A quick peek into some research on … optimizing product portfolios using value optimization to improve decision making. Basic PPM offers the ability to balance, resource enable, and track new product development (NPD) projects. To make better portfolio decisions, the report overviews advanced PPM techniques that help companies choose projects with the highest potential financial return and shows them which risks and uncertainties they should address first in their plan. For more information, please download the report, Issue in Focus: Optimizing Product Portfolios with Advanced PLM – Applying Value Optimization to Portfolio Decision Making.
The Research Findings
Companies have achieved important business value from implementing the basic functions of PPM and the associated best practices. These tools help drive higher levels of profitability, as discussed in Tech-Clarity’s Issue in Focus: The ROI of Product Portfolio Management. But there is more value to be gained by extending those tools to encompass a deeper understanding of the financial value available from the project. Basic PPM offers the following important capabilities (knowledge well established by specialists in this field like Doctors Edgett and Cooper (among others):
- Develop and track to realistic timelines, tasks, and costs
- Identify and correct bottlenecks
- Uncover and address skills gaps
- Document and mitigate project issues and risk
- Provide enterprise visibility to project health and status
Advanced PPM goes further. The primary enhancements Advanced PPM offers include:
- Analyze a variety of potential outcomes for a project (resulting in a range of potential financial returns)
- Develop a common understanding of the factors that influence the value (uncertainties and risk, as described in a Value Map)
- Allow companies to focus on the biggest areas of uncertainty earlier in the project plans (allowing them to get a better understanding of the actual value they will achieve, and helping them make better portfolio decisions as the company learns from the project)
Combining Basic and Advanced PPM allows companies to develop a more comprehensive, valuable portfolio management process. As Tech-Clarity’s PPM Framework (below) points out, it is important to determine and monitor product value. Advanced PPM adds this capability to current best practice PPM solutions to help them achieve higher return on product portfolio investments.
Implications for Manufacturers
Whether a manufacturer already has PPM best practices in place or not, there are significant benefits available from adopting advanced PPM concepts. Companies have the opportunity focus their decisions and product development efforts on realizing the highest potential for the product portfolio, and moving risk and uncertainty management form a passive approach (just managing the risk) to a proactive approach (using a tornado diagram to identify and focus on highest value uncertainties early in the project in order to better understand the achievable value of the product). The basics of PPM are still incredibly important, of course, and can be implemented first, in parallel, or following advanced PPM and value management techniques.
So that was a quick peek into some recent research on PPM, I hope you found it interesting. Does the research reflect your experiences? Do you see it differently? Let us know what it looks like from your perspective. And please feel free to review more free research and white papers about PPM, PLM and other enterprise software for manufacturers from Tech-Clarity.