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NPD PortfolioManagement for aGlobal ManufacturerPLM BEST PRACTICE CONFERENCE 2009SEOUL KOREA
Where Innovation Operates
ManagementConsultants
20 May 2009
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 2
Introducing PRTMPRTM is Premier Operational Strategy Consulting Firm Specializingin Operational Innovation§ 30 ,
(Operational Strategy, Innovation and Execution)
– : PACE® (Product And Cycle-time Excellence)
– : SCOR® (Supply ChainOperations Reference)
§ 1,200 6,000
§ 90%
§ Consulting Magazine Kennedy Research“ ”
§ 600 18
§ Samsung SDS (2007)
§ :– ,– ,– Consumer Packaged Goods ( )– ,–– ,– /– ,––– &–
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 3
What is Portfolio Management?Portfolio Management supports management investment decisions§ Setting, communicating, and aligning project priorities with a company’s
strategy
§ Choosing the level of investment in projects relative to others
§ Making strategic resource allocations
Portfolio Management’s scope includes all types of projectscompeting more or less for the same scarce resources§ New product development, IT, capital deployment, technology development,
customer care, infrastructure, six sigma, acquisition integration, businessprocess improvements
§ Includes ongoing, potential, and planned projects
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 4
StrategyDevelopment
Portfolio andPipeline
ManagementProject
Execution
FunctionalResource
Management
RevenuePlanning and
Budgeting
What is Portfolio Management? continued
Portfolio Management is at the heart of innovation management
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 5
Why Companies Should Care
Reference: Adapted from Portfolio Management for New Products, Robert Cooper, Perseus Books, 1998
Informal Approach
Non-rigorousselection criteria
Weak decisions
Poor PortfolioManagement Practices
Resources spread thinNew project queue growsQuality of execution suffers
Projects cancelled late
Constant second guessing
Good projects starvedIncremental approachMissed Opportunities
ProblematicDecisions
Slow, late projectsBusiness value notdelivered
Development budgetswastedProjects languish,adoption is slow
Few high value projectsToo many low valueprojects
Poor BusinessPerformance
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 6
Case Study Overview: SmartCoTwo billion dollar global supplier and solutions provider with astrong brand equity; markets thousands of products in 60+countries
Approach:§ Implemented PACE® project and portfolio
excellence with PRTM§ Deployed IT-enabled portfolio and process
management with Sopheon Accolade
Smartco
Opportunities Threats
Opportunities for high-valuepromotions and tie-ins
Innovative solutions to driveincreased premiums
Grow market share leadership
Leverage brand todemand premiums
Maintain/extenddominance of channels
Complexity of productsincreasing
Increasing commoditizationpressures
The Wal-Mart effect
Demand for greater productvariety/SKU proliferation
Poor historical track record forproject execution
Results:§ Dramatic reduction in time to
market§ Improved project execution
capability§ Reduced administrative burden§ Increased profitability
Reality: revenues andmargins weakening
Possibility:profitable growth
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 7
SmartCo Had Hit a RoadblockSmartCo Lacked Consistent,Strong Project Management Skills§ Project management not integrated;
not able to emphasize cross-functionalinterdependencies
§ Project accountability not clearly defined
§ Frequent specification/scope changes
§ No effective processes or systems toestimate project schedules or resourcerequirements
§ Most project teams unable to develop ormanage realistic work plans
§ No consistency of process acrossmultiple divisions and locations
The Corporate Portfolio Could Not BeHarmonized Across Opportunities§ Difficult to obtain a realistic forecast of
resources and a corporate roll-up ofresource supply/demand
§ Resource allocation sub-optimized
§ Broad portfolio and resource availabilitynot integrated into stage reviews
§ Unable to make tradeoff decisionsacross new product developmentopportunities
§ Difficult to obtain corporate NPD views
§ Manual tools not in real time andinsufficient to support decision making
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 8
InformalManagement
Stage 0Functional
Management
Stage 1Project
Excellence
Stage 2
PortfolioExcellence
Stage 3Cross-
EnterpriseExcellence
Stage 4
Capabilities are typically additive andimplemented in stages, leading tobreakthrough improvements
Best-in-Class
Averagefor
Industry*SmartCoPrior toProject
Goal: Move SmartCo to Portfolio Excellence
Average Growth: 8% 12% 19% —
TTM Index: 2.0 1.0 0.8 —
Profit Advantage: 35% 54% 67% —
Practices based onindividual experience
Management ofactivities within
functions to drivequality and consistency
Excellence within andacross functions to
drive effective, rapidexecution fromconcept through
product retirement
Alignment of strategicprocesses and plansto drive innovation,platform leverage,
and portfolio balance
Collaboration withpartners, suppliers,and customers tooptimize value,responsiveness,
and development ofresources across
enterprises
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 9
SmartCo’s Processes Provided a SkeletonBenefits of the Existing StagedDevelopment Process§ Brought structure to a situation that was
nearly in chaos
§ Introduced common terminology to anorganization that was not very processmature
§ Outlined expectations for a new productas it moved through the developmentcycle
Limitations of Generic StagedDevelopment Process§ Difficult to coordinate cross-functional,
cross-group work
§ No credible way to test the reasonabilityof project schedules
§ No management across projects
§ Little emphasis on critical path projectplanning and management
§ Did not always provide adequate info foreffective decision making
§ Decision processes not well defined
§ Resourcing priorities unclear
Existing Processes Could Not Enable Best-in-Class NPD Performance
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 10
Improvements Required to Attain GoalPutting “Meat on the Skeleton”…§ Optimized coordination among functions and teams by including well-defined
roles and responsibilities
§ Designed tools, templates, and processes for cross-project and cross-divisional consistency
§ Developed planning standards based on project complexity and major blocksof work
§ Integrated critical path into standard work plans
§ Emphasized high-quality information availability for evaluation and tradeoffanalysis
§ Structured the front-end discovery process to increase the innovation pipelineflow
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 11
Three Primary Objectives
§ Create a portfolio ofprograms that helpsachieve corporateobjectives§ Ensure that development
of priorities aligns withbusiness strategy
1. MaximizeValue
3. Link toStrategy
2. BalanceResources
§ Maximize corporate NPD return§ Emphasize value measures other than
financial (e.g., urgency, complexity)
§ Balance resourcesupply and demand§ Align priorities with
staffing decisions
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 12
An Optimized, Critical PathEnabled Project Management
Roadmap Is Developed for EachDevelopment Project
§ Resources§ Critical path§ Deliverables
Customized MS Project Work Plan
Generic Project Management Template
Cycle-Time and Resource Standards
15-9025.0High (>6.0)
4-2112.5Medium (>3.5, <6.0)
0.5-54.5Low (< 3.5)
Typical R&D Resources(FTE’s)
Average Best-in-ClassCycle-time* (months)
Project Type /Complexity
15-9025.0High (>6.0)
4-2112.5Medium (>3.5, <6.0)
0.5-54.5Low (< 3.5)
Typical R&D Resources(FTE’s)
Average Best-in-ClassCycle-time* (months)
Project Type /Complexity
2.36.09.83.33.8High
1.13.04.91.61.9Medium
0.41.11.80.60.7LowPhase 4Phase 3Phase 2Phase 1Phase 0
2.36.09.83.33.8High
1.13.04.91.61.9Medium
0.41.11.80.60.7LowPhase 4Phase 3Phase 2Phase 1Phase 0
Structured Development ProcessPhase 0 Phase 1 Phase 2 Phase 3 Phase 4
Credible estimatesto forecast projectcycle-times and themulti-functionalresources requiredfor individualprojects
Optimized standardproject managementtemplate applicableacross all projecttypes,
Clear roadmap forcross-functionallymanaging newproductdevelopment efforts
Goal: Create Corporate Portfolio Excellence
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 13
1. Action on Questionable Project Investments
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 14
2. Critical Skill Sets Balanced
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 15
3. Investment Consistent With Strategy
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 16
4. Prioritized Projects Adequately Staffed
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 17
5. Decision Processes Operationalized to Teams
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 18
6. Processes Monitored to Track Improvement
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 19
7. Reduced Administrative Burden
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 20
Improvements Applied to Critical NPD AreasCorporate Portfolio Management§ Ensured a tight focus on the most valuable opportunities§ Linked R&D investment with business strategy and risk§ Provided ability to manage critical resources
Operationalized NPD Process§ Upgraded staged development process with cross-functional
integration and project management capability§ Aligned lexicon, behaviors, and metrics to increase
transparency, predictability, and adoption§ Structured decision forums for effective governance across
the companyEnabled Tools and IT Systems§ Used systems and role-based process workflows to make
decisions executable and controllable§ Dramatically reduced administrative burden
Phase 0 Phase 1 Phase 2 Phase 3 Phase 4
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 21
Results: 66% Reduction in Time to Market
Cycle-Time Performance Before and After Improvement Initiative
66% Reduction Realized
Also§ Increased market share§ Increased product revenue§ Decreased cost§ Increased profitability
PreviousPerformance
NewPerformance
0 20 40 60 80 100 120 140 160 180Average Cumulative Cycle Time (Days)
First SamplesReady
CustomerApproval
First PlantSample
PrelimQual.
Ready forOrder
FirstShipment
PRTM Portfolio Management— 20 May 2009 | © 2009 PRTM Proprietary CONFIDENTIAL | 22
Portfolio Management Improves Performance
ImprovesStrategic
Fit
ImprovesStrategic
Fit
AchievesBalance
AchievesBalance
MaximizesValue
MaximizesValue