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Portfolio Management

Portfolio management provides the critical link between strategic planning and operational execution. By allocating budgets and resources to specific projects and operational activities, portfolio management is used to control which work gets done, and very often replaces or greatly enhances an organization’s annual and quarterly budgeting process and capital approval process.

The objective of portfolio management is to do “the right projects”. This means maximizing the effectiveness and return of your innovation investment – aligning investment to achieve strategic objectives, optimizing financial risk and reward, and balancing investment across product lines, customer segments, investment categories and time horizons.

IFT’s Solution

IFT’s solution delivers the Product Development Institute’s best-practices for portfolio management techniques, providing a step-by step approach to:

Define project portfolios, based on multiple criteria for membership and standard definitions of different types of project and operational activity

Identify the value, strategic alignment and risk of candidate and current projects, based on quantitative metrics and scorecards

Prioritize projects in a portfolio, according to value, alignment and balance

Allocate strategic bucket funds to prioritized projects to optimize financial risk and return, align with the strategic plan and balance investments across businesses, customer segments and time horizons

Identify project dependencies to ensure funded projects are not dependent on unfunded

Perform what-if and sensitivity analysis to fine-tune your investment plans and react to changing market circumstances

Use visual dashboards to predict, track and respond to portfolio performance

Example Solution Capabilities

Funnels charts: are used to analyze a portfolio according to its progress in the development process. As with Matrix charts, the size of the bubble and its color can be configured to give additional information.
Funnels allow decision makers to measure how the overall NPD process is performing. Do we have enough ideas at the discovery stage? Are we killing enough of them along the way to allow the most performing ones to succeed? Do we have too many of them at the same stage which will prevent us from achieving any by lack of resources?

Scorecards: enable decision makers to compare projects according to multiple standardized criteria: financial indicators like ROI or NPV, probability of success, strategic alignment, etc…. When a large number of criteria are used, the IFT solution allows them to be combined and weighted to provide a composite indicator to simplify analysis. Criteria values can be associated to stoplight colors to facilitate understanding. Scorecards can be built and saved to provide managers with standard as well as ad-hoc analysis.

Simulations: managing a portfolio includes anticipating future problems and reacting quickly to the unexpected: decreasing sales potential, new competitor entering the market, delay in project, cost increases, priority changes, etc. The IFT solution allows you to change any parameters of the project and of the portfolio, investigate as many scenarios as needed and compare the different simulation results at any point in time.

Example Solution Capabilities

Matrix charts: are used to analyze a portfolio according to different dimensions for comparison, prioritization and arbitrage purposes.
These charts display each project according to two dimensions such as risk vs. rewards, technical newness vs. market newness, competitive strength vs. market attractiveness, etc...
The size of the bubbles can represent an additional dimension such as forecasted cost of the project, while its color can indicate its current status (proposal, approved, etc…).
Matrices allow decision makers to understand if the portfolio is well balanced and, for example, encourage new project candidates in areas where they are not in sufficient number or value.

Related NPD Processes