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IBM Software

Thought Leadership White Paper

Aerospace and Defense, Automotive, Medical Systems and Electronics

Linking business strategyto technical execution

Enabling the critical analysis necessary to deliver successful product lines

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3IBM Software

The idea of engineering a product line is not new. Many com-

panies have been doing this for years with varying levels of

success. Referred to as PLE, this is a systematic approach to

defining, developing and delivering a comprehensive portfolio

of related products. This approach also allows for product line

extensions in the future.

The promise behind PLE is strategic reuse—helping compa-

nies effectively design, develop and deliver a variety of uniqueproducts more quickly for different market segments, purposes

and industries. Greater profitability is achieved when common

product or manufacturing assets can be used for different

versions of a product. This ability to build multiple product

variants is what is meant by the expression economy of scale in

the product family.

What is new is the fact that software and systems have

emerged to play a critical role in how companies deliver

value across practically every industry and almost every tech-

nology imaginable. As product differentiation moves from the

physical attributes provided by mechanical components and

electronics to software-based capabilities, the product line

concept is making its way into software development. PLE is

helping organizations achieve product diversity at the speed

and efficiency it takes to satisfy customers. The focus of PLE

is on the means of efficiently producing and maintaining mul-

tiple similar software products, exploiting what they have in

common and precisely managing what varies among them.

This focus, however, begs the question, what’s the point of

delivering product variants to the marketplace more quickly

and at a lower cost if they do not add value to the portfolio?

PLE is about more than executing on technical requirements.

It’s about achieving business objectives by delivering the right

mix of products that consumers value.

Assessing business outcomes of the

portfolio and product linesReleasing products that customers want and can’t get else-

where creates higher demand and allows the organization to

charge a premium during the adoption period. In contrast, on-

time delivery of products and services that have little appeal to

the targeted market segment can send sales plummeting. The

reality is that, unless the right offerings are launched at the

right time to the right market segments, the probability of

success is extremely low.

Time to market pressure drives process improvements

A recent Aberdeen report indicates that the inability to

exploit opportunities in the marketplace is the biggest hur-

dle that companies face when they try to optimize their

product portfolio. “Launching before competitors is a time

to market pressure, which means companies are looking

for better system engineering practices to improve the

efficiency of their development processes so that they can

get their products to market first and capture market

share.”1

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4 Linking business strategy to technical execution

With such a fine line between success and failure, the product

portfolio and downstream product management and PLE

decisions need to be based on well-documented, collaborative

research and analysis—not guesswork, agendas, intuition or

the loudest voice in the room.

Yet in most organizations, the strategic management of

the portfolio—and subsequent processes for product manage-

ment that drive requirements definition and technicalspecifications—is often highly compartmentalized, poorly

defined, and seldom enabled by collaborative and automation

technologies. In fact, most companies continue to manage

these processes with spreadsheets and graphical presentation

tools that don’t provide deep understanding of the business

impact of the various trade-offs required when defining a

portfolio.

Organizations must stop crippling themselves with poor prod-

uct planning. Successful product innovation does not happen

by accident. It is not an art; it is a process. An environment

that nurtures high-performance portfolio management

processes and a culture of innovation can attract innovators

and give them a reason to stay.

Managing the product portfolio as an

investment What would such an environment look like? It would enable

the organization to manage its product portfolio as an invest-

ment. The portfolio investment strategy would be well defined

and communicated across the enterprise, based on up-to-date,

comprehensive information from the entire organization and

business ecosystem. To properly manage the opportunities and

risks, executives would have constant access to reliable and

comprehensive business information, so they could quickly tell

whether strategies were being executed properly and could

take corrective action as necessary. And employees would be

aware of the business decisions and risk for which they are

responsible. The focus would be on the following:

● Representing the best possible mix of innovative and sus-

taining offerings● Delivering the appropriate blend of risk and return and of

cost and benefit● Yielding the best trade-offs among customer demand, strate-

gic objectives and competitive response● Making the best use of existing human and capital resources

In this environment, the product portfolio represents the

business strategy (see figure 1). It answers such questions as

where the company should make investments and which prod-

uct lines should be retired. The value a product offers to the

business is typically assessed using various factors, including

the net present value (NPV), competitive and marketplace

assessments, and technical and commercial risk factors.

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5IBM Software

Helping to ensure a marketplace focus To accelerate product time to market and extend time in mar-

ket, product portfolio and product line management teamsmust be able to keep their fingers on the pulse of the market-

place. Best practices enable organizations to capture and

preserve feedback from industry and marketplace analysts,

customers, distributors, technical support teams and services

organizations for a greater understanding of how target mar-

ket segments define value.

For example, understanding how an opportunity was won is

often just as valuable as understanding why it was lost. An

organization that has a disciplined process in place to make

effective use of win–loss reports gains greater insight into the

perceived value of the company’s products. In addition, the

ability to leverage the latest social media technology allows anorganization to provide its customers and partners with a con-

venient forum for expressing their issues and priorities.

Creating a multidimensional view of the

business case Too often, each group involved in the product life cycle cre-

ates its own information repository. When individual teams

work on products within product lines, the level of complexity

increases exponentially. Sales teams maintain a customer

PORTFOLIO MANAGEMENT

CEO

Product VPs Product managers Product engineering

PRODUCT MANAGEMENT PLE

Businessstrategy

Businesscase

Businessrequirements

Level ofeffort

Figure 1: Successful portfolio and product management solutions enable value-driven PLE.

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6 Linking business strategy to technical execution

database to help close deals. Support teams track product

issues in a bug-tracking system. Engineering departments keep

detailed system requirements and project plans in separate

development systems. Marketing depends on marketplace

research and competitive intelligence databases. And financial

back-end systems capture cost and revenue information. Each

system tells only part of the story.

Product portfolio and product line managers need a unified view of what’s happening in the marketplace and in the busi-

ness as a whole. They must also have ready access to the most

up-to-date information relevant to their market segments and

product lines, no matter where that information resides, either

inside or outside the organization.

Effectively prioritizing customer requirements

With IBM Rational® Focal Point™ software, ABB can

gather all customer requirements using a structured

process and easily access them through a central reposi-tory. The pairwise comparison feature of the Rational

software enables product managers to instantly visualize

prioritized requirements, enabling more rapid time to

market for competitive products while reducing develop-

ment costs.

Prioritizing requirements against well-

defined parametersBased on the company’s product investment strategy, product

management decides which product ideas to fund by balancing

answers to many questions, such as the following:

● What product features add the most value to the customer?● Which of these features can realistically be delivered within

a specified timeframe?

A disciplined, quantifiable and consistent process for cost–

benefit and trade-off analyses enables product managers to

visualize the complexity of decisions and make the right

choices. For example, stakeholders, such as existing customers,

prospects, sales managers, product marketers and engineers,

can contribute valuable assessment information that helps

define the needs of customers, including requests for enhance-

ment, defect reports, marketplace analysis, warranty data and

call reports. This information includes subjective observations

and objective data. An efficient way of quantifying both types

of information can help simplify analysis.

Well-designed business cases allow decision makers to more

easily assess the trade-offs among opportunity value, cost and

risk factors and can also show where investments in delivery

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7IBM Software

capability can provide significant revenue potential. The effec-

tive opportunity assessment process enables business cases to

be as simple or as comprehensive as needed to cover all the

criteria deemed critical to business success—with the ability

to combine qualitative and quantitative data in the decision-

making framework. Process standardization helps ensure that

input is gathered from all relevant stakeholders and that new

ideas are evaluated against all of the company’s strategic

objectives.

It is important that the methodology for defining relative

value be flexible enough to handle exceptional requirements,

such as giving higher priority to key customers. In addition, it

should enable rapid what-if analysis through simple adjust-

ment of the relative weights of the different metrics to reflect

different business scenarios.

A process that uses such quantifiable models of risk and

reward allows managers to compare projects objectively to

determine the best return to the company. These models also

help encourage transparency and build trust and buy-in

among stakeholders.

Aligning execution with strategy To help ensure that what the business case requires is what is

actually built, the strategic portfolio and project management

processes must precede and link to the PLE process—bridging

the communication gap between the planning and the devel-

opment sides of the business. With value-driven PLE, the

business case drives the use cases used to define technical

requirements. Effective use of automation and collaboration

tools helps ensure that changes to the one trigger the right

corrective action to the other, whether it is a reevaluation of

the portfolio or an adjustment to technical requirements.

There is clear visibility into the status of requirements as well

as traceability from each technical requirement to the system

as a whole and from product features back to the idea source.Stakeholders across the organization have insight into how the

different elements of the portfolio are linked to business strat-

egy and to the underlying business architecture, information

systems and technology infrastructure.

Why IBM? As a leader in integrated systems engineering and embedded

software development and product life-cycle management

(PLM), IBM understands the need for a collaborative life-

cycle approach based on open-standards-based development.

And because today’s product’s hardware, electrical, electronics

and software components are often built in parallel, IBM rec-

ognizes the need to integrate and collaborate with a global

ecosystem of suppliers and partners.

To support value-driven PLE, IBM offers an innovation and

portfolio management decision support system that extends

decision support from the corporate portfolio, through lines of

business and product groups, to product lines and individual

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Please Recycle

products, and all the way to individual features and their

requirements. It integrates competitive analysis with require-

ments management solutions; gap analysis with prioritization;

and marketplace definition with product, project and release

planning. It provides sophisticated collaboration tools that can

help an organization enforce best practices, develop workflows

and approval authority, and provide valuable data when it’s

needed and in a format that’s appropriate for each stakeholder

in the portfolio and product management process.

For more information To learn more about IBM Rational Focal Point software and

the IBM Rational Software Platform for Systems solution,

please contact your IBM sales representative or IBM Business

Partner, or visit: ibm.com /software/rational/systems/ple

Additionally, financing solutions from IBM Global Financing

can enable effective cash management, protection from tech-

nology obsolescence, improved total cost of ownership and

return on investment. Also, our Global Asset Recovery

Services help address environmental concerns with new, more

energy-efficient solutions. For more information on

IBM Global Financing, visit: ibm.com /financing

© Copyright IBM Corporation 2010

IBM CorporationSoftware GroupRoute 100Somers, NY 10589U.S.A.

Produced in the United States of AmericaOctober 2010 All Rights Reserved

IBM, the IBM logo, ibm.com, Rational, and Focal Point are trademarks of

International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarksof IBM or other companies. A current list of IBM trademarks isavailable on the Web at “Copyright and trademark information” atibm.com /legal/copytrade.shtml

References in this publication to IBM products or services do not imply that IBM intends to make them available in all countries in whichIBM operates.

The information contained in this documentation is provided forinformational purposes only. While efforts were made to verify thecompleteness and accuracy of the information contained in thisdocumentation, it is provided “as is” without warranty of any kind, expressor implied. In addition, this information is based on IBM’s current producplans and strategy, which are subject to change by IBM without notice.IBM shall not be responsible for any damages arising out of the use of, orotherwise related to, this documentation or any other documentation.Nothing contained in this documentation is intended to, nor shall havethe effect of, creating any warranties or representations from IBM (or itssuppliers or licensors), or altering the terms and conditions of theapplicable license agreement governing the use of IBM software.

IBM customers are responsible for ensuring their own compliance withlegal requirements. It is the customer’s sole responsibility to obtain adviceof competent legal counsel as to the identification and interpretation of any relevant laws and regulatory requirements that may affect thecustomer’s business and any actions the customer may need to take tocomply with such laws.

All customer examples described are presented as illustrations of howthose customers have used IBM products and the results they may haveachieved. Actual environmental costs and performance characteristics may

vary by customer.

Aberdeen Group, System Engineering: Top Four Design Tips to Increase Profit Margins for Mechatronics and Smart Products, Michelle Boucher,October 2009.

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