PPM, P for Project or Product?
By now Project Portfolio Management (PPM) is starting to become well known in IT. Not stating there isn’t much to improve, but at least there is a foundation and organizations tend to know what they are talking about. The benefits of a well-structured PPM organization are not only applicable to IT organizations, it will improve outcomes for all organizations or business verticals. This blog post will focus on the added value of PPM for (New) Product Development environments.
By Roy Scholte
PPM, P for Project or Product? Actually, in NPD you’ll need a combination of both… Project Management in NPD is often based on Stage Gate principals where progress is tracked and monitored per phase. At phase ends (gates) go/kill/hold decisions are made for the continuation of the project. This way the effort and money spent is clear and a re-validation of the projects’ business case makes sure that the perceived outcomes remain valid. The investment size increases with each gate making sure that the big investments are only made for projects which have the highest potential of being a commercial success.
But there is more to a successful business than a good product creation management methodology. Still PDMA (Product Development and Management Association) studies state that only one in every nine product launches become a commercial success. Even worse, 40% of all products fail at launch! Assuming this is a given, how can you still operate a successful business? The answer lies in Product Portfolio Management. Excelling in Project Management is a must: ‘doing the things right’. ‘Doing the right things’ is just as important, if not more… To build a product portfolio and a product pipeline is key to have a successful business today and to remain relevant in the market of tomorrow. This pipeline and your actual portfolio needs to have the right mix of the following aspects:
Value Maximalization – Profitability vs Risk vs ROI
Balance – ROI short vs long term, various markets, business arenas, technologies
Business Strategy Alignment – Align spending with company’s strategic goals
Pipeline Balance – Balance pipeline resource demand vs available resources
Sufficiency – Make sure your innovation strategy can be funded by your current project portfolio
The reason all five aspects are equally important and need to be considered will make sense if you think about the negatives if you only do ‘value maximalization’ for instance. You may gridlock your workforce by pushing too much work on them or lose market presence without this being part of your strategy. These kinds of negatives may appear for all aspects which you do not consider in your Product Portfolio Management process.
To be able to create a good Product Portfolio, and based on it a sound Project Portfolio, requires a lot of information which is best stored centrally for easy access and scenario comparison. There are good tools available which help you gain that type of information and capabilities but please understand that none of them can do what is key for your success: feel the market, define your companies’ strategy, create quality products and launch them at the right time in the right market. That’s what an organization needs to be able to do themselves.