A vital question in the product innovation
battleground is, "How should corporations most effectively
invest their R&D and new product resources?" That is
what portfolio management is all about: resource allocation to
achieve corporate new product objectives.
Today's new product projects decide tomorrow's product/market
profile of the firm. An estimated 50% of a firm's sales today
come from new products introduced in the market within the previous
five years. Much like stock market portfolio managers, senior
executives who optimize their R&D investments have a much
better chance of winning in the long run. But how do winning companies
manage their R&D and product innovation portfolios to achieve
higher returns from their investments?
There are many different approaches with no easy answers. However, it is a problem that
every company is addressing to produce and maintain leading edge products. Portfolio
management for new products is a dynamic decision process wherein the list of
active new products and R&D projects is constantly revised. In this process, new
projects are evaluated, selected, and prioritized. Existing projects may be accelerated,
killed, or de-prioritized and resources are allocated (or reallocated) to the active
projects.
Portfolio Management – A Problem Area!
Recent years have witnessed a heightened interest in portfolio management, not only in
the technical community, but in the CEO's office as well. Despite its growing popularity,
recent benchmarking studies
have identified portfolio management as the weakest area in product innovation management.
Management teams confess that there are rarely serious Go/Kill decision points and more
specifically, no criteria for making the Go/Kill decision. As a result, companies are
facing too many projects for the limited resources available!
|
