product portfolio management (ppm) & new product introduction (npi)

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.


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...


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.


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.


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


Pat Scanlan

PRODUCT Doughnut (CSF#1)

Additional Software

Standards & Procedures

Additional Hardware

System Integration

Installation &Debugging

Cables &Equipment

Training &Support GENERIC

PRODUCT


Pat Scanlan

PRODUCT Differentiation CSF#1 & MARKET Studies CSF#2

• What is customer doing when using product ?

• How ?• Where ?• Who ?• What ?• When ?


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


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 )


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.


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


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


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 ?)


Pat Scanlan

CSF#5 Organisational Structure

• Cross Functional Teams• Team Empowerment• A defined and accountable Team Leader


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”


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


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


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


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


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


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


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


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)

product portfolio management (ppm) & new product introduction (npi)

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