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Quick Tips for Cleansing Your Product Portfolio
By Mike Wiebe, Principal Consultant, Global Solutions
Despite the high value this important activity brings to organizations, only 1 in 6 companies
deploy even basic Portfolio Management practices. Given the relatively recent introduction
of Portfolio Management practices to the discipline of New Product Development, this is not
a surprising result.
For many organizations, ‘Product Portfolio Management’ means resource or program
management where leadership monitors a dashboard of investments or resource effort on projects. These
Portfolio Management exercises, while important, are ultimately very tactical. Truly
effective Portfolio Management, which results in the optimized selection of high-performing
new product projects requires significantly more strategic effort. Many executives understand
this and have a strong desire to move in this direction, however, face a tough obstacle – their
current portfolio is clogged with low value, incremental projects.
Recognizing when your Portfolio needs ‘cleansing’
How do you know if your product portfolio needs cleansing? A variety of common indicators
exist, for example:
Lack of results: It’s time to cleanse your portfolio if it is not producing the desired business
results.
Tunnel instead of a funnel: The company has a history of always saying yes, or perhaps more correctly,
never saying no. This problem is intensified if the organization also has poor visibility on resource
availability. When both exist together, you create a tunnel and many projects simply become ‘stuck’ somewhere
in that tunnel.
Project Delays: When numerous red flags are raised due to project delays, one of two things is
happening. Either the company is making poor project selection decisions in the first place or
the portfolio is not balanced.
Too many low value projects: Short term pressure on this quarter’s sales often
results in knee-jerk decisions to attempt too many smaller ‘quick hit’ new product
projects instead of striking a good balance between the important and urgent projects
Quick Hits – How to Cleanse Your Portfolio
There are a number of quick hits you can undertake to cleanse your portfolio of non-value-added
projects and refocus those scarce resources on more strategic, higher value or better balanced
projects:
Resource Capacity Analysis: By understanding where and how the capacity bottleneck group – or ‘most
valuable resource’ group – spends its time, two key data elements are revealed. First,
you’ll be able to determine how many projects the organization can handle at one time. Second,
and perhaps more importantly, you may learn that you don’t have nearly as many people working on
product development as you thought! Through a resource capacity analysis, one recent client learned
that from a group of 51 R&D professionals, only 23% of the total available effort was being spent
on new product development. That’s almost 40 people spending time on the urgent projects
that weren’t important to the business!
Project Prioritization Event: An industrial organization recently catalogued more than 400 product
initiatives of all sizes and scope going on in their organization. The solution was a one-time
portfolio event where 200 of those projects were eliminated. To do this effectively, three things
were required. 1) clear agreement of the urgency to undertake the initiative for the betterment
of the business and not any one function in the business; 2) clear agreement, in advance, as to what
constitutes a good or a bad project – the decision criteria; and 3) an understanding that getting
it ‘90% correct’ was significantly better than letting the problem persist because they couldn’t
achieve perfection. As part of this initiative, management was also careful to communicate
that this was good for the company, and in no way reflected poorly on people working on those
projects.
Triangulate your portfolio decisions: If your retirement portfolio planner used a one-size-fits-all
approach to plan your investments, you’d probably fire them! Similarly, there is no one
way to determine the right new product portfolio. As a minimum, you need to consider evaluating
each project for its strategic fit, balance (time, risk, geography, etc.), and its individual ‘value’ relative
to other projects. Most notably when evaluating projects, heavy reliance on financial metrics is
far from best practice. Pragmatists will clearly note that the numbers are wrong – we’re
just never sure how wrong. So we need value measures that are broader than just financial. For
example, a well thought through Stage-Gate scorecard is a fine indicator of individual project value. Again,
the goal here is to make quick decisions as to what projects to work on, and which ones to
leave behind.
Get senior management involved: Too often the task of ‘managing’ the portfolio turns
into one of ‘tracking’ because senior leadership has little visibility and involvement. Whether
through a one-time prioritization event or the creation of a Product Innovation Strategy to drive better
long term portfolio decisions, Portfolio Management is the job of senior management. As
Dr. Cooper says, this is, after all, only the future of your business!
In the end, having a clean effective portfolio of projects relies on good, strategic considerations. However,
it’s possible to get a good kick-start – cleaning up a stuck portfolio – with just
a handful of short term actions, some examples of which are noted here. While the list is short,
they are not trivial actions to undertake. Additionally, the best practice companies we talk to
have one further thing in common. They recognize that the use of portfolio management
is evolving. But rather than being concerned, they embrace the evolution and just get on
with it, solid in the belief that doing something is better than doing nothing.
Additional Resources
- Developing
a Product Innovation Strategy and Deciding Your New Product Portfolio
Executive Seminar Led by Dr. Robert G. Cooper in partnership with the ISBM
September 23-24, 2008 in Alexandria, Virginia
- Contact Stage-Gate International Global Solutions
Invite one of our Portfolio Management Solutions experts into your organization
to help you ‘Cleanse your Portfolio’.
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