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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’.
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.
- Clear agreement of the urgency to undertake the initiative for the betterment
of the business and not any one function in the business
- Clear agreement, in advance,
as to what constitutes a good or a bad project – the decision criteria
- 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 note that the numbers are wrong – they’re
just not 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 Resource
Contact Stage-Gate
International Global Solutions
Invite one of our Portfolio Management Solutions experts into your organization
to help you ‘Cleanse your Portfolio’.
For more information call us at
+1-905-304-8797 or email us at solutions@stage-gate.com.
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