Managing the New Product Portfolio
Towards an end-to-end approach
Author: Larsson, Flemming
Supervisor: Mortensen, N. H., Andreasen, M. M., Hein, L., & Hildre, H. P.
Institution: Technical University of Denmark, Department of Management Engineering
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.