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Managing the New Product Portfolio

Towards an end-to-end approach

Managing the New Product Portfolio

Year: 2007

Author: Larsson, Flemming

Supervisor: Mortensen, Niels Henrik; Andreasen, Mogens Myrup; Hein, Lars; Palstrøm, Bjarne

Institution: Department of Management Engineering, Technical University of Denmark

Pages: 242

ISBN: 978-87-90130-13-8

Abstract

Product development companies are increasingly confronted with an unforgiving global marketplace, which urges the top management to pursue every product development opportunity that appears on the road. However, a company cannot typically fund all the product development opportunities which are available. This situation incurs an important question: Which product development opportunities should a company choose to pursue in order to maximize the business results?
Portfolio management is an essential means to accommodate this paradox. Starting from the theory of the product development process and contemporary portfolio management theories this research investigates three central aspects: 1) the structural elements and principles of portfolio management, 2) the phenomenon over-commitment, and 3) the dynamic development portfolio. The three major contributions documented in this dissertation are a reference model for portfolio management, and a mindset together with three supporting tools.
The reference model builds on a set of defined and interrelated elements, which in total comprise the portfolio management architecture in a company. The model accentuates that it is beneficial to discriminate between at least three generic classes of portfolios when making decisions about the new product project portfolio mix. This supports a nuanced and coherent end-to-end approach to portfolio management.
The suggested mindset explains the dynamics of the burdensome phenomenon over-commitment. The thinking pattern rests upon the fundamental assumption that over-commitment well may be rooted in an unrealistic perception of the product development capability within the company compared to the portfolio.
The three supporting tools encompass the dynamic portfolio map, the project evaluation matrix and the project planning matrix. These are interrelated tools, which in combination can be utilized to visualize the dynamic portfolio. An explicit and dynamic linking between each project’s development process and the portfolio overview forms the crux of the tools.
The research project has been carried out at the Technical University of Denmark (DTU) and, partially, at the Massachusetts Institute of Technology (MIT). The results of the dissertation build on research literature and empirical studies in leading Danish and American companies. All contributions have been confronted with industrial portfolio management practices or industry professional’s judgement.
The contributions encourage an improved understanding of the portfolio management concept as well as support industry professionals in their efforts to compose and continuously maintain a business wise strong product development portfolio.

Resumé
Virksomheder konfronteres i stigende grad med et globaliseret marked, hvor den skćrpede konkurrence stiller store krav til at virksomhederne lancerer nye produkter i et højt tempo. Situationen tilskynder ledelsen i mange virksomheder til at forfølge alle ideer til nye produkter, som viser sig. Kun de fćrreste virksomheder har imidlertid ressourcer nok til at realisere alle ideer. Det giver anledning til et vigtigt spørgsmål: Hvilke ideer til nye produkter bør en virksomhed vćlge at realisere således at forretningsskabelsen maksimeres?
Portfolio management er et centralt middel til at imødekomme dette paradoks. Med afsćt i procesteori for produktudvikling samt portfolio management teorier undersøger denne forskning tre centrale aspekter: 1) de strukturelle elementer og principper i portfolio management, 2) fćnomenet over-commitment, og 3) den dynamiske udviklingsportefølje. De tre hovedresultater dokumenteret i afhandlingen består af en reference model for portfolio management og et tankemønster (mindset) sammen med tre understøttende vćrktøjer.
Referencemodellen bygger på en rćkke definerede og sammenhćngende elementer, som samlet set udgør portfolio management arkitekturen i en virksomhed. Modellen fremhćver, at det er fordelagtigt at skelne mellem mindst tre generiske porteføljetyper, når der skal trćffes beslutninger om sammensćtningen af porteføljen af udviklingsprojekter. Det understøtter en nuanceret og sammenhćngende tilgang til portfolio management.
Tankemønstret forklarer de dynamiske aspekter af det byrdefulde fćnomen over-commitment. Tankemønstret er baseret på antagelsen, at over-commitment i virksomheden kan skyldes en urealistisk opfattelse af produktudviklingskapabiliteten holdt overfor porteføljen.
Det dynamiske porteføljekort, projektevalueringsmatricen og projektplanlćgningsmatricen udgør de tre understøttende vćrktøjer. Vćrktøjerne kan i kombination bruges til at visualisere den dynamiske portefølje. Kernen i vćrktøjerne består i en direkte og dynamisk kobling mellem hver projekts udviklingsproces og et overblik for projektsćttet.
Resultaterne bidrager til en styrket indsigt i portfolio management konceptet ligesom de understøtter fagfolk i deres bestrćbelser på at sammensćtte og løbende fastholde en forretningsmćssig stćrk produktudviklingsportefølje.
Forskningsarbejdet er sponseret af Dansk Industri (DI) og er delvist udført på Massachusetts Institute of Technology (MIT). Afhandlingens resultater bygger på litteraturstudier kombineret med omfattende empiriske studier i førende danske og amerikanske virksomheder. Alle resultater er blevet konfronteret med industriel portfolio management praksis eller industri fagfolks vurderinger.

Keywords: portfolio management, program management, project selection and product development, portfolio management, porteføljeledelse, projektporteføljestyring, programledelse, projektudvælgelse og produktudvikling

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Design 2010