SPM 8 Portfolio Management

Software Product Management Portfolio management

Lecture 8

Garm Lucassen

Sjaak Brinkkemper

19 September 2014

Agenda

• Definitions

• Product lifecycle management

• Portfolio assessment models

• Product lines

• Partnering, contracting and IP

The portfolio

• Portfolio is defined as the collection of assets and investments of an organization. (Krebs, 2009)

• Three portfolio’s can be distinguished:

1. Product portfolio (aka asset portfolio)

2. Project portfolio (incl proposals/ideas)

• Release projects, i.e. product releases

• Service projects, i.e. product implementations, customer consultancy, trainings, etc.

• Process improvement projects: internal change processes

3. Resource portfolio: HRM, capital, tooling infrastructure, offices

The Product Manager is responsible for establishing the corporate status and vision of the product portfolio. (c.f. SPM Competence Model)

In this lecture we focus on product portfolio management.

Product portfolio

• Product portfolio concerns the set of existing products, i.e. releases of a product, that are on the market, and their associated services

• Example: Microsoft

– Windows - Multimedia and games

– Office Suite - Server software

– Developer tools - Certification program

• Example: Philips Medical

– X-ray - Ultrasonic

– Computed tomography - Services

SPM Competence Model

Portfolio management?

• Portfolio management is defined as the strategic decision process, whereby a business’s portfolio is constantly updated and revised in order to meet business objectives (Pohl et al., 2005)

• Bottom line: How to get the most out of your company’s investments and products! (Cooper, 2001; Krebs, 2009)

• Good portfolio management requires close oversight, constant review of historical and current performance, and the courage to rebalance and rationalize the portfolio when necessary while aligning your actions with the overall strategy of the organization (Haines, 2009)

Portfolio management is...

• Ongoing Product portfolios should be analyzed frequently and not just once a year, or when things break

• Multi-dimensional Consider internal and external factors

• Multi-phased Consider all product across the entire lifecycle, including product being developed, launched, and already being sold in the market

• Investment balance A diverse product portfolio balances resource (manpower, budget, tooling) investments by considering how much is being invested in every product, across its lifecycle, considering the risks associated with each of those investments

(Haines, 2009)

Goals of portfolio management

• Maximization of value of all products in the portfolio

• Balance or spread of risks related to ongoing and future projects

• Strategic alignment of all corporate initiatives with corporate vision

(Cooper et al., 2001)

Typical portfolio questions

• What are the profitability rates of our products?

• What is our cash-cow for the future?

• What is missing in the portfolio?

• In which new product idea should we invest?

• How to balance resources over projects?

• Are there enough ideas in the pipeline?

• Which product should be terminated?

Possible consequences of bad portfolio management

• Holes in the product portfolio

Example: Google Docs Drawing lacks integration with Visio

• Delays in the pipeline

Example: Duke Nuke Forever was 13 years late…

• Missing interface

Baan lacking a data warehousing integration with ERP product

Agenda

• Definitions



• Product lines


Product lifecycle management

• Managing a software product through its complete product

lifecycle from its initial conception till it is finally phased

out.

• Responsibility of Product Manager

• Involves decisions on:

– Features to be developed and (re)prioritized

– Releases of products

– Alterations and enhancements of the product

– Diversifications into new market segments

– Product phase out and end-of-life

The software product lifecycle

Initiate

Design

Build

Test & integration

Release

Evolution

Phase-out

Stages in the product lifecycle from an economical perspective

Lower development

costs though

engineering efficiency

and knowledge re-use

Fast product

introduction. Possible

product price premium

and first provider

advantage

Reduce the cost of late

changes in product and

process development

Rapid innovation and

responsiveness to

market changes - add

new variants quickly

Improved market and

customer requirements

fulfillment and greater

ability to customize to

order

Sustained end-customer value

from consistent product

quality and performance Flexibility to enter new

markets and develop

mid-life kickers

Ability to extend

business value in

the aftermarket

Ways to optimize profits in the PLC

Product management lifecycle model

New product planning

New product introduction

Post-launch management

Concept Feasibility Definition Development

Launch

Strategic and tactical management

DCP DCP MDP DCP

Areas of work

Phases and

gates

DCP = Decision Check Point MCP = Major Decision Point

MDP

Product portfolio work area ‘buckets’

New product planning

New product introduction

Post-launch management

Concept Feasibility Definition Development Launch Growth Maturity Decline Exit

0

Negative cash flow

Positive cash flow

Break-even point

Releases

I II III

Sunsetting / phasing out / end-of life

Decisions on the phase out of products

• At some point in time a product should be phased-out and reaches its end-of-life

• Reasons for phasing out a product:

– No demand for the product anymore

– Maintenance becomes to expensive (as products grow)

– New product version that is released

– New product of competitor

– New technology or platform

– Bad performance in field (causing harm to company image)

– Legal constraints

• Elimination is sometimes difficult, i.e. the first product of the company or interdependencies between products

Why did Google kill Google Reader?

Microsoft’s phase out policy

Sonic Software’s phase out policy

Agenda

• Definitions



• Product lines


Portfolio assessment models

• Boston Consultancy Group Growth Share model

• GE/McKinsey model

• Shell Directional Policy Matrix model

• Porter’s five forces model

BCG Growth Share model

Dimensions:

• Relative market share

• Market growth potential

Categories:

• Cash cows: high market share in a slow-growing industry. Generate funding for other products.

• Dogs: low market share in a mature, slow-growing industry. Break even, but should be sold off.

• Question marks: grow rapidly and consume large amounts of cash, do not generate much cash. Analyze for future investment or divestment

• Stars: high market share in fast-growing industry. Investments needed for market positioning Relative market share

High Low

Mark

et

gro

wth

pote

ntial

Hig

h

Low

Kill

Divest Prioritize

Invest

General Electrics/McKinsey model

• Dimensions:

– Business position

– Industry attractiveness

Industry attractiveness

Busin

ess p

ositio

n

Harvest / divest

Harvest / divest

Selectively invest

Harvest / divest

Selectively invest

Invest / grow

Selectively invest

Invest / grow

Invest / grow H

igh

Low

High Low Medium

Mediu

m

Shell Directional Policy Matrix

• Dimensions:

– Prospects for sector profitiability

– Company’s competitive capability

Prospects for sector profitability

Com

pany’s

com

petitive c

apability

Cash generation

Growth Leader

Phased withdrawal

Custodial Try harder

Disinvest Phased

withdrawal Double or

quit

Weak

Str

ong

Attractive Unattractive Average

Avera

ge

Porter’s five forces analysis

• Framework for industry analysis and business strategy development

• Michael E. Porter, Harvard Business School, 1979

• Three forces from ‘horizontal competition’

• Two forces from ‘vertical competition’

Forrester Wave

Enterprise Data Warehouses

Agenda

• Definitions



• Product lines


Product lines: managed variability

• A product line is a range of software products sharing a common platform and exhibiting similar features

• Why product lines?

– A common platform results in higher quality, lower cost (re-use) and shorter time-to-market

– Mass-customization: Tailoring products to customer requirements using built in variability

Examples

• Example 1

– Microsoft’s Office product line

– Consisting of product types such as Word, Powerpoint, Project and Visio. They can be used in combination and customized individually

• Example 2

– Home automation product line

– Consisting of product types such as home security system, lighting control system, remote access extensions. Of each of the types different products are available that can be assembled into a home automation system

Document variability in product lines

• To support

– Decision making

– Communication

– Traceability

• What to document?

– What varies?

– Why does it vary?

– How does it vary?

– For whom is it documented (internal/external)?

Defining variability in a product line

• Variation point: A variable item of the real world or a variable property of such an item, e.g. color or language

• Variant: An instance of a variation point, e.g. ‘green’ or ‘Japanese’

• Variability of a product line, e.g. option to select the user interface language

• Commonality of a product line, e.g. every variant within the product line offers the option to select the user interface

Meta-variability model

VARIATION POINT VARIANT

VARIABILITY

DEPENDENCY

EXTERNAL

VARIATION

POINT

INTERNAL

VARIATION

POINT OPTIONALMANDATORY

{complete, disjoint}

{complete, disjoint}

1..n 1..n

ALTERNATIVE

CHOICE

Min

Max

0..1

2..n

part of

0..n0..n

Source: Pohl et al., 2005

Optional Mandatory

Graphical notation

[name]

VP [name]

V Mandatory

Optional

[min, max] Requires V_V / VP_VP / V_VP

Excludes V_V / VP_VP / V_VP

Variation point Variant Variability dependencies

Alternative choice Constraint dependencies


Example: home security system

Security package

VP

Basic

V

Advanced

V

Intrusion detection

VP

Camera surveillance

V Window sensors

V

Motion sensors

V

Requires V_V

Requires V_V


Agenda

• Definitions



• Product lines


Partners

• Implementation partners – SAP Implementation Partners:

Accenture, Cap Gemini, Deloitte, etc.

• Development partners – (Offshore) development

partners for parts of your product

• Distribution partners – Microsoft Windows for Adobe (Flash, Acrobat, etc.)

Service level agreement example

• The service is used by description of user community to describe the service capability. The IT department guarantees that:

– The service will be available percentage of the time from normal hours of operation. Any individual outage in excess of time period exceeding time period per month will constitute a violation.

– The IT department will respond to service incidents within time period, resolve the problem within time period, and update status every time period. Missing any of these metrics on an incident will constitute a violation.

– The IT department will respond to non-critical inquiries within time period, deliver an answer within time period, and update status within time period. Missing any of these metrics on an incident will constitute a violation.

(www.sun.com)

Intellectual property

• Intellectual Property (IP) is any intangible asset that consists of human knowledge and ideas.

• Examples are patents, copyrights, trademarks, designs, models, and software.

• IP cannot be recognized on a balance sheet when internally generated, since it is very difficult to objectively value intellectual property assets

– Different rules apply in the case of software that has been released and sold, as this generates revenue.

• They can, however, be included in a balance sheet if acquired, which allows a more accurate valuation for the asset.

Microsoft vs. MikeRoweSoft

Relevant forms of IP

1. Copyrights

2. Trade Secrets/Know How

3. Trademarks

4. Patents

Copyrights

• The copyright is the exclusive right of the creator of a work of art or science, or of its right obtainers, to publish and distribute the work, except for legal restrictions.

• Exist the moment an idea is reduced to tangible form:

– creating a design

– writing source code

– making a website

– etc.

• Usually owned by the employer by means of the employment contract

Trade secrets / know how

• Crucial knowledge related to a business

– Product, services, processes

– Customers

– Organization, state of affairs

• Often intangible in form; “the way we do things”

• Non Disclosure Agreements (NDA)

• Competition constraint

Trademarks

• A trademark is the exclusive right to utilize an expression of art or science to identify a good

• The purpose of a trademark is to distinguish the own character

and to establish a reputation.

• A trademark can be: – Name – Shape – Drawing – Print – Stamp – Flagrance – Colour

– Slogan: Sense and simplicity

• Proper designation: McDonalds or

Patent

• Exclusive right to exploit an invention

• Issued by national government authority, valid for 20 years

• Used by many technology companies to protect intellectual capital

• Design can be patented; no need for sellable product

• Owned by inventor or employer

• Employee is recognized and rewarded as inventor

• Requirements: – Novelty: not existent before

– Inventive: the work of an inventor

– Useful: concrete and tangible

– Not sold! Can be in beta-test

Patent

Open source

• Open Source: “free” als in Free Record Shop

– Sun bought MySQL (1B$), Red Hat bought JBoss (420M$),…

• 3 types of open source

– Free-for-all

– Keep-open

– Share-alike

• GNU and FSF looking for legal showcases

– Most are settled (so far)

– Keep away…

Using their open source licenses

• Check for each piece whether you want to use it or not

– Modification, reciprocal, copyleft, patent infringments, relicensing

• Examples:

– GPL: all software that uses the it must itself be open sourced.

– LGPL: provides an exception to the usage and distribution of the

software, allowing for non-free products to include the LGPL'ed

software

• Make a policy, communicate with developers

• NOTICE, reciprocity, linking, … consequences

• Keep a list of used third party tools

– Version, licenses, sources, changes

SPM Competence Model

57

References

• Grieves, M. (2006). Product Lifecycle Management: Driving the next generation of lean thinking. McGraw-Hill: New York.

• Microsoft Support Lifecycle: http://support.microsoft.com/default.aspx?scid=fh;en-us;lifecycle&SD=gn&LN=nl#Service%20Pack%20Support

• Hamm, R., Bostic, P., and Payne, K. (2002). The SAS system on the Windows and Microsoft.NET platforms: Time for a change? Whitepaper SAS Inc.

• Cooper, R.G., Edgett, S.J., Kleinschmidt, E.J. (2001). Portfolio Management for New Products. Perseus Publishing: Cambridge, MA.

• Krebs, J. (2009). Agile Portfolio Management. Microsoft Press: Redmond, Washington.

• Pohl, K., Böckle, G., Linden, F. van der (2005). Software Product Line Engineering. Springer-Verlag: Berlin.

• Haines, S. (2009). The Product Manager’s Desk Reference. McGraw-Hill: New York.

• Vähäniitty, J. (2004). Product portfolio management in small software product businesses – a tentative research agenda. Proceedings of the 6th International Workshop on Economics-Driven Software Engineering Research (EDSER-6), pp. 48–52.

Software Product Management Interviewing and Asssessing

Lecture 9

Garm Lucassen

Sjaak Brinkkemper

19 September 2014

SAM Tool

• Let’s have a look at the actual tool…

Performing the assessment

Introductions:

• Introduce yourself, tell a bit about:

– Your background (study, etc.)

– Why you are performing this research

– What’s in it for the product manager

• Let the product manager introduce himself:

– What is his background (how did he become a product manager, what did he do before, how long has he been a product manager, etc.), and write this down as well.


During the interview:

• Don’t interrupt the product manager too much.

– You might hear some interesting stories which help you with questions yet to come.

– But keep an eye on the time and gently steer the product manager back to the questions if needed.

• It’s ok to ask questions besides those in the questionnaire.

– There is probably a lot you can learn from a product manager/practice, use the opportunity.


During the interview:

• The questions do not have to be answered in the order they are presented in (though it is probably easier if you do stick to the order given).

• Don’t get carried away to much in the story of the product manager

– A PM might want to look good

• Don’t count halves as wholes

– If a capability is only implemented ‘sometimes’ than this is not a solid process


Closing:

• Indicate when the product manager will receive the results

• Invite product manager to industry feedback session

• Thank him/her

Tips

• Keep asking questions

• Question their answers

• Ask for proof

• Expect situational factors to have no impact

• Gaps are to be expected

• Argue

SPM 8 Portfolio Management

Education

Transcript of SPM 8 Portfolio Management