Product Portfolio Management (PPM) & New Product Introduction (NPI)
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Transcript of Product Portfolio Management (PPM) & New Product Introduction (NPI)
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Portfolio Management
Pat Scanlan
Product Portfolio Management (PPM)& New Product Introduction (NPI)
Presenter: [email protected] Purpose: In-company Improvement Progamme PPM
final year project for MSc Technology Mgt (UCD) Material Based on: works of Cooper, Edgett &
Kleinschmidt; AD Little, Urban & Hauser.
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Portfolio Management
Pat Scanlan
New Products Challenges
• In last 10 Years New Products’ Slice of Companies SALES revenues have increased from 33% -> 50% and PROFIT from 22% -> 40%
• EXPECT to increase rate of product introductions by 21% over next 5 years.
• Innovation drives companies’ investment value….
• Cooper’s studies with 35 leading firms in various industries...
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Portfolio Management
Pat Scanlan
Some Bad News too ! New product management is in trouble !!
• 46% of product development resources goes on “losers” and “no-brainers” projects
• 1/7 Concepts are Winners• 1/3 of new products fail at launch (e.g. Iridium, Edsel)• 66% of CEOs “somewhat” or “very disappointed” with their firms
new product performance.
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Portfolio Management
Pat Scanlan
8 Critical Success Factors(CSF) (Measurement Criteria) in product development life-cycle
• 1. Product (uniqueness & superiority)-> 7 ingredients in recipe• 2. Strong Market Orientation • 3. More Spending Pre-development work - “Up front Homework”• 4. Sharp & Early Product Definition (Voice of Customer)• 5. Appropriate Organisational Structure (X Functional Teams)• 6. Sharper Project Selections Decisions ( Hi Focus )• 7. Speed => competitive advantage (Reduce cycle time)• 8. Hi Q, Disciplined & Systematic New Product Process.
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Portfolio Management
Pat Scanlan
PRODUCT CSF#1the 4 peas !
PricePromotion
PlaceProduct
• list price• discounts• allowances• payment period• credit terms
• promotion•advertising•sales force•public relations•direct marketing
• channels• coverage• locations• inventory• logistics
• Features• Design• Variety• Packaging• Services• Warranties
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Portfolio Management
Pat Scanlan
PRODUCT Doughnut (CSF#1)
Additional Software
Standards & Procedures
Additional Hardware
System Integration
Installation &Debugging
Cables &Equipment
Training &Support GENERIC
PRODUCT
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Portfolio Management
Pat Scanlan
PRODUCT Differentiation CSF#1 & MARKET Studies CSF#2
• What is customer doing when using product ?
• How ?• Where ?• Who ?• What ?• When ?
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Portfolio Management
Pat Scanlan
CSF#1 Product Superiority (7 Ingredients)
• 1. Meets customer needs better than competitors• 2. Is better quality than competitor’s ( from customer view )• 3. Has Unique benefits/feature for the customer (Differentiated)• 4. Solves customers problems• 5. Reduces customers costs ( better value in use )• 6. Has highly visible benefits• 7. Is innovative or novel
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Portfolio Management
Pat Scanlan
PRODUCT CSF#1 & MARKET CSF#2 Technical Products : Adoption Life Cycle
3.5%
13.5%
33%
17%
33%
Techy’sInnovators
try it !
Visionaries !Get ahead of the herd
Early majorityPragmatists
Stick with the herdLate Majority Conservatives
LaggardsScepticsNo Way !
CHASM
In the chasm => (OS/2, NeXT, AI, OCR, CASE Tools, ISDN, Video Conferencing )
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Portfolio Management
Pat Scanlan
Market Orientation CSF#2
• Increased Market Knowledge, Research & Contact– user needs and market need satisfaction
• Key FAILURES Reasons : “poor market research & analysis”• Idea generation : 75% of success products come from customer
generated ideas• Product design : Market Research is input into Product Design• Development : constant customer contact• Post Development : trials, test markets to verify/tweak market
acceptance• Launch : well designed, targeted, resourced guided by good
marketing plans based on solid market information.
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Portfolio Management
Pat Scanlan
CSF#3 More “Up front Pre Development Work”
• Screening • Market Studies• Technical feasibility• Business Case Development
• Economically Attractive ?• Target Customer• Positioning • Features, attributes,
performance• Can it be done ? Cost ?• HOW ?
Better Project Definition Better Speed of Development
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Portfolio Management
Pat Scanlan
CSF#3 Typical role of CEOs in new product programmes (Ed Roberts. Technology Review 1977)
Study Design Develop Production Marketing
Activity profile of typical CEO
Ability to influence product outcome
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Portfolio Management
Pat Scanlan
CSF#4 Sharp & Early Product Definition
• Target Market Definition• Product Concept & Benefits to be delivered (in language of
customer) • Positioning Strategy ( including Price )• Features, Attributes, requirements & specifications…(what’s
new ?)
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Portfolio Management
Pat Scanlan
CSF#5 Organisational Structure
• Cross Functional Teams• Team Empowerment• A defined and accountable Team Leader
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Portfolio Management
Pat Scanlan
CSF#5 Leverage of Resources/Skills (Assess Position)
TechnologySignificance Leader Strong Favourable Tenable Weak
Base
Voice switching ALARM-> WASTEDRESOURCES
ALARM signal for “Survival”
Key
Mobile/IP Opportunity for PresentCompetitive Advantage
ALARM signal for “Present”
Pacing
Value AddedServices
Emerging
“3G”
Opportunity for FutureCompetitive Advantage
INDUSTRYAVERAGE
ALARM Signal for “Future”
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Portfolio Management
Pat Scanlan
CSF#6 Predictable New Product Success !
• Sharper Project Selection Decisions : SCORECARD to yield better focus.
• Classic Problem : Too Many Projects and Too few resources• Why ? A Failure to Focus• We need “Funnels” not “Tunnels”
Idea Pre-study Feasibility Develop Launch
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Portfolio Management
Pat Scanlan
CSF#6 Focus on Successful Projects
• Use Score Card Technique with round table assessment & agreement ( e.g. business, r&d, market, finance )
• Apply a standard criteria at all decision gates using scorecard• Include more quantifiable financial criteria e.g. forecasted sales,
ROI, payback period, NPV, IRR, DCF as a judgement criteria.• Assess Risk e.g. probabilities of technical, commercial success
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Portfolio Management
Pat Scanlan
R&D Portfolio CSF#6
Embryonic Growth Mature Aging
Dominant
Strong
Favourable
Tenable
Weak
Pro
bab
ility
of
Te
chni
cal S
ucce
ss
Technological Uncertainty & Uniqueness Increases
Technical Competitive Position
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Portfolio Management
Pat Scanlan
Scoring & Ranking CSF#6
Project Name NPV Prob TS Prob CS Dev Cost Comm Cost ECV Total Score IOTA 30 0.8 0.5 3 5 5 68NoClue 22.5 0.5 0.8 5 6 19 60Plutonius 3 0.75 0.75 2 1 2 80Saturn 44 0.6 0.7 1 0.5 1.5 21Venus 5 1 1 5 3 2.3397 48.6
Ranking of Projects on Financials & Non Financial Indicators
Dimension….Probabaility of Commercial SuccessRating Scale Rating Comment
Key Factor 1 4 7 10
Tachnical Gap Large Gulf Big Change Step Change Incremental 1 big learning curve !Complexity Difficult Many Hurdles Do-able Straightforward 1
Skill Base New Some experince Practiced widely known 4Resouce availability
must hire/ build known shortage
resources tied up
resources available 7
13 total score 13/40
Example Scoring Template
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Portfolio Management
Pat Scanlan
CSF#6 R&D Portfolio for Ericsson A Personal View of How we can view our products !
DATA
TELECOM / VOICEMOBILITY
Where we want to beNew Telecoms World
Where we are, maybe !
More products & combined solutionsfor mobility, voice and data
communication
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Portfolio Management
Pat Scanlan
CSF#7 Speed !
• But not at the expense of quality of execution !
• Speed yields Competitive Advantage : beat competitors to market
• Speed yields higher profitability:– revenues are realised earlier ( time value of money )
– more revenues are realised
• Speed means fewer surprises– reduces odds that the market environment has changed
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Portfolio Management
Pat Scanlan
Use PROPS = CSF#8Overlay Stage Gates (Go/Kill) Decision Points• R&D + Marketing + Finance participants at each decision meeting• Senior Management buy-in• “non subjective criteria” SCORING MODEL at Gates• Financial => Estimate Commercial Value of Projects• ECV = { [ (NPV x Pcs x SI) - C ] x Pts} - D • Non financial ( 5 dimensions )
– 1. Probability of Technical Success– 2. Probability of Commercial Success (product c.a & market attractive?)– 3. Reward (NPV,return,payback time,certainty,cost+TTM)– 4. Business Strategy Fit– 5. Leverage of company’s resources & skills
• (Idea Selection)Index Attractiveness= (PROBtechsxs x PROBcommsxs x Profit )/Devcost
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Portfolio Management
Pat Scanlan
The Project Plan of Action
• Interview / Survey analysis of current/past methods (8 CSFs)• Propose agreed changes/improvement on specific CSF• implementation plan (extent which are priority factors ? what
CSF needs fixing ?)
• Make fixes and implement a specific scoring technique for problem CSF areas
• Record changes
• Note changes/improvements• Post interview/survey (relevent CSF’s)