Product Portfolio Management

Many companies these days are trying to do too much and hence failing to get their products launched on time. It is understandable in these straightened times to want to do everything possible and to hedge ones bets, thinking that this will maximise the opportunities for success. However it often leads to overloading of resources, which leads to delays and hence not meeting sales targets because the products have not been released.

The answer is Product Portfolio Management which is a process of prioritising the new product development products, so that they are undertaken in an orderly, rather than chaotic, manner. This means that you choose which products have first call on the resources and deliberately delay others until resources are available (or obtain more resources to reduce the bottlenecks), rather than having project deadlines moved around in a higgledy-piggledy uncontrolled fashion.

Portfolio Management Goals

The three goals of product portfolio management are typically:

  1. Maximize the value of the portfolio
  2. Seek balance in the portfolio
  3. Keep portfolio projects strategically aligned

Portfolio Management Tools and Methods

There are a number of methods that can be used to help decide and control what is in the portfolio. Some of the most common ones are listed below

Financial Methods

  • NPV
  • ROI
  • Time to Break-Even
  • Expected Commercial Value (ECV)
  • Development Productivity Index*

Strategic Methods

  • Strategic Buckets

Scoring Methods

  • A list of key factors each with a weighting factor and each scored 1-10

Bubble Charts and Pie Diagrams

  • A bubble chart showing a graphical view of various project metrics/characteristics such as portfolio risk-reward. It is used to assure balance in the portfolio of projects (e.g., neither too risky or conservative and appropriate levels of reward for the risk involved) or provide a breakdown of the project portfolio with different characteristics.
  • A Pie diagram showing the split between different classifications of projects, e.g. by type or by region, to show the balance (or not) between the various types

* Development Productivity Index = (Net Present Value x Probability of Success) / Development Cost Remaining

2nd Generation Portfolio Management

Typically portfolio management has concentrated on the financial aspects, i.e. allocating budget to projects. However the real problem is handling limitations on resources, i.e. manpower. Therefore 2nd Generation Portfolio Management needs to have an equal focus on resource allocation, especially manpower. See Resource Management for more info.

For further information, please contact us and we will do our best to help