Your Project Portfolio is the Main Vehicle for Executing your Business Strategy.
Your Business Strategy and Your Project Portfolio Should Be Mirror Images.
The Reality for Most Organizations
• R&D resources often over-committed by 200%-300%
• Project mix does fit the strategic imperatives of the company
– Often biased in favor of derivative/short-term projects (clearer
• ROI/NPV) at expense of long-term capability building projects
• Senior management only selects among Proposed projects
– Has no vehicle to exert influence over WHAT is proposed
• Firms lack explicit Structure + Process for managing portfolio
– Project selection is ad hoc and often reactive and political
– Process does not reflect the reality of capacity constraints
– Little explicit link of portfolio “design” to business strategy
Four Steps to Portfolio Success
Step 1: Strategy and Resource Allocation
– Commitment to $R&D (as % of sales)
SteStep 2: Identifying Different Project Types
– Important dimensions, both internally and externally
– E.g., breakthrough, platform, derivative
*Defining Platforms
• “Next generation” product or service: a significant improvement in performance, cost, or other attributes
– Platforms represent a new “system solution” for a customer
– Often based on new technology or systems configuration
• Establishes a design architecture that can be efficiently leveraged across subsequent derivations, enhancements
– Creates a new product or service family
• Platforms are defined by certain core design elements that stay constant over time, while peripheral elements change
Step 3: Allocate Resources by Project Type
– Driven by industry environment and company strategy
Step 4: Select Projects to be Funded
– Compare within project types
– Actively shape portfolio
• Compare project proposals within categories
– Platform ideas compete with other platforms
– Derivative ideas compete with other derivatives
• Use different criteria across categories
– Derivative: ROI or NPV, feature enhancement
– Platform: Fundamental performance, basis for line
– Breakthrough: long term capabilities/new options
• Management’s job is to actively manage process
– Shape menu of choices, not just passive selection
– Send “back to the drawing board” if no good options
Example of Le Petit Chef
You should think about failure.
Solution: “Option-based” Portfolio Design
