Avoid the Top 5 Product Portfolio Pitfalls and Maximize Product Development Success

  Avoid the Top 5 Product Portfolio A Planview White Paper Pitfalls and Maximize Product Carrie Nauyalis, Development Success Product Line Manager Part 1 of the Product Portfolio Pitfalls Series Background Bringing the products that your customers want to market at the right time and at the lowest cost is the most basic goal of product development. Yet with limited budgets, people, and time, many organizations are hard-pressed to streamline their product portfolio processes, despite the fact that doing so has repeatedly proven to advance that very goal. Keeping the status quo, however inefficient, is sometimes all a product organization can manage. Often, there are simply too many products competing for the same scarce resources. Consider these facts, brought to light in the only benchmark survey of its kind of more than 400 product portfolio managers and executives. Fifty-six percent of respondents indicated that one of their top three pain points is having too many projects for their resources. And companies report that hitting time-to-market is one of their biggest risks, yet 40% of them admit that their projections for project delivery dates are highly or mostly inaccurate. I. The Pitfalls In an industry review of the most common product portfolio management pitfalls, five recurring issues were uncovered: 1. Inadequate resource planning. Product and management teams are often unable to accurately predict their current resource availability or future demand because they cannot access relevant and current data. Many simply give in to whatever project manager is shouting the loudest for resources, or are forced to rely on “gut feel.” But emotion-based assumptions carry a varying margin of error, posing a hefty risk if the assumptions are off even a bit. Ideally, there should be an accurate and visual method to assess a project’s or product’s resource demand compared to resource capacity across a product portfolio, with the ability to test different scenarios. 2. Lack of prioritization. Without a standardized project prioritization process, it is difficult for managers to properly align work and resources to company strategy. Often lower-priority projects drain resources that could be dedicated to higher-return work, or new products are initiated without any clear direction. In this scenario, there is no accurate method to estimate the benefits of the effort before committing the resources. A method gaining popularity is that of Efficient Frontier analysis, which considers a universe of possible investments and explores what might be an optimal portfolio among them, empowering managers to determine which resources to apply to which projects and products to meet strategic goals. 3. Insufficient or unreliable data. Even with helpful technology readily available, some organizations still rely on manual spreadsheets on shared drives to store data. But spreadsheets are static elements and seem to invite human error, rendering them unreliable and an inconsistent system of record. Further, they are tedious to maintain and are not collaborative, as they allow editing access to only one person at a time. Portfolio managers therefore spend an inordinate amount of time maintaining and collecting data rather than analyzing information, calculating ROI, and making fact-based decisions. Relying on insufficient and erroneous data naturally imposes risks and places the organization at a competitive disadvantage. 4. Inability to recognize and react to underperforming projects and products. According to the benchmark survey, only 11% of companies regularly monitor and halt underperforming AVOID THE TOP 5 PRODUCT PORTFOLIO PITFALLS projects and products. One of the issues noted that contributes to this problem is a lack of collaboratively defined and adopted processes that cross departments and support the enterprise, Without defined guidelines for evaluating and measuring the performance of an organization’s products and projects, decisions of this importance cannot be made systematically, objectively, and methodically. This, combined with the lack of visibility into real-time data, makes it nearly impossible to proactively identify problems early on to save dollars and resources, let alone determine what caused the failure. And, of course, this pitfall begs the question: what is the cost of not putting a stop to these underperformers – both in real dollars and in opportunity cost? 5. Lack of financial transparency. Accurately calculating the total cost of development (TCD) for a new product and the maintenance of existing offerings is not always easy when relying on spreadsheets based on disparate and often inaccurate information. Product managers, without access to real-time data, cannot consolidate all expenses and track actual versus planned costs to capture and report TCD from ideation to retirement. This prevents the product organization from maximizing budgets while enforcing accountability with visibility into all work, capital, and other costs associated with each product in the portfolio. II. The Implications The implications of NOT avoiding these common product portfolio management pitfalls are staggering: ▪ Delivering good products that miss the market window in terms of margin premiums, seasonal needs, or other competitive time-to-market drivers ▪ Greater risk and increased costs due to bad data ▪ Lack of available resources for higher return products ▪ An environment in which product development’s credibility comes into question with management III. The Solution While the problems seem overwhelming, the answer is simple. Companies armed with the right tools to efficiently deliver the right products to market at the right time, using the right resources, have the advantage over those who don’t. Applying portfolio management principles and a dedicated software solution to the product development process can enable more predictable execution through centralized product planning and financial transparency throughout product lifecycles. What is portfolio management? Portfolio management, also known as PPM, empowers organizations to achieve greater levels of control over their ever-changing environments by dynamically balancing strategy with people and money. Working together, its capabilities provide improved visibility, fewer redundancies, increased efficiency, and the ability to focus limited resources on higher value work. Portfolio management has been applied effectively and measurably for years to IT project management, where the ROI has been measured by Forrester Research to be high and fast – more than 250%, with payback within less than 12 months. "Both inside and outside of IT, leaders are turning to PPM to better capture, manage, prioritize, and align investments and resources with the hopes of increasing the amount of business value they can provide…A Total Economic Impact™ (TEI) analysis shows that a comprehensive PPM tool investment is likely to provide an ROI of more than 250%…" –Forrester Research1 And other analysts support the ever-growing adoption of portfolio management within product development organizations: “It’s not just large numbers of products and projects that drive the need for product portfolio management; it’s global competition and time to market.” – AMR Research2 © 2010 Planview Inc. Page 2 of 3 AVOID THE TOP 5 PRODUCT PORTFOLIO PITFALLS When done right, by the right vendors, portfolio management includes business process expertise, in the form of best practices, and an integrated framework for more disciplined management of all resources to help a company build the right portfolio to meet key revenue targets and business objectives. These processes offer organizations a clear path for communication, financial and strategic visibility, and execution. By applying the portfolio management discipline, companies will deliver more of the right products at the right time. In fact, the Aberdeen Group found that companies that are best in class at product portfolio management are four times more likely to achieve margin premiums of 75% or higher for new products3. IV. Summary The key to portfolio management success is to avoid the common pitfalls and make high quality, data- driven decisions to deliver the right products to the market at the right time. Change can be good; rather than trying to avoid it, leading companies embrace change and use it to their advantage to gain momentum in the marketplace. By implementing a defined product portfolio management process and solution, they: ▪ Increase revenue by applying the discipline of portfolio management to product development, and killing underperforming development products and projects ▪ Facilitate product development through a collaborative product management system, based on consistent, current, and reliable data ▪ Optimize resources across product lines to ensure products hit time-to-market targets ▪ Provide transparency into the actual cost of product development ▪ Drive the product lifecycle with actionable analytics   Learn more now • Learn more about how your organization can benefit from product portfolio management at www.planview.