MANAGEMENT SCHOOL

UNIVERSITY OF LIVERPOOL

Project Portfolio Management: The Case of Scott Paper Company

Uchenna Solomon Ohaeri1

1MSc Programme and Project Management Student, Management School, Faculty of Humanities,

University of Liverpool, UK. E-mail: solodotcom2010@gmail.com

Marked 23 May, 2013

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Abstract

Effective application of project portfolio management (PPM) methodologies and best practices is

growing in most project oriented organisations while considering the strategic goal in identifying,

assessing and prioritising of their various projects for appropriate resource allocation. In a bid to achieve

this goal, processes are put in place with the sole aim of generating current project status reports to

facilitate the sharing of resources to ensure the completion of projects that are in line with the

organisation’s overall business strategy. On the other hand, these dynamic status reports will also

facilitate the identification and assessing of projects that falls short of the overall organisational

deliverables.

The aim of this report is to critically evaluate how a case organisation uses the project management

methods in relation to project portfolio management for new product development (NPD) and launch. A

brief literature review on PPM and best practices will be conducted as it relates the concept of new

product development (NPD) and to match the organisation’s current approach to industry best practices

which is based on the use of existing models and concepts.

Keywords: Project portfolio management (PPM), new product development (NPD), new product

development framework, strategic goals, project management office (PMO).

Introduction

The Scott Paper Company is a USA-based corporation that manufactures primarily paper based consumer

products, such as tissues and paper towels. In 1995 Scott Paper merged with Kimberly-Clark however the

brand of Scott paper remains. In this scenario, Scott paper is managing a portfolio of new product

launches. Its overall business strategy is to extend an existing international consumer Products Company

into new international regions and markets. Scott Paper wants to grow incrementally and become more

efficient with its Research and Development spending. The R&D efficiency focus is both internal within

Scott Paper and external through Open Innovation sources.

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The efforts by a company to orchestrate the whole process of new product development strategy is

generally seen as a good practice and a precursor to perform an excellent project portfolio management to

meet the strategic goals of identifying, assessing, prioritising and selecting various projects for new

product launches. Adopting a pragmatic approach to new product development strategy will substantiate

the proper use of project portfolio management methodologies and project selection processes based on

the alignment with the company’s strategic mission.

The report seeks to answer and critically discuss the questions: What project portfolio elements are

currently in place in the case company’s new product development processes? How does the company’s

new product development approach reflect its overall business strategy? What are the limitations with

the approach that the company is following?

In the research conducted by Cooper et al. (2000), they stated that “there are two ways for a business to

succeed at new products, doing projects right and doing the right projects”, according to them, portfolio

management, in relation to the success of new product is about doing the right projects and have asked

the question: How should a company most effectively invest in R&D and new product resources?, this is

what portfolio management is all about.

Literature Review

Project Portfolio Management (PPM)

According to PMI (2008, pp. 8-9):

A portfolio refers to a collection of projects or programs and other work that are grouped

together to facilitate effective management of that work to meet strategic business

objectives and its management refers to the centralised management of one or more

portfolios, which includes identifying, prioritising, authorising, managing, and controlling

projects, program and other related works, to achieve specific strategic business

objectives.

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Levine (2005) argues that PPM generally aligns the management of stand-alone projects with business

operations management (BOM). A periodic review and update of a dynamic process which consists of

portfolio of current and active projects with new ones being reviewed and prioritised (Cooper et al.,

2001).

Cooper et al. (2000), elaborates that project portfolio management should attain four strategic goals:

portfolio value maximisation, portfolio balancing (right mix of projects), strategically aligned portfolio

and resource capacity alignment. Achieving these goals goes with the support of various tools and

techniques which will result to a better portfolio management. A more product-centric definition is

presented by Adams-Bigelow (2004), cited in Khan et al. (2012, p. 182) stating that portfolio

management represents the screening out of product concepts to identify the preferable product concepts

with which to proceed.

New Product Development (NPD)

A new product development process is made up of activities undertaken by companies during the

developing and launching of new products. Khan et al. (2012) explains the concept of new product

development (NPD) practice as a customary performance that implements ideas and policies leading to

the development and launch of new products and services. Booz, Allen and Hamilton (1982) identified

seven sequential stages of new product development: new product strategy development, idea generation,

screening & evaluation, business analysis, development, testing and commercialisation. Adopting this

systemic framework for managing new product activities will lessen associated risks inherent in the

process. Cooper (1994) identified five stages in his stage gate NPD process: scoping, build business case,

development, testing & validation and launch, each stage is presided by decision points called gates.

New Product Development Frameworks

The development of NPD frameworks is gaining grounds in the field of project portfolio management

over the years, as quite a number of theoreticians, scholars and practitioners have tried to come up with

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New Product Strategy

Development

Idea Generation

Screening and

EvaluationBusiness Analysis Development Testing Commercialisation

models that accentuate the important stages of the new product development process (Cooper, 2001 and

Scheuing, 1974). Some of which are the Booz, Allen and Hamilton’s framework developed by Booz,

Allen and Hamilton (1982) in association with  Booz Allen Hamilton Inc., the stage-gate framework

developed by Cooper (1994) in association with Product Development Institute Inc., and Stage Gate

International.

Booz, Allen and Hamilton’s Framework

The Booz, Allen and Hamilton’s seven-stage framework for new product development process is shown

in figure 1 below.

Figure 1: Booz, Allen and Hamilton’s framework – Stages of NPD

(Source: adapted from Booz, Allen and Hamilton (1982))

The seven sequential stages of the framework are:

New Product Strategy Development: Lays foundation for the new product process in line with

company’s missions and objectives and clarifies the strategic requirements of new products with

reference to subsequent NPD stages (from idea to launch).

Idea generation: Series of searches for product ideas that meets companies strategic goals with

series of self-assessment to determine product categories.

Screening and Evaluation: Analyses ideas gathered from the previous stage for further scrutiny.

Business Analysis: Further scrutiny of ideas are performed and evaluated via a business plan that

identify product attributes, barriers to entry, profits, target market, etc.

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Development: This is the transformation of conceptual business ideas into products with offerings

going through many alterations to fit test input results.

Testing: Validates earlier business projections to fit market conditions.

Commercialization: Market launch for the newly developed products.

The Stage-Gate Five Stage Framework

The elements of a five-stage, five-gate framework of NPD process is shown in figure 2 below.

Figure 2: Five-Stage, Five- Gate framework – Stage Gate NPD

(Source: adapted from Cooper (1994))

A close look at both frameworks shows some similarities, Cooper’s Stage gate model is made up of five

decision points called gates, a “go/no-go” decisions are made at these points before proceeding to the next

stage and through to the final product launch stage.

1.0 The Case

1.1 Elements of Project Portfolio Management at Scott Paper Company

In a bid to identify some of the elements of project portfolio management that exists in Scott Paper

Company’s new product development process, an x-ray of the new product development frameworks

described in the literature review will be examined. Both frameworks will be used as yard sticks to bring

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out some of these elements. Based on these frameworks, six project portfolio management elements are

evident in Scott Paper’s new product development process, namely;

1. Strategy development

2. Idea generation

3. Product Innovation via Research and Development

4. Business case building

5. Testing and sampling

6. Ranking and prioritisation of projects.

Strategy Development – new product:

Scott Paper Company tries to lay a solid foundation for the new product process from idea to a successful

lunch and in line with company’s business strategy and requirements. As confirmed by Wind (1982),

cited in Bhuiyan (2011, p. 751), before proceeding on a new product development project, companies

must set clear objectives and formulate a clear new product strategy to meet them.

This, the company’s Chief Technology Officer (CTO) exhibited by taking a “core-satellite” approach to

the company’s project portfolio, this involves a passive core – low cost diversification and an active

satellite – cost effective concentration. This approach also reflects a core global organisation maintaining

relationships with satellite organisations and partners (Speier et al., 1998), the core organisation usually

calls on other partner (consumers, retailers, wholesalers, advertising agents) to respond to market

opportunities (Anderson & Narus, 1990; Harrigan, 1998 cited in Speier et al., (1998, p. 266)).

This is evident because the CTO’s strategy approach looks at high volume products with better market

definition and a higher success of product launch and build strong relationship with business partners,

which is the ultimate goal of the company, this will set the pace for further product innovation for other

markets like Japan.

Idea Generation:

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Another element of portfolio management present in the company’s new product development is the

element of idea generation which is the fuel of any dynamic process. The product ideas generated at this

stage are tailored to conform to the company’s strategic goals observed at the new product strategy stage.

This is clearly seen from the company’s new product development process and innovation which is

anchored on monthly and quarterly reviews with major stakeholders and international partners

respectively. They also brought in top management ideas via the CEO on a periodic basis and most

importantly, from the customers as these products are tailored to meet their needs, this makes the

company more customer-centric in their product development, creating a large source to capture ideas

thus, expanding the pool of ideas to pick from.

This is important because, a study conducted by Booz, Allen and Hamilton (1982); Griffin (1997) cited in

Bhuiyan (2011, p. 754), reveals that “a firm has to generate at least seven ideas to generate one

successful, and on a larger scale, an average of 100 ideas must be generated in order to yield 15.2

successes.” Moore (2010) suggested that a consistent mechanism of idea capture can increase the number

of ideas that could translate into a project within the portfolio and enhance its effectiveness and meeting

the organisational goals.

Product Innovation via Research and Development:

There are evidences of product innovation strategy element, through their research and development

efforts and supported by ideas from within and outside the company via open innovation, this is also in

line with the company’s overall business strategy of achieving growth and being efficient with its

research and development spending. Ideas are like food to innovation and as the greatest inventor of our

time Thomas Edison puts it “innovation is 1% inspiration and 99% perspiration” that 1% inspiration is

the idea, innovation in this context is all about the commercialisation of ideas into products.

Scott Paper Company has initiated a research and development effort to commercialise the idea of placing

medical substances into their already existing personal tissue product to relieve nasal congestion for

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individuals with cold and flu. They have also extended their effort to add different colours and scents to

the product mix and a host of new product development effort in the mass transit tickets, stock/bond

certificates and a new high end speciality stationary paper.

This is important because it is in line with best practice and this is where they will create an impact by

growing the business and create new opportunities and new market frontiers. An innovation strategy is an

essential tool for product development and continued growth even in difficult times (Cooper and Edgett,

2010).

Business case building:

Scott Paper Company also followed the element of business case building though feasibility studies

depending on the established product categories that meets the company’s strategic characteristics.

The company has attached so much importance to this aspect as they have seen it as ‘a living document’

which qualifies ideas based on the degree of business they contribute to the bottom line. The ideas that

have been classified as “Go” ideas at the current decision point must be screened further using criteria set

up by top management using various business models (Cooper and de Brentani, 1984; de Brentani, 1986

cited in Bhuiyan (2011, p. 756)).

Testing and sampling:

The element of testing and sampling is also present in the company’s new product development process

and are crucial in both NPD frameworks, testing are carried out on ‘go’ product ideas that have gone

through the decision points (progressive elaboration) that leads to the testing stage.

The company’s ultimate goal is to reduce financial risk by reducing uncertainty through customer

acceptance and market research tests in sampled customer categories and markets to ascertain the potency

of the products, this was confirmed by the company’s VP, Research and Development who said that once

the financial stakes are low, some level of uncertainty will be tolerated. The importance of this stage

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cannot be overemphasised as it has the capability of reducing the probability of failure in the product

launch stage, it also possesses the ability to bring out market failure issues (Urban and Hauser, 1993).

Ranking and prioritisation of projects:

Ranking and prioritisation is performed in an iterative manner at Scott Paper Company across four

categories that exhibits the critical success factors of the new product development process and which are

in line with the company’s overall strategy.

The ranking process is quite dynamic, as process might change in response to the disequilibrium in

market conditions and new product test results, customer feedback, that will warrant constant

reprioritisation as the categories changes. Cooper et al. (2000) elaborates that portfolio management is a

dynamic decision process, characterised by a constant updating and revision of active new product

projects, at the long run may be accelerated, killed, or de-prioritised.

1.2 Scott Paper Company’s NPD Approach and Overall Business Strategy

The real power of program management (portfolio management) is the ability to link similarly aligned

projects into programs that are tied to the business strategy of the organization (Martinelli and Waddel,

2004). Therefore, there are certain goals and criteria project portfolio management must exhibit in the

new product development process of Scott Paper Company, in order to reflect its overall business

strategy, a project is termed failed without them. According to Cooper et al. (2000); Pennypacker and

Retna (2009), some of the highlighted goals and objectives in project portfolio management are: Strategic

Direction/Alignment, Strategic Balance and Value Maximisation (Returns).

Strategic Alignment/Direction:

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Scott Paper Company’s new product development stages reflects the overall strategic goals of the

business in terms of reducing costs across projects and market segment, speed to market, brand

protection, product innovation strategy and development priorities. These are evident in their statements,

firstly, for those products area where financial uncertainty is less, some testing phases will be eliminated

to lower costs and increase speed to market, secondly, Scott is unlikely to invest in areas that are

inconsistent with what their brand represents, thirdly, going into long term product development will

negate their overall strategy of incremental growth, fourthly, they have focused on products that require

more innovation, particularly for selected international markets such as Japan and lastly, in their

development if they spend a couple of months and can’t get to where they want to be, the product will be

reprioritised, these are some of the strategic directions of the various projects in the new product

development process that supports or fits the overall business strategy of the company, they are regarded

as necessary and sufficient for the overall strategy to succeed, if sufficiency is taken out, failure abounds,

rendering the other aligned projects useless (Pennypacker and Retna, 2009).

Strategic Balance:

Strategic balance, according to Pennypacker and Retna (2009), means that the portfolio has an

appropriate mix of projects with respect to the organisational objectives and mandates. The balance could

be based on some matrices such as the balance between short and long term projects, markets

diversification, categorisation of products, to mention but a few, these are exhibited at Scott Paper

Company and are pointers to the overall strategic goal.

Value Maximisation (Returns):

Scott Paper Company’s new product development approach will reflect the overall business strategy

through value maximisation which according to Pennypacker and Retna (2009), means “that the approved

portfolio achieves the best aggregate financial outcome in relation to the required aggregate investment

into the product, this will translate to profit for the company which is in line with their organisational

growth strategy.

1.3 Scott Paper Company’s NPD Approach - Limitations

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Some of the limitations with the approach Scott Paper Company is following includes;

Screening and Evaluation /Business Analysis Process

Too many innovative product

Project Management Office (PMO) establishment

Screening and Evaluation /Business Analysis Process:

The tools and techniques employed in the two stages (Screening and Evaluation & Business

Analysis) of the new product development process adopted by Scott Paper were basically hinged

on only qualitative techniques in date analysis which includes physical observation and

knowledge of market conditions, monthly and quarterly reviews.

Quantitative techniques of data analysis like some financial or economic models which analyses

project evaluation much like a conventional investment decision Bhuiyan (2011) can be used to

assess and finally select projects. Some of these tools are the Expected Commercial Value (ECV),

Net Present Value (NPV), Internal Rate of Return (IRR), and the Profitability Index (PI).

Too many Innovative product:

It is evident from the innovation strategy of Scott Paper’s NPD process that there are too many

product development programs at a time, the question is, will the available resources and

investment match these projects? And is it in line with the overall strategy of incremental growth

and efficiency in research and development spending? The answers are not positively correlated

with the numerous product development programs initiated by the company. Investing in too

many innovations means taking huge risks.

Project Management Office (PMO) establishment:

Every project portfolio management is backed up by a Project Management Office (PMO) which

is set up to better coordinate and manage the activities of the entire new product development

process, providing guidance and best practices where necessary to ensure organisational goals are

met. Scott Paper Company falls short of this.

2.0 Development of Project Portfolio Management within an Organisation

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For the development, implementation and maintenance of a healthy and sustainable project portfolio

management, an organisation needs to possess some important attributes such as the communication of an

explicit corporate and strategic goals and objectives that supports the project portfolio management

initiatives, more importantly is the commitment and leadership of top management team to set the right

organisational culture inherent in policies, strategies and guidelines.

This is supported by Killen et al. (2007) stating that the involvement of top management team from the

outset is key to realising the full benefits of project portfolio management, accompanied with effective

resource allocation to accomplish it. For example, in the product development setting, Heising (2012)

also buttressed the fact that involvement and support of top management at the outset of the development

process. He further attributed this to the success of most companies as researches have shown.

On the other hand, the processes of the project portfolio management must conform to the project

management best practices and methodologies maintained in the organisation, and support the assessing,

prioritisation and selection of projects. Levine (2005) argues that PPM generally aligns the management

of stand-alone projects with business operations management, the overall strategy of the business and

performance evaluation.

Organisational Culture:

Project portfolio management is a process that spreads across the organisation, therefore, a healthy level

of organisational culture must be maintained in order to cope with the changes in the projects due to

internal and external factors which is the characteristic of a sustainable PPM. The culture of the

organisation must also support the acceptance of the project portfolio management process outcomes at

every organisational level.

The Project Management Office (PMO):

PMI (2008) stipulates that a PMO is an organisational body or entity saddled with various

responsibilities of centralised and coordinated management of projects under its domain. They are

developed to support project managers in carrying out their duties, acts as the information and

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communication hub for the entire organisation, allocate and manage resources within projects, provides

uniform reporting format and documentation, develop, maintain and enforce project management best

practices and standards at all times and most importantly, integration of work across functional units in

the organisation.

Therefore a well-established project portfolio management in a projectised organisation will ensure that

projects are carried out efficiently based on established KPIs and integration with the organisation by

pairing them down and prioritising them (LaBrosse, 2010, p.75).

Figure 3 below shows a pictorial view of a project portfolio management setting in an organisation.

Figure 3: PMO setting and responsibilities

(Source: adapted from http://www.edufungames.com/businesscorner/biznizgames.php?tid=5)

8.0 CONCLUSION AND FUTURE WORK

The importance of project portfolio management in new product development cannot be undermined,

though its successful implementation still poses challenges for most organisations. But a lot of

organisations are beginning to acknowledge the major contributions new products development process

are adding to their bottom line and are continuously seeking for more opportunities to improve the

practice of the process for improved performance.

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Scott Paper Company is not left out on this feat, as they have tried to inculcate some of the project

portfolio management elements in their new product development process and reflect the overall business

strategy in their actions, decisions and implementation of the process, which is the ultimate goal the PPM

seeks to achieve. Scott Paper should also try to set up a PMO that will sit across the functional units of

the projects to provide coordination, advisory, training and continuous improvement services to the

company and to ensure the complete realisation of the overall business goals.

Further works should be carried out in the critical assessing and analysing the new product development

process in a bid to identify how companies like Scott Paper Company can up their performance in the

process with more emphasis on the CSFs.

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