Eight Important Facts about NPD and R&D Portfolio Management

By: Paul O'Connor

Often the tasks at hand take our focus off of the big picture. In new product development (NPD) and R&D portfolio management, there are several “givens” that may seem obvious when stated but are often overlooked. Bring your attention back to these eight tried and true ways to improve your portfolio management and increase your product development productivity.

1. Doing nothing is not an option. The biggest mistake companies make in portfolio management is to do nothing at all. A “default” portfolio seldom beats a competitor’s “proactive” portfolio, no matter how good individual project execution may be. Because your competitors are making progress, doing nothing in NPD and R&D portfolio management is very risky.

2. Data quality can be improved. Data quality is to portfolio management as location is to real estate. With good data, the value of portfolio management can be tremendous. So the converse is also true, i.e., poor data can negatively impact the value of portfolio management. But what makes portfolio data quality so much different than real estate location is that data quality can be improved. In many ways, the implementation of portfolio management can be viewed as the task of improving portfolio data quality. It is important to maintain a focus on improving portfolio data quality.

3. Improving capability maturity helps organizations optimize portfolios. Organizations must improve or “advance their capability maturity” in order to move closer to optimizing their portfolios. Management can accelerate the benefits from portfolio management by exploiting an understanding of maturity levels through specific SpiralUp™ implementation plans (Read our article, “Capability Maturity Model for Portfolio and Pipeline Management” to learn more about capability maturity and the SprialUp process). While poor implementations will create negative results that can, if left unchecked, outlast the tenure of the management teams, good implementations will secure and increase the benefits of portfolio management.

4. Improving flow management improves NPD productivity. Portfolio management must also address Project Flow Management because it is the stream of developments that matters the most. If projects are too slow, gains will be greatly diminished. Flow management requires queuing information on the duration that each projects remains within each element of the NPD process and the expected economic value of the project. A real-time dashboard of the cumulative duration-value of projects within process work elements enables smart managers to spot and address bottlenecks as they occur (see Figure 1). The better an organization is at flow management, the greater its NPD productivity. There are software systems, such as PortView™, that can assist in this process.

Figure 1: PortView: Turning data into useable graphical views to assess project flow.

5. Resource forecasting techniques must be learned, implemented and improved over time. In order to optimize an NPD or R&D portfolio, the supply and demand of skill-specific resources must be forecasted several months into the future. Because task durations and task outcomes can be highly uncertain in NPD and R&D, special techniques are needed to do such forecasts. The more mature an organization is at project management and portfolio management, the better the techniques and the better the results. For those organizations just starting, advanced resource forecasting techniques are almost always too burdensome but just getting started with the basics will have positive impacts. Begin with forecasting only the one or two specific skills known to cause bottlenecks at a “man-month” level of granularity.

6. Identify your organizational and strategic weaknesses and you’ll uncover the systemic risk factors that cut across most projects. A significant amount of risk in an NPD or R&D portfolio is systemic – the same contributing risk factor cuts across most of the projects. Systemic risk is caused by either organizational/resource or strategic/competitive weaknesses. Project teams cannot address systemic risks as easily as can top management. Still, most senior managers are unaware of the systemic risk in their portfolio. Tools, such as RiskAssessor™, can provide valuable insight into these risks by identifying statistically significant risk factors that are common across the portfolio of projects and generating a comprehensive statistical and qualitative report that is easily viewed and shared.

It is a mistake to omit the role of the experienced product manager who would bring analysis and an understanding of what if scenarios to the interpretation and graphical representation of the data.

7. Appreciate the value of and process for multi-metric graphs for providing insights into trade-off decisions. Portfolio decisions and project prioritization require managers to make trade-offs among multiple measures or metrics. Communicating insights about trade-offs is best done through good, multi-metric graphical views, not via tables of data (see Figure 2). Yet, quite often top managers will delegate the task of creating views to subordinates with limited experience thinking this is an administrative exercise in MS Excel manipulation. It is a mistake to omit the role of the experienced product manager who would bring analysis and an understanding of what if scenarios to the interpretation and graphical representation of the data.

Figure 2: Multi-metric Graph: This most-popular PortView chart shows a dynamic view of how the portfolio has changed since the last review. Each vector indicates the direction and the degree to which a project has progressed since the last review.

8. Effective NPD and R&D portfolio management requires coordinated and consistent workflow and decision flow. All processes require both a workflow and a decision flow. Data generation, collection and analysis are the primary components of the workflow within a portfolio management process. Optimal reallocation of resources is the primary component of the decision flow. Coordination and consistency in both the workflow and the decision flow are prerequisite to gaining benefits from NPD and R&D portfolio management.

While seemingly apparent, any one of these eight facts of NPD and R&D portfolio management can easily be overlooked or de-prioritized. If you’re ready to improve the productivity of your portfolio, give these areas the attention they deserve. Now that you know what needs to happen, you likely want to learn more about ways to improve these processes. Here are some helpful resources:

Whitepaper: Overcoming Portfolio Inertia and Portfolio Entropy
On-demand Webinar: Integrating a Winning NPD Process
Workshop: Portfolio, Pipeline and Platform Management

By Paul O’Connor

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