New Product Portfolio Management - PMIH€¦ · New Product Portfolio Management: A Brief Overview . Speaker: Teresa Jurgens-Kowal, PhD, PMP . Company: Global NP Solutions, LLC

New Product Portfolio Management: A Brief Overview

Speaker: Teresa Jurgens-Kowal, PhD, PMP Company: Global NP Solutions, LLC Website: www.globalnpsolutions.com Welcome to the PMI Houston Conference & Expo and Annual Job Fair 2015

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-1- www.globalnpsoltuions.com

What is a New Product?

• Good, service, or combination of

• May be: – New to the world – New to the company – Enhancement of existing product – Cost reduction


New Products are Programs

• PMI Definitions – Project – Program

• New products are really programs

– Market development – Technology development


Strategy in Project Management

• Pre-Initiation Phase

• Business Case – why are we doing this project in the first place? – Business objectives – Options analysis – Strategic alignment


Classic Business Strategy

Narrow Market Scope

Broad Market Scope

Uniqueness Competency

Low Cost Competency


Strategic Response to Change

• First to Market • Seeks out growth, risk-taking Prospector • Niche Markets • Not overly innovative Defender • Fast Follower • Balances new with operations Analyzer • Not aggressive vs. competition • Reactive to market conditions Reactor


PM Knowledge Areas

Project Integration

Management

Core Functions • Project Scope

Management • Project Time

Management • Project Cost

Management • Project Quality

Management

Facilitating Functions • Project Human Resources

Management • Project Communications

Management • Project Risk Management • Project Procurement

Management • Project Stakeholder

Management STR

ATEG

Y


PPM and PM Knowledge Areas

Initiating

Project Integration

Planning

Time Management

Cost Management

Human Resources

Executing

Stakeholder Management

Monitor & Control

Quality Management

Risk Management

Closing

Close Project


Product Portfolio Management • Select the highest value projects

– Dynamic future state – Balance and mix – Strategic alignment – Limited resources

• What does value mean??


Defining Value

• Financial evaluations – NPV and ROI most common – Compare different projects

• Does value match the strategy?


Financial Assessment


Project Name NPV ($M) Type Resources (FTE) Dev Cost ($M)

Cookies 112 Breakthrough 12 2

Cake 100 Derivative 7 2.5

Donuts 84 Support 3 1

Popcorn 68 Support 2 0.75

Peanuts 63 Derivative 6 3

Potato Chips 53 Platform 10 0.5

Financial Assessment


Project Name NPV ($M) Type Resources (FTE) Dev Cost ($M)

Cookies 112 Breakthrough 12 2

Cake 100 Derivative 7 2.5

Donuts 84 Support 3 1

Popcorn 68 Support 2 0.75

Peanuts 63 Derivative 6 3

Potato Chips 53 Platform 10 0.5

23 Available Resources

Grow Salty Snacks Business


Project Name

NPV ($M) Type Resources

(FTE) Dev Cost

($M) Total Cost ROI

Popcorn 68 Support 2 0.75 35 94%

Potato Chips 53 Platform 10 0.5 29 83%

Cookies 112 Break-through 12 2 68 65%

Donuts 84 Support 3 1 55 53%

Cake 100 Derivative 7 2.5 87 15%

Peanuts 63 Derivative 6 3 56 13%

23 Available Resources

You Try It!

• Evaluate financial portfolio in pairs • Strategy is to grow the TREE business

– Moderate growth in vegetables – Maintain market share in flowers

• Other information: – You have about 25 product development

resources to work on new product projects – Internal hurdle rate = 15% ROI


Sample New Product Portfolio Project Name Business NPV

($M) Type Resources (FTE)

Dev Cost ($M)

Total Cost ROI

Carrots Vegetable 100 Break-through 10 8 75 33%

Cucumbers Vegetable 40 Derivative 7 15 25 60%

Daffodil Flower 140 Support 5 15 130 8%

Eggplant Vegetable 55 Derivative 6 10 56 -2%

Fir Tree 60 Break-through 12 7 35 71%

Oak Tree 35 Derivative 8 12 33 6%

Pine Tree 130 Platform 6 50 95 37%

Rose Flower 50 Platform 10 10 35 43%

Tomatoes Vegetable 30 Support 3 3 28 7%

Tulip Flower 70 Support 2 2 60 17%


NPV Prioritization Only Project Name Business

NPV ($M) Type

Resources (FTE)

Dev Cost ($M)

Total Cost ROI












Maximizes NPV=$440M Overall ROI ~22%

Consumes 23 resources

Select Only Tree Projects Project Name Business

NPV ($M) Type

Resources (FTE)

Dev Cost ($M)

Total Cost ROI








Carrots Vegetable 100 Break- through 10 8 75 33%


Cucumbers Vegetable 40 Derivative 7 15 25 60% -17- www.globalnpsoltuions.com

Reduced NPV = $225M Overall ROI ~38%

Consumes 26 resources

NPV + Growth Strategy Project Name Business

NPV ($M) Type

Resources (FTE)

Dev Cost ($M)

Total Cost ROI










Tomatoes Vegetable 30 Support 3 3 28 7% -18- www.globalnpsoltuions.com

Modified NPV = $358M Overall ROI ~34%

Consumes 25 resources Delay Fir Project

Evaluating Fuzzy Front End

• Fuzzy Front End is messy, beginning period of innovation where activities are more chaotic and less determined – Typically comprise stages of opportunity

identification, concept generation & evaluation

• Product or service idea is not fully formed – Sales volumes and pricing unknown


Scoring Methods


• Very useful for early stage projects • Criteria may include:

– Strategic Alignment – Product Advantage (for customer) – Market Attractiveness – Leverage Core Competencies? – Technical Feasibility – SHE (Safety, Health, Environment) – Commercial Reward vs. Risk – Capital Investment – Legal and Regulatory Risk

• Project Attractiveness is the weighted addition of the items rated

• Rank-order the projects

Scoring Example


Project Strategic Alignment

Product Advantage

Market Attractiveness

Core Competency

Technical Feasibility Reward Points Normalized

ScoreNumber

Resources Status

Thorium 5 5 5 5 4 5 29 97% 16 ActiveHelium 2 5 5 5 4 5 26 87% 20 ActiveNeon 5 4 4 4 5 4 26 87% 15 ActiveHydrogen 5 4 3 4 3 3 22 73% 20 ActiveOxygen 5 3 4 3 4 2 21 70% 15 HoldNitrogen 2 2 5 2 5 4 20 67% 30 HoldFluoride 4 4 2 4 2 4 20 67% 20 HoldRadium 3 5 5 1 1 4 19 63% 25 Hold

Stop Here, only 75

Resources Available

Limited Resources


Critical Chain Planning (Eli Goldratt)

Product Portfolio Management

• Goals 1. Maximize the value of the portfolio

• Staff with limited resources 2. Balance and mix of the portfolio

• Support the strategy • Align with strategic goals & objectives


Balancing the Portfolio


52%

27%

21%

Support

Enhancement

New Product

PPM Risk vs. Reward


NEW PRODUCT PORTFOLIO RISK-REWARD

Relative Market Share

Mar

ketG

row

th R

ate

© Copyright 2010 Global NP Solutions, LLC

Size of Bubble = Investment

low high

Efficient Frontier (MS Project)


Cum Reward/Cum Dev Costs

05

10152025303540

0 2 4 6 8

Dev Cost Remaining (M$)

Cum

NPV

(M$)

Accelerate

SolidMarginal

Project Type Balance


0 2 4 6 8 10 12

2016

2015

2014

2013

Number of Projects

Projects by Launch Date and Project Type

BreakthroughPlatformDerivativeSupport

© Global NP Solutions, LLC

Starting with PPM


• Lots of charts and analyses available – Choose what makes sense for your business – Easy to understand (fewer variables on one

chart, usually better) – Communication Tools – One chart doesn’t tell the whole story

PPM Goals • Maximize value

• Balance with strategic objectives


Cautions in PPM

-30- www.globalnpsoltuions.com Cooper, Edgett & Kleinschmidt, Ch. 6

Dominant Portfolio Method

-31- www.globalnpsoltuions.com Cooper, Edgett & Kleinschmidt, Ch. 6

Benefits of PPM

• Portfolio Management Value delivers: – Higher NPD Return on Investment (ROI) – Quicker to Market – Better Decision Making – Early Selection of Exceptional Projects


Tips for Implementing PPM

• Software tools are helpful – Greater than 20 projects

• Buy-in from stakeholders – Stimulate conversation to ensure strategic

alignment – Start small…and simple…

• Don’t overbook NPD resources • Clearly established criteria for projects


Contact Information • Speaker: Teresa Jurgens-Kowal, PhD, PMP • Company: Global NP Solutions, LLC • Website: www.globalnpsolutions.com • Phone: 281-280-8717 • E-mail: [email protected]

Thank You -34- www.globalnpsoltuions.com

Back-Up Information


ROI Prioritization Project Name Business

NPV ($M) Type

Resources (FTE)

Dev Cost ($M)

Total Cost ROI










Eggplant Vegetable 55 Derivative 6 10 56 -2% -36- www.globalnpsoltuions.com

Low NPV = $150M Good Overall ROI ~58% Consumes 29 resources

Minimize Development Cost Project Name Business

NPV ($M) Type

Resources (FTE)

Dev Cost ($M)

Total Cost ROI










Pine Tree 130 Platform 6 50 95 37% -37- www.globalnpsoltuions.com

NPV = $260M $100M less than modified NPV

Overall ROI ~31% Consumes 27 resources

Documents

New Product Portfolio Management - PMIH€¦ · New Product Portfolio Management: A Brief Overview . Speaker: Teresa Jurgens-Kowal, PhD, PMP . Company: Global NP Solutions, LLC