PORTFOLIO MANAGEMENT for New Products, Second Edition

Au tho red by Dr. Ro bert G . Coope r, Dr. S cott J. E dg ett and Dr. El k o J. K l ein s chm idt, P ubl i sh ed by Pers eu s Publ i sh i ng , 2001

TABLE OF CONTENTS
1 The Quest for the Right Portfolio Management
What Is Portfolio Management? What Happens When You Lack Effective Portfolio Management A Roadmap of the Block Portfolio Management Is Vital Much Room for Improvement Major Challenges for Portfolio Management Some Definitions

5 Portfolio Management Methods: A Strong Link to Strategy

Goal 3: The Need to Build Strategy into the Portfolio Linking Strategy to the Portfolio: Approaches Developing a New Product Strategy for Your Business A Quick Guide Moving to the Attack Plan Product and Technology Roadmaps Strategic Buckets: A Powerful Top-Down Approach Strengths and Weaknesses of Top-Down Approaches The Special Case of Platform Projects A Variant on Strategic Buckets: Target Spending Levels Bottom-Up Approach: Strategic Criteria Built into Project Selection Tools Top-Down, Bottom Up Approach But How Much Should We Spend? Summary

9 Making Strategic Allocations or Resources: Deployment

In Search of the Right Portfolio Method Resource Allocation Across Business Units: The Methods Deciding the Spending Splits: The Strategic Buckets Model Strategic Buckets: A Step-by-Step Guide Some Features of the Strategic Buckets Decision Process Summary

10 Making Portfolio Management Work for You: Portfolio Management and Project Selection
Three Key Components of the Portfolio Management Process Strategy: The First Key Driver of the Portfolio Management Process (PMP) Gating: The Second Key Driver of the PMP Two Fundamentally Different Approaches to a Portfolio Management Process Approach 1: The Gates Dominate An Overview of How It Works Approach 2: The Portfolio Review Dominates Pros and Cons of Approach 1 Versus Approach 2 In Conclusion: An Integrated Decision System

2 Three Decades of R&D Portfolio Methods: What Progress?

Recent Advances in Portfolio Management Methods Where Portfolio Management Stands Today Major Gaps between Theory and Practice Portfolio Management: Its Not So Easy Requirements for Effective Portfolio Management What the Leaders Do: Three Goals in Portfolio Management

6 Portfolio Management Methods Used and Performance Results Achieved

The Average Business The Best and Worst Performers Satisfaction with Portfolio Management Methods The Nature of Portfolio Methods Employed Popularity and Use of the Various Portfolio Methods Which Methods the Best Performers Use Specific Project Selection Criteria Employed Selecting Projects in Rounds How Specific Portfolio Methods Perform The Benchmark Businesses Conclusions and Advice from Our Practices and Performance Study

3 Portfolio Management Methods: Maximizing the Value of the Portfolio

Goal 1: Maximizing the Value of the Portfolio Using Net Present Value to Get Bang for Buck Expected Commercial Value The Productivity Index (PI) Options Pricing Theory (OPT) Dynamic Rank-Ordered List The Dark Side of the Financial Approaches to Project Evaluation Valuation Methods: Scoring Models Developing and Using Scoring Models Assessment of Scoring Models Checklists as Portfolio Tools Paired Comparisons Value Maximization Methods: Summing Up

11 Designing and Implementing the Portfolio Management Process: Some Thoughts and Tips Before You Charge In
Before You Charge In Stage 1: Defining the Requirements Stage 2: Designing the Portfolio Management Process Key Action Items Stage 3: Trial Installation and Adjustments Stage 4: Implementation and Improvement Winning at New Products

7 Challenges and Unresolved Issues

General Conclusions Specific Conclusions and Challenges Identified in Effective Portfolio Management Challenges and Issues Portfolio Management Is Not the Complete Answer The Path Forward

Appendices
Appendix A: Overhauling the New Product Process Appendix B: Sample Gate Screening Criteria (Scored) Appendix C: NewPort Max Software: A Tool for New Product Portfolio Management Appendix D: The NewProd 3000 Model

4 Portfolio Management Methods: Seeing the Right Balance of Projects

Goal 2: Achieving a Balanced Portfolio Other Bubble Diagrams Bubble Diagram Recap Other Charts for Portfolio Management Balance: Some Critical Comments

8 Data Integrity: Obtaining Reliable Information

Types of Information Required Marketing, Revenue, and Pricing Data Manufacturing or Operations and Related Costs Estimating Probabilities of Success Estimating Resource Requirements Deal with Uncertainties: Sensitivity Analysis and Monte Carlo Simulation Summary

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