Managing Project Portfolios

 

 

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