Main content of this chapter
This chapter links strategy to project selection. The product portfolio is defined as: The collection of current and potential new products that forms the basis for a product development program, including product improvements, product cost reductions, product line extensions, and products that are new to the company. This chapter introduces various methods of project selection. These methods are both a means of assessing the potential of projects and a way to ensure that the prioritization of individual projects is aligned with the overall strategy and that product types are balanced. Portfolio management is a cross-functional activity that exists throughout the new product development process through to market. Portfolio management is the ongoing review of existing products to ensure they are the best fit with strategy and resource availability.extract
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Definition of Portfolio Management: A (product) Portfolio is a collection of sets of programs, projects and/or operations that are managed in combination. The constituent elements of a portfolio are not necessarily interdependent or even related, but they are assembled into a portfolio and managed as a unit to achieve strategic goals.
The role of portfolio management: to establish and maintain a balance between existing projects and new product development projects, making them consistent with business strategy and innovation strategy.
For the objectives of portfolio management, there are five core points as follows:
- Value maximization: Maximize portfolio value (sum of commercial value of individual projects) through resource allocation.
- Project Balancing: Maintain the right balance between the right projects based on pre-set decision criteria, including long-term versus short-term balance, high-risk versus low-risk balance, product- or market-category-specific balance.
- Strategic synergy: ensure that the overall portfolio is always consistent with the business strategy and innovation strategy, and that portfolio investments are consistent with organizational strategic priorities.
- Pipeline Balance: Ensure resources and focus are not spread too thin, most companies tend to have too many projects in their product portfolio. The correct number of projects, the best balance between pipeline resource requirements and available resources should be determined.
- Financial soundness: Ensure that selected projects in the product portfolio can achieve the financial goals set out in the product innovation strategy.
Portfolio management should be an ongoing process, that is, an ongoing process of evaluating the product portfolio, whether looking at existing products, new products, product enhancements, maintenance and support, or R&D. During this process, portfolio optimization should be carried out according to strategic objectives, so as to maximize the return on investment. Portfolio management runs through the overall role, as shown in the figure below.
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The main features of portfolio management are:
- is a decision-making process in a dynamic environment that requires constant review.
- Projects are in various stages of completion.
- Future events are involved, so success cannot be guaranteed. Portfolio management is used to increase the likelihood of success of an entire project or product.
- Product development and product management resources are limited and often shared with other business functions. To maximize returns, organizations need to allocate these resources.
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The three goals of achieving strategic synergy in portfolio management are: strategic fit, strategic contribution, and strategic priority.
Because portfolio management is dynamic and continuous, in order to ensure a clear link between strategy and product portfolio, Cooper proposed three methods of project selection and continuous review: top-down, bottom-up Above, combine the two.
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For a variety of reasons, chief among them to achieve a good risk-reward balance, most organizations should try to include a range of new product opportunities in their portfolio. The business unit, product category, target market to which the new product opportunity belongs, or the characteristics of the project or product can all be used as the classification criteria for the new product opportunity. For example:
- Breakthrough projects, derivative projects, platform projects, supporting projects;
- R&D costs, commercialization costs;
- potential rewards or benefits;
- Risk level - development stage or commercialization stage;
- technical difficulty - development or maintenance;
- Time to market - time from decision to develop to commercial return;
- Capital investment in facilities and equipment;
- The driving creative potential of intellectual property.
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Resource allocation is a key part of portfolio management. Many organizations are bogged down with redundant projects, resulting in poor execution, delays to market and commercial failure. Embedding capacity planning in the innovation strategy provides the foundation for resource planning and enables portfolio management to proceed smoothly.
There are two fundamental principles of resource allocation—project resource requirements and new product goals—that are best applied in the overall portfolio management process.
interpret
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A (product) Portfolio is a collection of sequences of Programs, Projects and/or Operations managed as a Portfolio.
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Personal understanding:
what is portfolio management? I think portfolio management is a multi-dimensional management model that balances resource conflicts and focuses on key projects or products.- original:
Ways to build a balanced portfolio:
- Determine the key dimensions and metrics for the portfolio. For example: increasing the proportion of high-risk product ideas, adding product opportunities for new markets, or changing the relative proportion of product improvements versus new products (relative to the organization itself).
- By applying the key dimensions and metrics of the portfolio, the product development opportunities in the portfolio are optimally balanced. In this way, it is also possible to ensure that the balanced portfolio is consistent with the strategy.
- The portfolio is managed on an ongoing basis to ensure that the portfolio remains in balance and product opportunities are properly selected throughout the development pipeline and product lifecycle.
- Personal understanding:
According to the above, it is still describing two independent activities of portfolio management—portfolio selection and portfolio review. The key dimensions and indicators are the criteria for establishing portfolio selection. The continuous management of portfolios is portfolio review. Those who pass the review ways to improve management.