1. Strategic Product Planning &
Portfolio Management
Projektverktygsdagen 27/5 2010
Torbjörn Grahn, Condesign AB
torbjorn.grahn@condesign.se

2. Agenda
• Condesign & Planisware, who we are…
• From the Tunnel to the Funnel
• The life without Portfolio Management
• The life with Portfolio Management
• What do the leaders do? The three main goals
 Maximation of Value
 Balance
 Strategic Alignment
• Summary

3. Information Knowledge since 1984
• Founded in Göteborg 1984 VÄSTERÅS
• 200 employees KARLSTAD KARLSKOGA
STOCKHOLM
• Offices at 9 different sites
• Business Areas:
- Engineering
- Communication
- IT/Operations Support GÖTEBORG LINKÖPING
JÖNKÖPING
LJUNGBY
MALMÖ

5. Condesign is a partner
Planisware is a global leadning supplier of PPM (Project Portfolio Management) systems since
1996
Planisware 5 is a system for PPM (Project Portfolio Management) that supports the organizations
complete project scope: from the operational level to the strategic level.
Focus on NPDI (New Product Development and Innovation)
Stage-Gate-certified – Best Practice for NPDI is integrated in the tool
Planisware’s PPM-system is used by more than 200 organizations worldwide with +200 000 users
in market segments such as: Pharma, Energy, IT, Aerospace & Defence, Automotive
A few examples:

6. Strategic Product Planning &
Portfolio Management
Which projects do we run ?
NOT

7. From the Project Tunnel …

8. … to the Project Funnel !

9. Strategic project planning

10. Attrition ratio for New Product Projects

11. Everyday life without
Portfolio Management

12. Symptom I

13. Symptom II

14. Symptom III

15. Symptom IV

16. General symptom – ”Acoustic prioritization”

17. Everyday life with
Portfolio Management

18. The vision
• Short Time to Market
• High efficiency – low failure rates
• Many Project Winners
• Within the Business Strategy

19. Portfolio Management – The Challenges
• R&D product portfolios are compared and benchmarked with existing products
 Uncertain estimations are compared with real data
• The decision process environment is dynamic
 The status and prospect for projects are ever-changing
• Projects in the portfolio are at different stages of completion
 From the early stages to commercialization stage
• Resources (money, people and time) is limited and hard to transfer seamlessly
 Give priority to one project means taking resources from another project
• Projects are interconnected
 Outcomes from one project is essential for another project
• Portfolio Management is critically important for the business
 New products are the leading edge of business strategy

20. What the Leaders Do –
Three Goals in Portfolio Management
1. Maximation of Value 2. Balance 3. Strategic Aligment

21. Goal I - Maximizing the Value of the Portfolio
• Main objective – the Portfolio should contain good projects that are:
 Profitable
 Successful
 Attractive
• Valuation methods:
1. NPV – Net Present Value
2. ECV – Expected Commercial Value
3. PI – Productivity Index Financial methods
4. OPT – Options Pricing Theory
5. Dynamic Rank-Order List
6. Scoring Model(s)

22. Goal I - Maximizing the Value of the Portfolio
Financial Methods – Practical Experiences
• Major Conclusions:
 Often error prone – insufficient and/or erroneous information
 Uncertainties in early approximations
 Tend to favorize short, low risk projects
• Improvement suggestions:
 Do consider financial data in go/kill-decisions – but not solely
 Strive to improve quality of information
 Track the estimates – do follow-ups, review the results

23. Goal I - Maximizing the Value of the Portfolio
Scoring Method – an example

24. Goal I - Maximizing the Value of the Portfolio
Scoring Methods – Practical Experiences
• Positive • Negative
 Captures multiple goals  Imaginary precision
 Reduces complexity  Halo effects – high scores on similar criterions
 Subjects each project  Tends to favorize large projects
 Forces deeper considerations
 Identifies strengths and weaknesses
Which Scoring Model ?
”If You can explain success - then You can predict success!”
Imaginary Precision
”They´re trying to measure a soft banana with a micrometer!”

25. Goal I - Maximizing the Value of the Portfolio
• Valuation methods - financial & scoring
 Both methods have their strength and weaknesses
• Find a set that fits the organization and its goals – considering the pros and cons
• Iterate better precision over time
 Both methods fail to
• Ensure to keep the portfolio balanced (Goal II)
• Ensure to keep the portfolio strategically aligned (Goal III)

26. Goal II – Acheiving a Balanced Portfolio
• Main objective – find a healthy Balance:
• Long-term projects versus short, fast ones
• High-risk long shots versus lower-risk sure bets
• Between various markets
• Different technologies
• Different project types (new products, improvements, cost reductions, R&D)
• Secondary objective – Manage risk and rewards
… a multidimensional task …

27. Goal II – Acheiving a Balanced Portfolio
Bubble diagrams

28. Goal II – Acheiving a Balanced Portfolio
Bubble diagrams - findings
• Criticisms:
 Information overload – maps, maps and maps
 Information display – not decision models
 What do they mean, how should they be used ?
 What is the ”right balance” ?
• Features:
 Handles multi-dimensional tasks
 Input for maximizing the portfolio value against goals (Goal I)
 Effective tool for monitoring that the portfolio is aligned with strategy (Goal III)

29. Goal III: Build Strategy into the Portfolio
• Main objectives:
 All active projects are aligned with the business strategy
 Alla active projects contribute to achieving the goals and objectives set out in the
strategy
 Resource allocations – across business areas, markets, and project types – truly
reflect the strategic direction of the business
• Approaches
1. Top-Down
• Product Roadmap
• Strategic Buckets
2. Bottom-Up
• Idea management
3. Top-Down, Bottom-Up
• Combines both above

30. Goal III: Build Strategy into the Portfolio
Product & Technology Roadmapping

31. Goal III: Build Strategy into the Portfolio
Strategic Buckets

32. The Three Goals in Portfolio Management - Repetition
1. Maximation of Value 2. Balance 3. Strategic Aligment

33. Conclusions and Advise on Portfolio
Management Methods
1. Portfolio Management Methods works !
2. Not one Right Valuation Method – Try a hybrid approach
3. Don´t over-rely on Financial Methods
4. Look more into Strategic Approaches
5. Consider a Scoring Model
6. Bubble Diagrams are a Must
7. Just Do It ! – Anything is better than nothing

34. The Business Case for PPM

35. The factors that determine the ROI
1. Benefits: How will your company benefit from PPM tools?
2. Costs: How will your company pay, both in hard costs and resources, for PPM tools?
3. Risks: How do uncertainties change the total impact of PPM tools on your business?

36. The Benefits
• Reduced project failures
• Reduced project cost overruns
• Reduced project throughput times
• Reduction in low-value projects
• Reduction in administrative activity time

37. The Costs
• Software
• Hardware
• Implementation and Roll-Out
• Support and Maintenance
• Enhancements & Application Management

38. The Risks
• Adoption
 Risk for low value for implementations that
• lack top-down support and accountability,
• were designed in a vacuum
• have objectives that aren’t communicated to end users
• Scope
 Risk for low value for implementations that
• only plan to include some of PPM disciplines in the tool
• become too complicated.

39. The ROI (Return on Investment) - exemplified
• Improvement in Time to Market, from idea to launch 20 – 30 %
• Improvement in number of projects completed with the same resources 25 – 300 %
• Cut in average project duration 25 – 50 %
• Better project success rate Over 90%
• Better profit margin 50 - 100 %
• Improvement in R&D productivity 50 %
Performance Measurement Group LLC, www.pmgbenchmarking.com

40. ”It’s all about knowing which
projects to run – and which
projects NOT to run.”

41. References
• Portfolio Management for New Products
 Robert G Cooper
 Scott J Edgett
 Elko J Kleinschmidt
• Product Leadership
 Robert G Cooper
• Project Portfolio Management
 Harvey A Levine
• Advanced Project Portfolio Management and the PMO
 Gerald I Kendall
 Steven C Rollins
• Optimizing Corporate Portfolio Management
 Anand Sanwal

42. Thank You !
Torbjörn Grahn, Condesign AB
torbjorn.grahn@condesign.se