Portfolio management systems are a terrific approach to handling resource gridlock: too many projects, projects that never die, projects of the week, and others. Certainly Stage-Gate systems are meant to control these issues; however, portfolio management also cleans the pipeline out on a regular basis. From a budgetary point of view, using this system has enabled us to gain approval for technology development programs by demonstrating their linkage to the business strategy. Because technology requires lead time for invention prior to market introduction, it is a mechanism for avoiding late-to-market issues. This process has enabled us to defend our existing head count at budget time, as well as increase head count to support critical programs. We have been successful in gaining approval in the budget for increases in the product testing budget and toxicology/registration budgets. These two budgets have historically been difficult to increase, as they tend to be a large percentage of the R&D budget.
I have often compared designing, implementing, and maintaining a portfolio management system to climbing a mountain. Sometimes the slopes are manageable, and the climb is easy. Then the landscape changes, the clouds move in, and the climb becomes painful and labored. You slip, fall back, lose ground, and must climb up that slope again. A plateau is reached, and you catch your breath before you tackle the next steep slope. If you put a great team in place, the design and implementation may go smoothly. Eventually, however, tough decisions will need to be made, and the slope will be slippery and treacherous. Every time the team composition changes on the business and technology teams, you probably lose some ground and have to learn to climb the slope again as a team. Maintaining the portfolio management system over the long term requires the whole team to be actively engaged in continuous improvement discussions. Every portfolio meeting should close with a discussion or survey of what is working and what is not.
We learned as a business team how to perform portfolio management, not just portfolio analysis. This meant looking at commercial failures of the past and determining honestly, as a team, what went wrong, why, and what we would change for the future to avoid a repeat performance. We learned as a business team to analyze for and allocate resources within and across SBUs to maximize the value of our portfolio. We had to learn how to categorize different types of programs and make portfolio decisions relating to them and their fit with our strategy:
• Balance in short- and long-term programs
• Balance for low- and high-risk programs
• Across different project types: new products, improvements, cost reductions, expansions, early pipeline technology development, market development, and others
• Appropriate support for each SBU depending on strategy
• Support of different technologies from embryonic to pacing to base
Flexibility in portfolio management is important. The world is not monochromatic but a wonderful digital rainbow of colors. This is the environment we had to learn to make decisions in. We learned how to push as a team to make decisions on programs, especially the tough no-go decisions, recognizing that these decisions would free up resources for better opportunities. Sometimes the decision making is difficult because the team must focus on what might be rather than what is. Decisions are always being made in a dynamic environment. It is difficult to compare projects when available information is scant or constantly changing. Programs do not stand still; thus, the best we can do is present snapshots in time as a basis for our decision making and try to project reasonably into the future. Projects are at different stages of development and competing for the same resources. Projects are not independent of each other; thus, funding decisions have wide-reaching repercussions on other programs.
New opportunities are continually presenting themselves, thus changing the landscape on a continual basis. For example, we would agree on a portfolio of programs to be supported at our full-day working meeting. Inevitably, a new opportunity would soon present itself. Since no slack existed for additional unbudgeted or hot programs to be introduced, we had to be prepared to make important, fast decisions on these opportunities. This can be done at monthly business team meetings or outside the meetings, depending on the urgency. We have accepted that it is okay to react on the fly to fund a project, using email or the telephone, if the window of opportunity will be lost, as long as the necessary parties are involved in the decision making and it is clear what program we are placing on hold or reprioritizing to free up resources for this new opportunity. However, full examination and a gate decision are required at the next business team meeting. This flexibility and discipline in the process need to be continually monitored by the process owner so that abuses do not occur.
Our meetings are interactive and lively yet facilitated and orderly. At our first portfolio management meeting, we made no-go decisions on two-thirds of the programs, realigned our programs to the business strategy, restructured our development teams, and put plans in place to train the teams on project management. More recently, at our full-day working portfolio management meetings, we spent only a small portion of the day on the current pipeline. The majority of the time is spent at the front end of the innovation pipeline, looking at new concept development, and the front end of our Stage-Gate process. These are all prior to commercial development, where we are screening opportunities and focusing on technology development. The gate reviews in our Stage-Gate process are managing the later pipeline programs. This is the area where Wheelwright and Clark have said management teams need to focus.20 When our business team progressed to these discussions as the primary focus in our portfolio meetings, it became obvious that the process had truly made the transition to a business-owned process.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.