator Platform
P&P Aerators: Line #1 (fixed mount)
P&P Aerators: Line #2 (floating)
P&P Aerators: Hi-Power
Extensions into Aerators for Chemical Waste
Platform Extension
Chemical Aerators: Line #1
Other:
Extensions, Modifications,
Improvements, Fixes, Cost Reductions
Chemical Aerators: Line #2
2. Tactical
Portfolio
Decisions:
Project selection
(Go / Kill),
prioritization and
resource allocation
Portfolio Review:
¾ Holistic
¾ All projects in auction
9 Right priorities?
9 Right mix?
9 Alignment?
9 Sufficiency?
9 Resource adequacy?
¾ By senior management
Stage-Gate® Process:
¾ Individual projects
¾ In depth evaluation
¾ Quality data available
¾ Go/Kill decisions
¾ Resources allocated
¾ By senior management
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4
Strategic Portfolio Decision:
The Right Split Across Project Types
Worst
Performers
Average
Business
Best
Performers
Promotional Developments &
Package Changes
12%
10%
6%
Incremental Product Improvements
& Changes
40%
33%
28%
Major Product Revisions
19%
22%
25%
New To The Business Products
20%
24%
24%
7%
10%
16%
~45%
~55%
~65%
New To The World Products
10 Point Steps
Best Performers focus more on innovative and game-changing projects
9
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Strategic Buckets:
The Right Splits Across Project Types
Best Practice Example
Platform
Projects
New Product
Projects
‰ Management makes strategic
choices in terms of:
¾
¾
¾
¾
‰ Projects categorized into Buckets
‰ Projects ranked in each Bucket until
out of resources
¾
Other:
Extensions, Modifications,
Improvements, Fixes, Cost Reductions
Project types
Market segments
Product lines
Technologies
Use different criteria per Bucket
‰ Resource allocation mirrors
strategic priorities
‰ “Strategy becomes real when you
start spending money!”
Best Performers seek optimal balance in terms of
resource allocation across markets, technologies and project types
10
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5
Using Strategic Buckets
Project
Project
Rank
Gate
Score
Rank
Savings
/MD
150-C
1
88
97-D
2
85
Jeanie
1
88
149-F
3
80
Monty
2
85
1402
4
77
Kool-Flow
3
80
98-DD
5
75
Pop-Up
4
77
1267
6
70
Regatta
5
75
1230-D
7
69
Slow-Brew
6
70
Widget-4
7
69
Project
Rank
$2M
Cost
New
Products=$2M Reductions
=$2M
Improvements
& Modifications
= $3M
Sales/
MD
Marketing
Requests = $3M
Project
Rank
$2M
Mktg
Score
1542
1
42.3
Walco-43
1
79
Pop-Redo
2
37.3
Mini-Pkg
2
68
Quick-Fit
3
31.2
Asda Refill
3
65
1498-K
4
25.5
Regen-3
4
61
Flavor-1
5
24.1
Small-Pack
5
55
Xmas Pkg
6
18.0
Tesco-Lite
6
52
Lite-Pkg
7
6.7
M&S-41
7
50
$3M
4 portfolios
Fire-walled
Rank projects until out of
resources in each bucket
$3M
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Can Use Other Dimensions to Split Resources
Architectural
Sealants
Flooring
Coatings
29.0%
Specialty
Applications
7.0%
25.0%
Institutional
35.0%
10.0%
14.0%
Automotive
26.0%
40.0%
14.0%
Deck Coatings
Roofing
Membranes
Industrial
Market Segments
Product Lines
Focus your resources into high productivity buckets
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6
Inputs to the Strategic Buckets Decision
Strategy & Goals
Best-in-Class Businesses
15% Cost
Reductions
25% New
Products
Strategic Buckets
New Product
Platform
Projects
Projects
30%
Improvements,
Modifications &
Extensions
(IMEs)
30%
Maintenance &
Support
(change the basis of
competition)
Other:
Extensions, Modifications,
Past Spending
Breakdown
Improvements, Fixes, Cost Reductions
Productivity of Previous Project
Types
16%
14%
Architectural
40
33%
Sealants
Flooring
Coatings
35
37%
30
Specialty
Applications
29.0%
7.0%
25.0%
35.0%
Institutional
10.0%
25
20
18%
23%
15
14.0%
10
Automotive
26.0%
5
0
40.0%
14.0%
23%
MKtg
Requests
IMEs
NPs
Roofing
Membranes
Deck Coatings
Cost Reds
Industrial
36%
Market Segments
Product Lines
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Determine Your Productivity:
By Project Types
Input – R&D Costs
18%
23%
40
Mktg Requests
35
IMEs
NPs
23%
30
Cost Reds
25
36%
Input
20
Output
PI
15
Output – 3 Yr Cum Sales
16%
14%
10
Mktg Requests
5
0
IMEs
NPs
MKtg
Requests
IMEs
NPs
Cost Reds
33%
37%
Cost Reds
Based on Ivoclar Vivadent; disguised data
14
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7
Productivity By Business Areas
Input – R&D Costs
13%
50
Bus Area A
45
Bus Area B
51%
Bus Area C
36%
40
35
30
25
Input
20
PI
Output
Output – 3 Yr Cum Sales
25%
28%
15
10
Bus Area A
Bus Area B
5
0
Bus Area C
Bus Area Bus Area Bus Area
A
B
C
47%
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Strategic Buckets: Recap
‰ Requires that you have:
¾
¾
A Business Strategy
A Product Innovation & Technology Strategy
• Goals
• Defined arenas of strategic focus
• Relative priorities of these
‰ A defined management process that moves from…
¾
¾
Strategy through to
Spending decisions (splits by bucket)
‰ Dimensions (splits) can be anything that’s relevant to you:
¾
¾
¾
¾
¾
Markets, segments, business areas or industry sectors
Geography (regions of the world)
Project types (new products, improvements, cost reductions, etc.)
Product lines, product types, product categories, product groups
Technologies, technology types
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Now Tactical: Project Selection &
Prioritization The Goal
High
Bread and Butter
Grade A
Sealant
Pearls
Auto
Seal
TP-40
Deck
Coat
D-50
‰ Maximize the productivity
of the portfolio
‰ Rank the projects:
¾
Top
Floor
U.V. Seal
$10 M
8
6
2
4
T-400
0
Reward (NPV)
Top
Coat A
Solvent
800
SPL
Solvent 1
Edge
Coat
Oysters
Top
Seal
First
Coat
Low
White Elephants
Best to Worst
‰ Pick your winners – focus
your resources
‰ Get these done as quickly
as possible
Do fewer projects… but better ones
(high value-to-the-corporation projects)
17
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Impact of Making Better Prioritization Decisions
‰ Situation:
¾
¾
¾
Three potential projects
Each project requires a total of $3M in person time to do
You have $3M person-days of resources per year
‰ Options:
A.
B.
Approve and start all three projects
•
Total cost: $9M
•
Takes 3 years at $3M/year to complete & launch all three
Or pick the best one – do it (put the others on hold)
•
Launch one at end of year 1
•
Another one at end of year 2
•
By year 3, more attractive projects are found
• Kill the remaining original one… because you find a
better “new idea” by then
• Do one “new idea” project – assume it has equal in
value to these first two projects
‰ What is the NPV of each approach?
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Impact of Prioritization
Values
8
Option A: Do
3 projects
concurrently
6
NPV=3.5
4
DCF of the 3 Values @ 20% = 10.4
Cost/year = 3 (PV=6.9 over 3 years)
1
Option B:
Prioritize &
focus – do 1
project
2
Years
3
NPV=8.0
8
7
6
DCF = 14.9
NPV is 2.28 times with the same person-days input
Prioritization increases Productivity by 128%
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The Worst Case Scenario with Prioritization
Values
8
Option A: Do
3 projects
concurrently
6
NPV=3.5
4
DCF of the 3 Values @ 20% = 10.4
Cost/year = 3 (PV=6.9 over 3 years)
1
Option C:
Pick the
worst
project,
followed by
2nd worst
2
Years
3
NPV=4.6
4
6
7
DCF = 11.6
Productivity is Still Better by 33% !
The failure to prioritize means loss of productivity in a major way
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Project Prioritization:
Use Both Portfolio Reviews & Gates
1.
Strategic Buckets
Strategic Portfolio
Decisions: Strategic
Platform
Projects
New Product
Projects
(change the basis of
competition)
Resource Commitment to NPD
• The Strategic Role of Your
Business
• Strategy,
Goals
and
Task
Approach
• Competitive Parity
• Spending Level Based on
Demand from Active Projects
Other:
Buckets and Strategic
Product Roadmap
Extensions, Modifications,
Improvements, Fixes, Cost Reductions
Product Roadmap
Extensions into Chemical Mixers
Original Agitator Platform - Extension
Chemical Mixers: Basic Line
Plan
extensions
& new
platforms
Chemical Mixers: Special Impellers
Resource
Commitment
to NPD
Chemical Mixers: Hi-Power
Extensions into Petroleum Blenders
Platform Extension
Petroleum Blenders : Low Power Range
Petroleum Blenders : High Power
New Product Platform: Aerators
Aerator Platform
P&P Aerators: Line #1 (fixed mount)
P&P Aerators: Line #2 (floating)
P&P Aerators: Hi-Power
Extensions into Aerators for Chemical Waste
Platform Extension
Chemical Aerators: Line #1
Chemical Aerators: Line #2
2. Tactical
Portfolio
Decisions:
Project selection
(Go/Kill),
prioritization and
resource allocation
Portfolio Review:
¾ Holistic
¾ All projects in auction
9 Right priorities?
9 Right mix?
9 Alignment?
9 Sufficiency?
9 Resource adequacy?
¾ By senior management
Stage-Gate® Process:
¾ Individual projects
¾ In depth evaluation
¾ Quality data available
¾ By senior management
¾ Go/Kill decisions
¾ Resources allocated
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Ranking Projects Using NPV
(Six Projects: Major Materials Company)
Project
PV
(present
value of
future
earnings)
Development
Cost
Commercialization
Cost
Ranking
Based
on NPV
Decision
(net
present
value)
NPV
Alpha
36
3
5
28
4
Hold
Beta
64
5
2
57
2
Go
Gamma
11
2
1
8
5
Hold
Delta
3
1
0.5
1.5
6
Hold
Echo
56
5
3
48
3
Hold
Foxtrot
70
10
2
58
1
Go
Note: Total Development Budget of $15 M
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Your Portfolio Decision Is:
‰ Undertake 2 projects
¾
¾
Foxtrot
Beta
‰ Consumes the entire budget of
$15 M
‰ Yields a portfolio value of $115 M
‰ For an overall Portfolio
Productivity Index of 7.67
‰ Which is quite good!
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Method 2: The Productivity Index
‰ Take what you are trying to maximize
¾
Example: NPV
‰ Divide by what the constraining resource is
¾
¾
Example: People (expressed as person-days)
Or Development funds ($000)
‰ And rank your projects by this index until out of resources
Productivity
Index
=
NPV= forecasted NPV of the
project
Output
Input
=
Or
=
NPV
Person-Days
NPV
Development Cost
Person-Days = resources
required to complete the project
Development Cost = cost to
complete the project (the “go
forward” costs)
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Productivity Index = NPV/Dev
Note: Same Total Development Budget of $15 M
Project
NPV
Development Cost
Productivity
Index=NPV/De
v Cost
Sum of
Dev
Costs
Beta
57
5
11.4
5
Echo
48
5
9.6
10
Alpha
28
3
9.3
13
Limit reached
Foxtrot
58
10
5.8
23
Gamma
8
2
4.0
25
Delta
1.5
1
1.5
26
Determine the Productivity Index for every NPD project
Use it to rank (prioritize) your projects
25
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Your New Portfolio Decision
‰ With Productivity Index, the decision is
different
‰ More efficient projects are selected
¾
¾
¾
¾
Beta
Echo
Alpha
And Gamma (to use up the last $2 M)
‰ The portfolio value is now $141 M
¾
¾
An increase of $26 M
With no increase in spending!
‰ The Portfolio Productivity Index
is now 9.40
¾
Up from 7.67
PI Example
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The Challenge: Dealing with Risks
‰ Not every project has a 100% chance of commercial
success
‰ Any many won’t achieve their sales & profit projections
‰ Some won’t even be developed
¾
Hit technical roadblocks
‰ How to handle risks and uncertainties
‰ Several options:
1.
2.
3.
Risk adjusted discount factor in your NPV calculations
•
Use different values of i for different project types
Probability-adjusted NPV
•
Adjust the values of some inputs to the NPV calculation
•
By their probability of occurring
•
Example: multiply Sales by a probability ( < 100%)
Options Pricing (Real Options or Expected Commercial Value)
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Method 3: Expected Commercial Value
‰ Value of the project if successful is…
¾
¾
$36 m
Based on DCF of future incomes stream
‰ Development cost: $3 m
‰ Commercialization cost (marketing roll-out, production
equipment): $5 m
‰ But…
¾
¾
¾
Only 50% chance of commercial success if we Launch
But 80% chance of success of technical success (getting thru
Development OK)
No costs (other than $3m and $5m) if not successful
‰ What is the value of the project?
Use Decision Tree Analysis to determine the ECV
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Details: Determination of Expected Commercial
Value of Project
Commercial
Success
$13M
Technical
Success
Pts
$ECV
Development
$7.4M
$36M
Yes
Launch
$C
No
Yes
$18M
$D
No
$10.4M
$PV
Pcs
Commercial
Failure
Technical Failure
ECV = [(PV * Pcs - C) * P - D]
ts
Three Methods to Estimate Probabilities:
¾ Delphi (modified)
¾ Data Tables
¾ Scoring Model
• See Portfolio Management for New Products, pp 231-232
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Method 4: Scoring Model
‰ Based on theory that qualitative factors predict NP project
success and project value
‰ Relies on those factors that are correlated with success &
value… examples:
¾ Competitive & product advantage
¾ Market attractiveness
¾ Leveraging core competencies
‰ A scoring system based on these factors
¾ A point count system
¾ Use scorecards
Make sure you choose factors that really do discriminate between
profitable and unprofitable projects – and you can prove it!
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A Best-In-Class Scoring Model
NP Projects – Gate 3
1. Strategic:
•
•
Alignment with Business’s strategy
Strategic importance of project
2. Product Advantage:
•
•
•
•
Unique product benefits to users
Differentiation vs. competitors’ products
Meets customer needs better
Score factors in red 0-10
Value for money
3. Market Attractiveness:
•
•
•
By gatekeepers
At Gate meeting
Use a scorecard – see end
Market size
Market growth
Competitive situation
4. Leverages Core Competencies:
•
•
•
Marketing & distribution leverage
Technological leverage
Manufacturing / Operations leverage
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Gate 3 “Should Meet” Criteria (continued)
5. Technical Feasibility:
•
•
•
Size of technical gap
Technical complexity
Track record & technical uncertainty
6. Risk Versus Return:
Expected profitability (magnitude: NPV)
Return (IRR)
•
Payback period
•
Certainty of revenue, cost and profit estimates
Should Meet items (factors in bold) are scored (1-5 or 0-10) on a
scorecard
Factor scores must clear minimum hurdles
Also added (weighted or unweighted) to yield Project
Attractiveness Score (Monty example)
•
•
•
•
•
Use Scorecards at Gate meeting to help make Go/Kill decisions
Also use it to rank (prioritize) your projects
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16
Using the Gates for Maximum Productivity
Idea Screen
Idea
Stage
Gate
1
Discovery
2nd Screen
Gate
2
Stage 1
Go to Develop
Stage 2
Business Case
Scoping
Gate
3
Stage 3
Development
‰ Use the Gates
¾ To scrutinize projects in depth
¾ Employ the NPV, PI and scorecard score – meet hurdles?
¾ Compare new project to the portfolio of ongoing projects
• Impact on portfolio – positive or negative
• Relative ranking (use PI & scorecard score)
¾ Prune out the weak ones
¾ Resource the strong projects
Commit resources to projects at the Gates
A Gate is “an irrevocable commitment of resources
to a project & team”
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Using the Portfolio Reviews for Maximum
Productivity
‰ Use Portfolio Reviews
¾
To manage the entire portfolio
Rank & prioritize projects – the prioritized list
•
•
¾
¾
New Products
23%
Cost Reductions
27%
To check for balance and alignment
•
•
¾
Breakdown by Project Types
Prioritized List of Active & On-Hold Projects
Based on scorecard & PI (with loadings)
Various pie charts
Bubble diagram
Platforms
9%
Make changes to the portfolio
Or signal changes to the gating procedure
High
Prioritized List of Active and On Hold Projects
Project
Rank (Priority
Level)
Total Project
Score
Portfolio
Balance Factor
Adjusted Total
Project Score
Soya-44
1
80
1.10
88
Encapsulated
2
82
1.00
82
Legume N-2
3
70
1.10
77
Spread-Ease
4
75
1.00
75
CharcoalBase
5
80
0.90
72
1
80
1.00
80**
Extensions
23%
Fixes
18%
Probability of Technical Success
¾
Pearls
TP-40
Deck
Coat
$10 M
8
Grade A
Sealant
Auto
Seal
D-50
Top
Floor
U.V. Seal
6
2
4
T-400
Solvent
800
Bread and Butter
0
Reward (NPV)
Top
Coat A
SPL
Solvent 1
Projects on
Hold
Edge
Coat
Oysters
N2-Fix
Slow-Release
2
70
1.10
77*
Multi-Purpose
3
75
.90
68
etc..
etc..
Top
Seal
First
Coat
Low
White Elephants
34
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Look for the Right Prioritization of Active Projects
‰ Do you have the correct project ranking to yield
maximum Productivity?
‰ Are the right projects Active (versus on Hold)
Project Name
Gate Score
(0-10)
Stage
Productivity
Index
NPV/MD
Resources
Required
(Loading MD)
Sum of
Loadings
(MD)
Rank
Murray
8.3
3
206
120
120
1
Timor
8.3
4
194
140
260
2
Bering
7.5
3
180
90
350
3
Elk
7.8
2
142
180
530
4
Berlin
7.0
4
148
100
630
5
Columbia
8.0
Hold at Gate
3
150
120
-
hold
Snap
7.0
Hold at Gate
2
160
80
-
hold
Moose
7.5
Hold at Gate
2
108
130
-
hold
Banda
7.3
Hold at Gate
3
129
110
-
hold
35
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Check Balance Against Your Buckets:
Actual Versus Targeted Resource Allocation
Breakdown by Market Sector
Breakdown by Project Types
Institutional: 6%
Target:10%
Cost Reductions: 27%
Target: 10%
Platforms: 9%
Target: 15%
New Products: 23%
Target: 40%
Extensions: 23%
Target: 25%
Medical: 10%
Target: 10%
Industrial: 25%
Target: 30%
Automotive: 20%
Target: 20%
Fixes: 18%
Target: 10%
Residential: 39%
Target: 30%
Your strategic buckets exercise yields target splits, shown in red – what should be
The pie chart slices show your expenditure breakdowns to date – what is
Look for imbalances that signal corrective actions
36
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Check for Balance and Risk Profile:
Risk-Reward Bubble Diagram
Plot all your projects
Circle size = annual
resources to each project
Pearls
Probability of Technical Success
High
TP-40
Deck
Coat
$10 M
8
6
Bread and Butter
Grade A
Sealant
Auto
Seal
D-50
Top
Floor
U.V. Seal
2
4
T-400
0
Reward (NPV)
Top
Coat A
Solvent
800
SPL
Solvent 1
Edge
Coat
Oysters
Top
Seal
First
Coat
Look for the right balance
in terms of risk and reward
White Elephants
Low
37
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Another Version of Risk Reward Bubble Diagram
High
(based on scorecard scores)
Advanced Development - Risk vs. Reward
25
Combustion
Pressure
Touch sensor
20
Torque Powertrain
Air Quality
Pedestrian
Torque EPAS
CO2
sensor
Score : Reward
Humidity Sensor
Hydrocarbon
15
Cylinder Pressure
Current
sensor
Turbo Speed
Sensor
Coupled Torque
Steering
Torque
AnglePosition
based
Oil Condition
Traction Control
Sun Sensor
10
Soot Sensor
EM Brake
Position Prediction
Force Sensor
5
Low
HVAC Flow
0
0
High
5
10
Score : Risk Level
15
20
25
Low
38
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The Result: An Effective Portfolio Management System
to Maximize Your Portfolio Productivity
Business Strategy &
Product Innovation
Strategy
1.
Strategic Portfolio
Decisions:
Product Roadmap
Extensions into Chemical Mixers
Original Agitator Platform - Extension
Strategic Buckets
Chemical Mixers: Basic Line
Strategic Buckets and
Product Roadmap
Plan
extensions
& new
platforms
Chemical Mixers: Special Impellers
Chemical Mixers: Hi-Power
Extensions into Petroleum Blenders
Platform
Projects
New Product
Projects
Platform Extension
Petroleum Blenders : Low Power Range
(change the basis of
competition)
Petroleum Blenders : High Power
New Product Platform: Aerators
Aerator Platform
P&P Aerators: Line #1 (fixed mount)
P&P Aerators: Line #2 (floating)
P&P Aerators: Hi-Power
Extensions into Aerators for Chemical Waste
Platform Extension
Chemical Aerators: Line #1
Other:
Extensions, Modifications,
Improvements, Fixes, Cost Reductions
Chemical Aerators: Line #2
2. Tactical
Portfolio
Decisions:
Project selection
(Go/Kill),
prioritization &
resource allocation
Portfolio Review:
¾ Holistic
¾ All projects in auction
9 Right mix?
9 Alignment?
9 Sufficiency?
9 Right priorities?
9 Resource adequacy?
¾ By senior management
Stage-Gate® Process:
¾ Individual projects
¾ In depth evaluation
¾ Quality data available
¾ Go/Kill decisions
¾ Resources allocated
¾ By senior management
39
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References
Books:
Portfolio Management for New Products, By Cooper, Edgett & Kleinschmidt (Perseus Books, Reading,
Mass) hardcover, 2002. The most comprehensive book on the topic available… provides an in-depth
look at the best portfolio methods, and their use in industry.
Order online for next day shipments: www.stage-gate.com
Articles: (log on www.stage-gate.com for no charge download)
1. R.G. Cooper, “Your NPD portfolio may be harmful to your business’s health”, PDMA Visions, XXIX, 2, April 2005,
22-26. For 1990 portfolio data, see: Cooper, R.G. & Kleinschmidt E.J., “An investigation into the new product
process: steps, deficiencies and impact”, Journal of Product Innovation Management 3: 2, 1986, 71-85.
2. R.G. Cooper and S.J. Edgett, “Overcoming the crunch in resources for new product development,” ResearchTechnology Management, 46, 3, May-June 2003, 48-58.
3. R.G. Cooper, S.J. Edgett, S.J. & E.J. Kleinschmidt, “Optimizing the Stage-Gate® Process: What Best Practice
Companies Are Doing – Part II”, Research-Technology Management 45, 6, Nov-Dec 2002.
4. R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, “New problems, new solutions: making portfolio management more
effective”, Research-Technology Management, 2000, 43, 2, 18-33.
5. R.G. Cooper, Edgett, S.J., & Kleinschmidt E.J, “Portfolio management in new product development: lessons from
the leaders – Part I”, Research-Technology Management, Sept.-Oct. 1997, 16-28.
6. R.G. Cooper, Edgett, S.J., & Kleinschmidt E.J, “Portfolio management in new product development: lessons from
the leaders – Part II”, Research-Technology Management, Nov.-Dec. 1997, 43-52.
7. R.G. Cooper, Edgett, S.J., & Kleinschmidt E.J., “Best practices for managing R&D portfolios”, ResearchTechnology Management, 41, 4, July-Aug. 1998, 20-33.
8. R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, “New product portfolio management: practices and performance”,
Journal of Product Innovation Management, 16,4, July 1999, 333-351.(winner of T.P. Hustad Best Paper award,
2000).
9. R.G. Cooper, “Doing it right -winning with new products, “Ivey Business Journal, July-August 2000, 4, pp 54-60.
10. R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, “Benchmarking best NPD practices – II: Strategy, resource
allocation and portfolio management”, Research-Technology Management, vol. 47, no. 3, May/June 2004, pp 5059.
11. R.G. Cooper & S.J. Edgett, “Ten ways to make better portfolio and project selection decisions”, PDMA Visions
Magazine, XXX, 3, June 2006, p 11-15.
Order APQC definitive benchmarking report online (www.stage-gate.com): Best Practices in Product
Innovation: What Distinguishes Top Performers.
40
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