0
David Townson Ph.D., PMP [email_address] Project Management Institute (PMI) Presentation Southern New England Chapter: 12 ...
Biographical Summary for David Townson   20+ years of project and portfolio management experience.  10+ years of leading g...
AGENDA 1. Environmental Scan: The Setting 2. Problem Statement: Observations 3. Solutions Employed: Granular Approach 4. E...
Environment: Organization Type Research and Development Setting Technology Projects with Long Development Time Highly Regu...
Environment: Culture Lessons From Both Large and Small Companies. Focus on Metrics as a Proxy for Productivity. High Share...
Timing Quality Cost Technical Regulatory Commercial Environment: Risk Types & Prepared by David Townson  http://www.linked...
Environment: Portfolio Management Maturity Level Organization Possessed an Inventory to Understand the Composition of the ...
Prioritization Process Inputs Established: - Quantitative:  - Expected Sales, NPV, eNPV, ePV, Cost, PTRS, etc. - Qualitati...
Prioritization: What to do with Results? - Inform the Allocation of Resources . - Inform the Allocation of Talent. - Infor...
Project A Project B Project C Project D Project E Project F Project G Project H Project O Project P Project Q Project R Pr...
Project A Project B Project C Project D Project E Project F Project G Project H Project O Project P Project Q Project R Pr...
Project  A Problem: Prioritization at only a Macro/Project Level Creates a “Prioritization Food Chain” Project  J Project ...
Question   Should EVERY Activity on a Highly Ranked Project Have Greater Priority than ANY Activity on a Lower Ranked Proj...
Answer   Of course not ! Generally, Projects Have:   - A defined critical path.   - Activities that are “close” to, but no...
Project A Project A Plan Treating  All  Activities on “Project A” as High Priority Essentially Makes This Plan Project A P...
Project A Project A Plan So What? Critical Path Activity Non-Critical Path Nice-to-Have Activity Color Key Prepared by Dav...
Unintended Result Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment While this Methodology does E...
Project  K Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment Response: Take a More Granular Appro...
Project  K Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment Response: Take a More Granular Appro...
Examples of Different Ways to Take a More Granular Look at the Portfolio
Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment Sensitivity of the Value Drivers <ul><li>-  Mar...
Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment Comparing Value Drivers Across Portfolio Delay ...
We can treat opportunities to address risk in a similar manner. Options to “buy-down” risk can be assigned values and comp...
Case Example: Assume  you  are responsible for increasing portfolio value and ensuring the portfolio assets hit key corpor...
Next  Project Phase 95% 95% 95% 90% Go? Y N Case Example: continued How can we increase value of the asset AND give a grea...
Answer: Because we need a successful result at each step prior to moving on we will run a parallel test - in this case we ...
If the present value of the asset is $200MM, then the difference in the two plans can be represented to be the difference ...
Therefore, spending an extra $1MM increases the risk adjusted value of the asset by $20MM. Is this better or worse than ot...
We can compare this type of value factor against other investment options in the portfolio to help us get the biggest “ban...
Portfolio productivity is measured many ways – in this example if getting to the next stage gate was a key corporate goal ...
Value is in the Eye of the Beholder Many Definitions Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelo...
Defining the “Value of Portfolio Management” After Getting Past Basic Prioritization Processes Organizations Can Derive Mo...
Examples of Exploring Value Opportunities Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment
Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment Understanding  Value Changes Versus Just Tracki...
Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment Tracking Versus Understanding Value Changes Exp...
Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment 500  450  400  350  300  250  200  150  100  50...
Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment Understanding Portfolio Value Trends Exploring ...
Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment Understanding Value Drivers Exploring Trends to...
Prepared by David Townson  http://www.linkedin.com/in/vpproductdevelopment Understanding Value Opportunities Value: ePV ($...
Summary In Managing a Product Pipeline it is Ideal to: 1. Provide “Adequate” Support to All Portfolio Assets.    Likewise,...
Conclusion Portfolio Management can make a major contribution to building value in organizations whether they are large or...
The End Thank You! David Townson Ph.D, PMP [email_address] I welcome you to connect with me on LinkedIn Prepared by David ...
Upcoming SlideShare
Loading in...5
×

Townson Pmi Portfolio Mgmt Final Version

914

Published on

Driving Value Based Decision Making in Portfolio Management

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
914
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • Environment scan = description of the environment(s) from where these lessons and examples were gathered. Specifically a Fortune 50 Pharma company and a start – up biotech.
  • Most examples taken from one org – Large pharmaceutical.
  • Both org types provided lessons – perhaps the biggest lesson being that the large pharma concepts were completely applicable to a start-up Biotech!
  • This is were the large pharma org was prior to the value-centered focus
  • This is were the large pharma org was prior to the value-centered focus
  • This is were the large pharma org was prior to the value-centered focus. “Attention” of the org meant things like: Occurrence on governance agendas, ability to muster assistance from execs when needed, etc
  • The main output of portfolio management was generating this ranking.
  • The highest priority projects get everything they can imagine (almost), then the next level gets pretty much what it needs, with the lowest priority projects getting the left-overs…often not enough resources, or not the right types, to really help much.
  • The Disney example may be an exaggeration, but I’ve seen high priority programs spends resources for “bells &amp; whistles” that really were low value options at the cost of critical activities on lower priority programs. Scope Creep – adding discretionary activities to the asset’s plan which is not required in order to meet the agreed upon scope agreement. Scope Dieting – reducing the stated cost of an asset’s plan in order to make it look more attractive and get funded.
  • Just a few examples of different views/analyses.
  • Determining the “sensitivity” of different value drivers is extremely important and will lead to surprising results.
  • Here we look at the sensitivity of value drivers across the portfolio….Imagine of Project F was a low-ranked program struggling for resources….would you be able to get more resources for this asset if you could demonstrate that accelerating the program would greatly increase its value? Probably!
  • Translating risk mitigation options into quasi-financial measures by portfolio mgmt can allow the org to more intelligently select investment options within your risk management program.
  • This is a real world case study. Besides PTS, other types of risk may be PRS (probablility of regulatory success), which in this example, are presumed not to be a factor.
  • Each step has a probability of technical success associated with it. In this case each one is very high. Each step is independent of the next one – we just need one successful result at each step before moving on.
  • In some situations, especially when you are dealing with the possibility of a false-negative, we could also just boost the statistical confidence of the fourth step by adding statistical power (i.e shift from 90 to 95%).
  • ePV – how we are defining Risk-Adjusted Value.
  • Each black circle represents an RPV factor for a program…if you were tasked with increasing portfolio present value THIS YEAR…where would you focus your effort? [Answer: in the upper left hand side of the graph]….perhaps despite the fact that higher value options elsewhere (unless of course you can initiate activities now that buy-down risk later which you can claim this year). Also to be considered is the fact that this method doesn’t account for the actual magnitude of cost…example in text box on the right side of the slide.
  • If you were managing the portfolio and your boss made it clear that getting this asset to the next stage gate ASAP was a “career defining task” – would you like to have that extra 10% probability?
  • A variety of value measures is necessary otherwise you will run the risk of only going for the low-hanging fruit and not the riskier long term projects which may have a high discount factor but probably make up the future of your pipeline. The temptationis to fund all of the near term work and get the quick pay-off.
  • Good portfolio management also fosters an understanding across teams that we succeed together as a portfolio rather than individually as a single team. By sharing resources and trying to move the entire portfolio ahead we eliminate the feeling that there are “elite” projects and “second rate “ projects – all assets are valued.
  • Good portfolio management also fosters an understanding across teams that we succeed together as a portfolio rather than individually as a single team. By sharing resources and trying to move the entire portfolio ahead we eliminate the feeling that there are “elite” projects and “second rate “ projects – all assets are valued.
  • Its one thing to track or “record” asset value changes…but this does necessarily help MANAGE the value prospectively. This shows us a view of asset value change from one time point to another time point. Most assets have changed – asset value volatility is not unusual especially since if you are making adjustments to value based on perceived risk….this is often a qualitative estimation (such as regulatory risk) and can change year to year based on many factors such as the external environment as well as of course rater differences.
  • In this example we see that three factors contributed to a value change: An acceleration add value, budget a revision to the budget cost us value…the big change was driven by external factors of a competitor’s problem with regulatory authorities.
  • Here we are focusing on a single risk-type. We see many negative value changes, but a couple big outliers….this should lead us to dig deeper into what is driving this loss of value….perhaps a certain class of product is facing risk?
  • Again, here is another reason to dig a little deeper into portfolio value drivers….This asset gained a lot of value ($1200MM), but that gain is discounted by nearly a third ($400MM) Regulatory Risk – these kinds of heavy adjustments bear examination as they may represent avenues for possible risk mitigation.
  • Here we see how portfolio management value driver analyses can help create a higher level of awareness of organizational behaviors. If we are consistently losing value due to delays is this due to: poor planning? Over aggressiveness in timing? Something else?
  • One final example. Here we are looking at the product characteristics that drive commercial value. The base value is at the junction of the Optimistic and Pessimistic profiles….what we see is that there a couple assets that have a huge upside or downside….obviously when we allocate resources to these assets we’d like to take a shot at getting to those upsides (Project B) and also buy-down risk that we will get stuck with those pessimistic product profiles that lose a lot of value (project C)
  • Adequate support - even if its only enough to keep minimal activities going to the next decision point). It would be ideal to kill projects on purpose. It would be ideal to fund the highest priority projects only inasmuch as they require without all the bells and whistles.
  • In my first full year employing these practices at a large company we doubled the productivity of our portfolio (as measured y new drug applications being submitted to the Food and Drug Administration). The practice of valuing risk buy-up options was employed to similar success at a small biotechnology company as well.
  • Transcript of "Townson Pmi Portfolio Mgmt Final Version"

    1. 1. David Townson Ph.D., PMP [email_address] Project Management Institute (PMI) Presentation Southern New England Chapter: 12 December 2011
    2. 2. Biographical Summary for David Townson   20+ years of project and portfolio management experience. 10+ years of leading global product development teams. Previous Worldwide Portfolio Director for a Fortune 50 healthcare company: Doubled therapeutic area productivity while managing $1BB in resources annually. Recognized subject matter expert in pharmaceutical and biotechnology portfolio management: Over a dozen conference speaking appearances. Education includes: Bachelor of Science Graduate Certification: Information Technology Applications Master’s Degree: Business Doctorate: Applied Management Project Management Professional (PMP) Certification Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    3. 3. AGENDA 1. Environmental Scan: The Setting 2. Problem Statement: Observations 3. Solutions Employed: Granular Approach 4. Examples of Exploring Value Opportunities 5. Summary/Conclusions Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    4. 4. Environment: Organization Type Research and Development Setting Technology Projects with Long Development Time Highly Regulated Industry Many Assets in the Portfolio Individual Asset Budgets Range: $2MM - $50MM/yr Portfolio Resources of $1BB/year Strict Budgetary Controls (and limited resources) Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    5. 5. Environment: Culture Lessons From Both Large and Small Companies. Focus on Metrics as a Proxy for Productivity. High Shareholder/Investor Awareness. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    6. 6. Timing Quality Cost Technical Regulatory Commercial Environment: Risk Types & Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    7. 7. Environment: Portfolio Management Maturity Level Organization Possessed an Inventory to Understand the Composition of the Portfolio: - Projects we have, and knew about it. - Projects we have, but did not know it. - Projects we thought we had, but didn’t. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    8. 8. Prioritization Process Inputs Established: - Quantitative: - Expected Sales, NPV, eNPV, ePV, Cost, PTRS, etc. - Qualitative: - Link to Corporate Goals, Management’s Favorites, Whomever Yells the Loudest, etc. Environment: Portfolio Management Maturity Level Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    9. 9. Prioritization: What to do with Results? - Inform the Allocation of Resources . - Inform the Allocation of Talent. - Inform the Hierarchy of Attention by the Organization . Environment: Portfolio Management Maturity Level Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    10. 10. Project A Project B Project C Project D Project E Project F Project G Project H Project O Project P Project Q Project R Project S Project T Project U Project V Project I Project J Project K Project L Project M Project N Project W Project X Project Y Project Z Project AA Project AB Prioritization Became a Process that Merely Generated a List of Assets that got Funding - Starting at the Top and Working Towards the Bottom. Situation: Company had Insufficient Resources to Cover all Asset Needs. Observation Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    11. 11. Project A Project B Project C Project D Project E Project F Project G Project H Project O Project P Project Q Project R Project S Project T Project U Project V Project I Project J Project K Project L Project M Project N Project W Project X Project Y Project Z Project AA Project AB All of the Portfolio Candidates Were Considered Valuable by the Organization. However, Resource Allocation Via the Prioritization Process Did Not Consistently Result in Funding of the Key Value Drivers of the Lower Priority Projects. This Caused Many of These Projects to Slowly Starve, Eventually Becoming Less and Less Valued. Problem Statement Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment There is nothing wrong with killing projects – but it should be done intentionally , not through neglect or poor portfolio management processes.
    12. 12. Project A Problem: Prioritization at only a Macro/Project Level Creates a “Prioritization Food Chain” Project J Project K Project Z Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    13. 13. Question Should EVERY Activity on a Highly Ranked Project Have Greater Priority than ANY Activity on a Lower Ranked Project? Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    14. 14. Answer Of course not ! Generally, Projects Have: - A defined critical path. - Activities that are “close” to, but not yet on, the critical path. - Some activities that are not close the critical path, and may be unlikely to become so - they have a degree of slack as to when and how they occur Some projects, especially those with a high organizational priority, often have: - Discretionary activities (“nice-to-haves”) that do not strictly relate to the project’s established success criteria/agreed-upon scope. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    15. 15. Project A Project A Plan Treating All Activities on “Project A” as High Priority Essentially Makes This Plan Project A Project A Plan Like this… Critical Path Activity Non-Critical Path Nice-to-Have Activity Color Key Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    16. 16. Project A Project A Plan So What? Critical Path Activity Non-Critical Path Nice-to-Have Activity Color Key Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Funding nice-to-have activities as well as non-critical path activities far in advance of when they are needed may: - Consume resources that could be applied to other assets. - Reduce the NPV of the asset. - Cause rework if other activities dictate a change in scope and activities have to be repeated.
    17. 17. Unintended Result Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment While this Methodology does Ensure that the High Priority Projects get Lots of Resources, it can become a Contributor to Productivity gaps in your Pipeline… Rather than creating a continuous stream of valued assets, macro-level prioritization may over-invest in some assets and slowly kill others by under-investing (not fueling the critical path) as well as lost investment opportunities.
    18. 18. Project K Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Response: Take a More Granular Approach to Asset Prioritization - Determine “Must-Haves” for Project Scope vs. “Nice-to-Haves”. Project A Project B Project C Project D Project E Project A Plan <ul><li>Assign resources </li></ul><ul><li>Sign external contracts </li></ul><ul><li>Have great kick-off meeting at Disney World </li></ul><ul><li>Initiate testing </li></ul>It is Important to Reconcile the Proposed Scope of Activities versus What is Required . “Scope Creep” is Common on High Priority Projects – so is “Scope Dieting” on Low Priority Projects.
    19. 19. Project K Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Response: Take a More Granular Approach to Asset Prioritization - Understand the Sensitivity of the Plan’s Value Drivers. Project A Project B Project C Project D Project E <ul><li>- Market Launch Date/Timing </li></ul><ul><li>- Competition </li></ul><ul><li>- Product Profile/Characteristics </li></ul><ul><li>- Technical Risk </li></ul><ul><li>- Regulatory Risk </li></ul><ul><li>Commercial Risk </li></ul><ul><li>Intellectual Property Risk </li></ul>Examples of Value Drivers Risk Types Will Impact Projects VERY Differently: For Example, One Project May Not be “Sensitive” to Delays…but for another Project it can be Costly.
    20. 20. Examples of Different Ways to Take a More Granular Look at the Portfolio
    21. 21. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Sensitivity of the Value Drivers <ul><li>- Market Launch Date/Timing </li></ul><ul><li>- Competition </li></ul><ul><li>- Product Profile/Characteristics </li></ul><ul><li>- Technical Risk </li></ul><ul><li>- Regulatory Risk </li></ul><ul><li>Commercial Risk </li></ul><ul><li>Intellectual Property Risk </li></ul><ul><li>Sales </li></ul>Delay Acceleration EXAMPLE: What is the impact to the asset’s value for a 3 month change in time to market? For this project the Value Driver “Timing” is more sensitive to a delay versus an acceleration . - $25MM + 2MM Revenue Difference
    22. 22. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Comparing Value Drivers Across Portfolio Delay Acceleration Without understanding the sensitivity of this particular Value Driver, the organization might fund the lower priority assets in a manner that does not avoid major losses of value due to delays (i.e. Project D), and it may miss opportunities to increase asset value via acceleration (Projects C & F) - 10 Projected Value Difference ($MM) For a 3 Month Timing Change + 50 High Priority Med Priority Low Priority + 10 + 5 + 75 + 5 - 10 - 50 - 10 - 10 Project A Project B Project C Project D Project E Project F + 5 - 5
    23. 23. We can treat opportunities to address risk in a similar manner. Options to “buy-down” risk can be assigned values and compared against other investment opportunities. Let’s look at an example of how this can be accomplished. Building in Quantitative Value Approximations for Risk Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    24. 24. Case Example: Assume you are responsible for increasing portfolio value and ensuring the portfolio assets hit key corporate goals. In this setting “value” is determined by risk-adjusting the present-value of assets. Thus, a project with present value of $200MM and a 75% probability of success (POS) has a “value” in your portfolio of $150MM. In this example, the 75% POS is attained from the probability of technical success (PTS) of four activities leading up to a major go/no-go decision-point. Driving Value Through Risk Management Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    25. 25. Next Project Phase 95% 95% 95% 90% Go? Y N Case Example: continued How can we increase value of the asset AND give a greater chance of meeting that next stage gate as soon as possible ? Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Assigning Value to Risk Management Rework * (.95 x .95 x .95 x.90 = .77) . Assumption: A successful test result is required at each step before proceeding. This plan has approximately a 75% chance* of getting the asset through the next stage-gate.
    26. 26. Answer: Because we need a successful result at each step prior to moving on we will run a parallel test - in this case we select the final step - in order to increase the POS* and boost asset value. 95% 95% 95% 90% Go? 90% Y N This plan gives us about an 85% POS (+10%). Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Assigning Value to Risk Management Next Project Phase * Assumes that the product being tested is able to do what we expect it to do. The probability of having at least 1 statistically significant result in step four of this plan will be 99% and the overall probability is (.95 x .95 x .95 x .99 = .85). Rework Duplicate Test Added Case Example: continued
    27. 27. If the present value of the asset is $200MM, then the difference in the two plans can be represented to be the difference in risk-adjusted value: Current Plan: 75% POS x $200M = $150MM Value Optional Plan: 85% POS x $200M = $170MM Value … .versus the cost of the parallel testing. Assigning Value to Risk Management OK, but is an 10% improvement in POS worth it? Case Example: continued Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    28. 28. Therefore, spending an extra $1MM increases the risk adjusted value of the asset by $20MM. Is this better or worse than other investment options? We can create a semi-quantitative factor in order to have a comparison against other investment opportunities we have in our portfolio. Assigning Value to Risk Management Assume the extra testing costs $1MM. Case Example: continued Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    29. 29. We can compare this type of value factor against other investment options in the portfolio to help us get the biggest “bang-for-the-buck” from our resources. Assigning Value to Risk Management Our example has a “Risk Productivity Value” of 20 (20:1) Case Example: continued 30 25 20 15 10 5 0 RPV 0 3 6 9 12 15 18 21 24 Time Horizon (Months) Portfolio View of Risk Productivity Value (RPV) vs. Time Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment This is only one method to objectively compare the value for managing risk and adding value within and across assets. If you were focused on increasing straight $$$ rather than a ratio you’d modify the approach because some low cost options might have high RPVs but yield a low total return (for example: Would you rather have a 1000% return on a $10,000 investment or a 100% return on $50MM?)
    30. 30. Portfolio productivity is measured many ways – in this example if getting to the next stage gate was a key corporate goal you could add more certainty (10%) by spending this extra $1MM (75% vs. 85%). Sometimes (especially when it comes to corporate goals) the more reasons you can come up with to build a higher POS on an asset to target key milestones the more the disciplines of project and portfolio management may be seen to add value as contributors to organizational success. Assigning Value to Risk Management Adding Certainty to Goals Case Example: Conclusion Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    31. 31. Value is in the Eye of the Beholder Many Definitions Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Beanie Baby Peanut The Elephant. $3000 <ul><li>- Future Revenue. </li></ul><ul><li>- Future Revenue Adjusted for Time, Risk, etc. </li></ul><ul><li>- Intellectual Property Value. </li></ul><ul><li>- Customized Semi-Quantitative Values: RPV, etc. </li></ul><ul><li>Qualitative Measures: Serve as proxies for productivity. </li></ul><ul><li>Today’s definition of value may be different tomorrow! </li></ul>
    32. 32. Defining the “Value of Portfolio Management” After Getting Past Basic Prioritization Processes Organizations Can Derive More from Portfolio Management Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Optimizing Portfolio Value Hitting Key Milestones More Reliably Managing Portfolio Budget Strictly While Allowing Flexibility at the Individual Asset Level Providing a Smarter Method to Investment Allocation Improving Success Rates of Assets & Reducing Attrition Improve Alignment Across Organization’s Stakeholders Optimizing Resource Allocation
    33. 33. Examples of Exploring Value Opportunities Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    34. 34. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Understanding Value Changes Versus Just Tracking Loss Gain 100 90 80 70 60 50 40 30 20 10 0 10 20 30 40 50 60 70 80 90 100 Change in Asset Value (ePV%): Dec 10’ – Dec ‘11 Project A Project B Project C Project D Project E Project F Project H Project I Project j Project G
    35. 35. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Tracking Versus Understanding Value Changes Exploring the Drivers of Value Loss for Project D Value Loss (%) 100 90 80 70 60 50 40 30 20 10 0 Project D Announcement of Competitor’s Product Rejection by Regulators Forecast Overage Acceleration of Timing by 6 months -70% -15% +15% Loss Gain By exploring the reasons for the projected loss of value we may be able to respond with solutions to mitigate the situation.
    36. 36. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment 500 450 400 350 300 250 200 150 100 50 0 Negative Adjustments to Present Value Driven by “Regulatory Risk” ($MM) Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 8 Project 9 Project 10 Project 7 Exploring Value Opportunities Areas of Potential Value Gains in a Single Risk Type
    37. 37. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Understanding Portfolio Value Trends Exploring Areas of Value Gains Regulatory Risk In this example the asset’s value is shown as expected present value (ePV). By exploring the discounts driving a reduction in value we can have conversations about where to focus effort to mitigate risk/restore value. ePV $800MM Total Change = PV $1200MM Risk Adjustment - $400MM - $350MM - $50MM Technical Risk
    38. 38. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Understanding Value Drivers Exploring Trends to Raise Awareness of Behaviors In this example the portfolio is showing a consistent decline in value driven by delays to the Value Driver “Timing”. If there is not an obvious reason for this (e.g. plant shutdown), could it indicate an organizational tendency to be overly aggressive in its timing estimates? 200 150 100 50 0 50 100 150 200 Loss (-$MM) Gain (+$MM) Adjustments to Expected Present Value (ePV) Driven by Delays Time Point Dec 2010 – Dec 2011
    39. 39. Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment Understanding Value Opportunities Value: ePV ($MM) 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 Project A Project B Project C Project D Project E Mapping the key product characteristics which drive commercial value for the base, optimistic and pessimistic product profiles at future launch. Optimistic Product Profile Pessimistic Product Profile (Base Profile is Where They Both Meet) Color Key
    40. 40. Summary In Managing a Product Pipeline it is Ideal to: 1. Provide “Adequate” Support to All Portfolio Assets. Likewise, Assets that are not Valued Should be Eliminated Intentionally. 2. Fuel both Long and Short Term Productivity. 3. Preserve the Peaks of Productivity & Eliminate the Valleys, While Managing Overall Risk. 4. Understand the Drivers of Value for Assets. 5. Have the Ability to Target Investment at a More Detailed Level vs. an All-or-Nothing Approach.
    41. 41. Conclusion Portfolio Management can make a major contribution to building value in organizations whether they are large or small. As the discipline matures beyond basic multi-project tracking and prioritization: - create techniques to extend utility of risk mgmt. - raise awareness of how value can be created or lost based upon how investment decisions are made - whether intentionally or due to a lack of understanding of key value drivers. - underscore value of project mgmt as a trusted source of critical data for decision-making.
    42. 42. The End Thank You! David Townson Ph.D, PMP [email_address] I welcome you to connect with me on LinkedIn Prepared by David Townson http://www.linkedin.com/in/vpproductdevelopment
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×