Chapter 10
Balancing Portfolios
© David O’Sullivan
10-1
Reflections
 Explain new product development.
 What are the main sources of funding for
new product development?
 List the ways in which new product
innovations can be protected.
 What are the key features of a market
launch plan?
 What is the commercialization of new
products?
 What are the main traits of an
entrepreneur?
10-2
Activities
[Discussion of selected student
‘Activities’ from previous chapter]
10-3
Learning Targets
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Explain the main ideas behind project portfolio
management
Describe four key strategies used in portfolio
management
Name a number of tools that can be used for portfolio
management
Explain the use of bubble diagrams as a means of
evaluating portfolios
Understand the difference between the portfolio
dominant and project dominant approaches
Discuss why organizations often have a mix of lowrisk and high-risk projects
10-4
Portfolio Approaches
 Portfolio management is about
continuously choosing, managing, and
adapting the mix of projects to match
resource availability and contribute to
organizational goals
 Key approaches include:
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Maximizing the value of a portfolio
Creating the right mix of projects
Maximizing alignment with goals
Optimizing resources
10-5
Portfolio and Project
Management
Goals
Portfolio
Management
Statements
Requirement
s
Strategies
Measures
Projects
Specification
Ranking
Schedules
Deployment
Results
Status
Scorecard
Trends
Innovatio
ns
Stimuli
Creations
Problems
Ideas
Team
s
Individual
s
Teams
Skills
Learning
Review
Project
Management
Maximising Value
10-7
Creating the Right Mix
10-8
Right Mix
> Quadrants
 Pearls
- Low risk and high reward projects.
 Oysters
 Risky projects with potential of high reward
 Bread and Butter
 Often small, simple projects – high likelihood of
success, but low reward.
 White Elephants
 Low probability and low reward projects. One
third of all projects and about 25% of spending
are White Elephant.
10-9
Right Mix

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> Types of Bubble Diagrams
Risk Vs. Reward
Technical Newness Vs. Market Newness
Ease Vs. Attractiveness
Strength Vs. Attractiveness
Cost Vs. Timing
Strategy Vs. Benefit
Cost Vs. Benefit
Etc. etc.
10-10
Right Mix
> Examples
Risk
Low
Uncertainties
High
Low
Reward
High
10-11
Risk-Reward
10-12
Actions
“Expenditure of your effort”
(what are your major current
and planned activities?)
Results
Goals
“Outcome of your effort”
(what is the current status of
your ‘goals’ and ‘actions’)
Results
“Objective of your effort”
(what do you want to
achieve in the future?)
Relationship
(which goals have no
actions? which actions
have no goals?)
10-13
Scope Matrix
10-14
Maximizing Alignment With Goals
10-15
Optimizing Resources
 Optimizing resources is the process of
balancing the
 Funding
 Worker hours
 Skill
requirements of the project portfolio
with the resources available over a
period of time
10-16
Portfolio Resource Loading
10-17
Portfolio Budgeting
 Budgeting is an important mechanism
for controlling and reviewing the
progress of an innovation plan
 Allocated budget will determine the
overall investment in terms of
resources and commitment
 Common budgeting methods
 Top-down budgeting
 Bottom-up budgeting
10-18
Balancing the Portfolio
 Maximizing contribution based solely on
financial methods can lead to short-term,
low-risk projects.
 A solely strategically aligned portfolio, may
not yield any short-term benefits necessary
to maintain momentum.
 Too rigid pursuit of the screening process
can result in behavior such as:
 Abandoning the more radical of proposed
innovations
 Focusing too heavily on a particular technology
 Concentrating too much on existing markets
10-19
Dominant Assessment Approaches
 Gates dominant
 Focus on reviewing each stage gate within the
individual projects in the portfolio
 Suitable where portfolios are static
 Portfolio dominant
 Favors a portfolio view over an in-depth review
of individual projects
 Suitable in fast, dynamic organizations where
projects are changing regularly and where the
business environment is fluid
10-20
Classification of Projects
10-21
Summary
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



Explain the main ideas behind project portfolio
management
Describe four key strategies used in portfolio
management
Name a number of tools that can be used for portfolio
management
Explain the use of bubble diagrams as a means of
evaluating portfolios
Understand the difference between the portfolio
dominant and project dominant approaches
Discuss why organizations often have a mix of lowrisk and high-risk projects
10-22
Activities
10-23
Search Online
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www.ideo.com
www.management.about.com
www.inventors.about.com
www.mindtools.com
www.mycoted.com/Category:Creativi
ty_Techniques
 www.blueoceanstrategy.com/
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10-24