New Product Portfolio Management

DoD policy first articulated the importance of project selection and portfolio management in the 1980s and has since refined the concept. The initial and most disruptive risk involved in program management lies in the inability to choose the right portfolio of new product projects in the first place. Fit and consistency with strategic plans, cash flow analysis and rate of return, and company competency ("can we make this product?"), lack of business analysis on markets, technical feasibility, and legal risk are key factors contributing to successful risk management.

Fit with company strategy. Alignment with strategy is a key risk challenge because projects that might otherwise be attractive might not be part of the company's plans for growth and competence. The weighted scoring model is one tool for assuring fit with strategy, but the risk here is in the inability to measure whether in fact a candidate project is going to help implement a company strategic goal.

Cash flow. Because profitability and rate of return are key to company growth, a project must be planned out over the long term to ensure net income growth. This means that candidate projects must be "fleshed out." The risk here is that cash flows are misestimated, and that key decisions and assumptions behind the decision are not made explicit.

Consistency with company competency. If the company does not have experience in a given area, it does not matter whether the project is consistent with strategy and cash flows are promising. Company capacity to perform is directly related to past experience and capacity; "sticking to the knitting" is still a major principle of success, and therefore a useful risk management concept.

Market analysis. If the market and future demand for a given project outcome or product/service are not well researched, the risk is that an efficient project may meet schedule, cost, and quality objectives, but produce a product that is not marketable. Therefore, the focus in risk planning must be in the adequacy of early business market analysis and research.

Technical feasibility. Because technical feasibility is key to new systems, if a project involves new, unproven technology, there is inherent risk in the project. Technical feasibility can be offset by embedded risk measures as described earlier in the product development process.

Legal risk. Legal and regulatory risk is attributable to changing government regulations and legal issues involved in liabilities for a given product. The risk here is that the company fails to understand and anticipate legal and regulatory constraints on a product or service.

Project Management Made Easy

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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