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with strategy, and risk management potential. A composite index is then constructed to allow for prioritizing the projects in numerical order. Finally, the company provides funds for projects from available funding categories based on each project's alignment with the company's business strategy. The concepts of cost estimate and project budget are given special meaning here. A cost estimate is the bottom-up "resourcing" and overall price of a project from its work breakdown structure and outline, using Microsoft Project or some equivalent software. Budgeting is the process of allocating available business funds to a project, thus giving it company legitimacy.

What differentiates this new product process from more typical portfolio development is the level of detail in the analysis and the timing for a concept to become a project. New product and service concepts will not be detailed as early as more conventional ideas because they present a high degree of uncertainty. In fleshing out the concept in the first phase of new product development, more detail is provided that sheds more light on the product before it becomes a project. Thus portfolio analysis continues on into the development process with new products, and the project reviews at the end of each phase allow analysis of go and no-go options.

The generation and evaluation of new product concepts and ideas is the most critical process for ensuring new product success. It is the preliminary articulation of the product and early judgments that serve to filter and bundle ideas and concepts for the purpose of narrowing down the alternatives. The risk is that good ideas do not survive because they are not well understood and not well represented. This process is one of advocacy as product idea sponsors are afforded the opportunity to make their case to management for a given new product concept in regular project reviews after each phase is completed.

The Eastern Case

The Eastern case demonstrates a process of developing a portfolio, beginning with business planning and strategic objectives in the manufacturing industry, and then moving to programs, new products, and projects. This process helps ensure that the new products actually funded and implemented are aligned with the business plan, promise good financial performance, and are accompanied by good contingency planning should risk events occur.

The risk of inadequate business strategy integration and new product development is inherent in the nature of a business. Business planning aimed at developing a business strategy considers various new product risks and threats to its success. But often the work of developing and implementing a portfolio of projects to improve the business does not align with the business priorities and plans.

This discussion uses the case study approach by addressing how a typical company—the Eastern Company—handles integration of strategy and new products in its business planning process.

The Eastern Company is a global manufacturer and distributor of aluminum products. Typically, Eastern faces major competition and challenge in a global aluminum market, and from foreign manufacturers who regularly "dump"

aluminum into western markets at artificially low prices. The company faces major increases in the price of electricity, one of its core manufacturing inputs. Thus there is continuous risk in the business from forces somewhat "out of the control" of internal company leadership and project management. To address the risks of integration failure inherent in its business, Eastern prepared a risk-based strategic plan.

Eastern faces eight integration risks, and has developed eight strategic goals to address them, as seen in Table 2-1.

Eastern recognized the need to directly take action to sustain its capability to successfully compete on a continual basis in the world aluminum marketplace. The assumption was that despite the fact that Eastern employees—in general—were dedicated to providing the highest quality products and services to the customer at a competitive price, as well as providing a positive return for the owner's investment, Eastern was heavily unionized. The company was committed to the principle that, "We will not be able to step up to those challenges unless our employees—and the union—can see where we are going and why, and have the opportunity to 'buy in.'" Through this strategic and communication

TABLE 2-1 Eastern's Risks and Strategies

Risk number

Risk

Strategy

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Project Management Made Easy

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.

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