Transcript Presentation Title

Project Portfolio Management
“Breaking through the barrier to
sustained growth and profitability”
Dr. Jim Wasson, PMP
[email protected]
607-727-4727
Growth Strategies International LLC Copyright © 2012
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Presentation Topics
This presentation will provide answers to the following questions:
• Is your R&D budget spent on incremental product improvements or are you
developing revolutionary disruptive technologies for future growth?
• Is there duplication in your core technology developments across your business
areas? How do you achieve horizontal integration?
• Do you have dedicated resources for advanced technology and new product
development or are your engineers always putting out today’s fires?
• Are your independent R&D (IRAD) projects and contract R&D (CRAD)
projects coordinated to leverage your internal investments?
• Do you develop technology roadmaps to manage the technology transition?
• Have you developed a robust product development portfolio that takes in to
account product lifecycle, core competencies and expanding markets?
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The State of U.S. Manufacturing Today
• U.S. Department of Commerce:
– U.S. manufacturing output rose 73% between 1993 and 2011.
– U.S. manufacturing produces $1.7T of value annually or 11.7% of GDP.
– U.S. exports of manufactured goods topped $1.2T in 2011.
• United Nations Industrial Development Organization:
– U.S. remains the world’s largest manufacturer with 24% of the world’s
manufacturing output in 2010. China comes in second at 15%.
• U.S. Department of Labor
– U.S. manufacturing jobs peaked at 19.5M in1979. By 2010 only 11.4M.
– Technological change, automation and IT boost output and cut payrolls.
– Labor shortages and widening skill gap to run automation systems.
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The Need for Innovation
and Technology Management
• Wall Street Journal “Economists put a number on R&D”:
– The US economy is expanding faster than contributions of capital and
labor alone due to “multifactor productivity”.
– In the past, R&D was treated as an intermediate expense, such as wages,
when measuring Gross Domestic Product (GDP).
– Dept of Commerce now treats R&D as a capital expense. By that
measure, R&D accounts for 7% GDP growth.
• Organic growth through Innovation can have a significant
impact on the bottom line. BCG and AMR Research Results:
– 41% of companies are increasing their R&D budgets >10% this year.
– However, 31% of executives feel that their new product development
launch process is out of control, and
– 40% of executives said half of their new products fail. Why is that?
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The Strategic Management Model
Source: Strategic Management: Formulation, Implementation and Control, John Pearce, Irwin McGraw Hill, 2000
• Economic
• Social
• Political
• Technological
• Ecological
• Entry barriers
• Buyer Power
• Supplier Power
• Substitutes
• Competition
• Buyer Behavior
• Labor Availability
Vision and
Mission
Statement
External
Environment
• Product/Service and Customer/Market
• Goals: Survival, Growth, Profitability
• Philosophy: Self-Concept, Public Image
• Commitment to Stakeholders
Internal
Environment
• Core Technical Competencies
• Past Performance Comparison
• Stage of Industry Evolution
• Benchmarking with Competitors
• Key Industry Success Factors
Strategic Analysis
And Choice
Strategic
Objectives
• Profitability
• Productivity
• Competitive Position
• Employee Development
• Employee Relations
• Technological Leadership
• Public Responsibility
Strategies
And Tactics
Strategic
Control
Feedback Loop
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• Concentrated Growth
• Market Development
• Product Development
• Innovation
• Horizontal Integration
• Vertical Integration
• Concentric Diversification
• Conglomerate Diversification
• Reformulation / Turnaround
• Divestiture or Liquidation
• Joint Ventures
• Strategic Alliances
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• Consortia
Product Technology Management
Goals and Objectives
• Become and Remain a World
Class Leader.
• Maintain an Edge in Product
Quality and Innovation.
• Have a Competitive Advantage
in Production Productivity and
Reduced Costs.
• Be Responsive to Customer
Interests and Needs.
• Have Major Breakthroughs
That Create New Market
Opportunities.
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“The nature of business is to make our own products obsolete.
If we do not do it ourselves, our competition will do it for us.
That is why we always try to come up with something new.
That is our initiative…our driving force.”
Akio Morita
Co-founder, Chairman, CEO
Sony Corporation
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The Strategic Purposes of R&D
Source: “Third Generation R&D: Managing the Link to Corporate Strategy”, Harvard Business School Press, 1991
DEFEND, SUPPORT,
AND EXPAND
EXISTING BUSINESS
DRIVE NEW
BUSINESS
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BROADEN/DEEPEN
TECHNOLOGICAL
CAPABILITY
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The R&D Strategy Cycle
an Iterative and Continual Process
Source: “Third Generation R&D: Managing the Link to Corporate Strategy”, Harvard Business School Press, 1991
WHAT ARE WE
TRYING TO DO
IN THE BUSINESS?
WHAT WILL
WE SUPPORT
IN R&D?
New Product Evaluation
• Customer Value?
• Competitive Advantage?
• Return on Investment?
• Requirements Risk?
• Technical Risk?
WHAT CAN WE
AFFORD?
HOW CAN R&D
CONTRIBUTE?
WHAT ARE THE
COSTS/BENEFITS
AND RISKS?
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Three Types of R&D
Source: “Third Generation R&D: Managing the Link to Corporate Strategy”, Harvard Business School Press, 1991
Type of R&D
Characteristics of the Type
Incremental
Normally, the clever exploitation of existing scientific
and engineering knowledge in new ways; characterized
by low risk and modest reward
Radical
The creation of knowledge new to the company - and
possibly new to the world - for a specified business
objective; characterized by higher risk and high reward
Fundamental or
Enabling
The creation of knowledge new to the company - and
possibly new to the world - to broaden and deepen the
company's understanding of a scientific or engineering
arena; characterized by high risk and uncertain
applicability to business needs
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Three Types of R&D
Source: “Third Generation R&D: Managing the Link to Corporate Strategy”, Harvard Business School Press, 1991
Probability
of Technical
Success
Time to
Completion
Competitive
Potential
Durability of Competitive Advantage Gained
Incremental
Very high,
typically
40 to 80%
Short,
typically six
to twentyfour months
Modest, but
necessary
Short, typically imitable by competitors
Radical
In early
stages
modest,
typically
20 to 40%
Mid-term,
typically
two to seven
years
Large
Long, often protectable by patents
Fundamental
or Enabling
In early
stages
difficult to
assess;
depends on
R&D
concept
Long,
typically
four to ten
or more
years
Large
Long, often protectable by patents
Type of R&D
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The Product Life Cycle
Source: “Third Generation R&D: Managing the Link to Corporate Strategy”, Harvard Business School Press, 1991
EMBRYONIC
GROWTH
MATURE
SUSTAIN
COMPETITIVE
POSITION
GROW NEW
BUSINESS
REVENUE
$
ESTABLISH
COMPETITIVE
POSITION
RENEW?
REJUVENATE?
ABANDON?
IMPROVE
COMPETITIVE
POSITION
LAUNCH NEW
BUSINESS
AGING
DIFFERENTIATION
COST REDUCTION
CUSTOMER
SUPPORT
COST REDUCTION
EXTEND RANGE
OF PRODUCTS
IMPROVE
FEATURES
REDUCE COST
INDUSTRY MATURITY
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Technological Maturity
Source: “Third Generation R&D: Managing the Link to Corporate Strategy”, Harvard Business School Press, 1991
Predictability
Technological
Maturity
Time to
Commercialization
Knowledge of
Competitive
R&D
Technical
Reward
R&D Costs
Durability of
Commercial
Advantage
Embryonic
7 - 15 years
Poor
Poor
Fair
Poor
High
Growth
2 - 7 years
FairModerate
Fair
High
Moderate
Moderate
Mature
1 - 4 years
High
High
High
High
Fair
High
Very
High
Very
High
Very High
Short
Aging
1 - 4 years
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Product Portfolio Management Model
Bubble Size reflects Market Size Potential
100%
Market Share
Bread & Butter: solid, reliable business
Pearls: rare & beautiful
75%
Arrows depict
Product Life Cycle
White Elephants: unlikely to flourish
Oysters: high potential, but uncertain
50%
1.0
10.0
100.0
Expected Value $M
$M
@ $ 1.65/£
Product A
Product B
Product C
2010 T1 Investment
Cash
P&L
1.0
0.5
0.3
1.0
0.5
0.3
2010-14 Orders
Potential
In Plan
Upside
0.0
0.0
0.0
20.0
12.1
6.6
Business Case (pre-tax)
T2 Investment
Past
To Go
Sales
ROS
IRR
Cash
Break Even
NPV
@ 10%
0.0
0.0
0.0
113.8
12.1
449.2
19%
59%
26%
43%
454%
68%
4 years
2 years
6 years
9.8
7.1
39.9
1.3
0.7
3.9
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Portfolio Risk and Reward
New to
Company
P(S)=.25 - .40
P(S)=.40 - .55
P(S)=.05 - .25
Discontinuities
Exploration
Adjacent
Product/
Technology
P(S)=.50 - .60
Expansion into
adjacencies
Market Penetration
Present
P(S)=.60 - .75
Present
Adjacent
New to
Company
End-Use Market*
P(S) = Probability of Success
*Market means customers, not geographies
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Portfolio of Options Approach
Source: Ian C. MacMillan and Rita Gunther McGrath, “Crafting R&D Project
Portfolios,” Research Technology Management, Sep-Oct 2002, pp. 48-59.
Technical Uncertainty
High
Medium
Positioning
Options
SteppingStone
Options
Platform
Launches
Scouting
Options
Enhancement
Launches
Low
Low
Medium
High
Market Uncertainty
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Balanced Product Portfolio
New to
Company
5
Emerging Opportunities –
Scouting Options
Growth Business –
Product Launches
4
3
Adjacent
Product/
2
Technology
Core Business –
Product Enhancements
1
Present
Projected 5-Year
Revenue >$1B
1
Present
2
3
4
Adjacent
End-Use Market*
Revenue = $50M to $999M
5
New to
Company
*Market means customers, not geographies
Revenue = <$50M
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Project Portfolio Selection Criteria
Scouting/Positioning Launches
Risk
Platform Launches
Enhancement Launches
Horizon 1 –
Core Business
• Orders
• IRR & ROS
0 - 3 years
Horizon 2 –
Growth Business
Horizon 1 criteria plus
• Strategic Fit
• Revenue Growth
• Market Share Gain
Horizon 3 –
Emerging Opportunities
Horizon 2 criteria plus
• Business Model
• Technical Maturity
• Pilot Programs / Demos
3 - 5 years
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5 -10 years
Strategic Product Technology Management
SYSTEM STUDIES
• NEW PROD RQMTS
• DERIV PROD RQMTS
• PROD IMPROV RQMTS
• EXTERNAL ENVIRON
• EVOLVING MARKETS
• CUSTOMER NEEDS
• PROD LIFE CYCLES
TECHNOLOGY
ASSESSMENT
CUSTOMER
CONTACT
ACTIVITY
TECHNICAL
EXCHANGES
TRANSITION
TO
PRODUCT
STRATEGIC
TECHNOLOGY
MGT PLAN
MARKET
ASSESSMENT
• TECH ASSESS
• TECH CONFERENCE
• TECH DEMOS
• TECH INTERCHANGE
MEETINGS (TIMs)
SWOT
ASSESSMENT
• MARKET TRENDS
• CUST REQMTS
• CRAD OPP / FUND
• CAPABILITY GAPS
• TECH WEAKNESS
• COMP THREATS
•CAPTURE STRATEGY
• POSITIONING PLAN
•SALES FORECAST
•MARKETING MIX
•PILOTS & DEMOS
INTERNAL R&D
PROPOSALS
COMPETITIVE
ASSESSMENT
HORZ TECHNOLOGY
INTEGRATION
• CONTRACT AWARDS
• PUBS / PATENTS
• CUST SURVEYS
• INTERNAL SURVEYS
CONTRACT R&D
PROJECTS
• STRATEGIC PROFILE
• BUSINESS MODEL
• MARKET ROADMAPS
• CAPABILITY NEEDS
• TECH THRUSTS
• ENABLING TECH
•TECH ROADMAPS
• PROD DEVEL PLAN
• PORTFOLIO MGT
• RESOURCE PLAN
• SYSTEMS INTEGR
• MANUFACTURING
•QUALITY & SAFETY
BUSINESS
DEVELOPMENT
PLAN
• MODULAR DESIGN
• PLUG N PLAY
COLLABORATIVE
PROJECTS
(CO-CREATION)
IRAD
PROJECTS
BID &
TECHNOLOGY TRANSITION PLAN
PROPOSAL
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Closing Thoughts
• No single metric can adequately
describe and track innovation trends
precisely because innovation is the
product of a complex interplay of ideas,
investment, manpower and incentives.
• Five indicators of Product Innovation:
– R&D spending as a percentage of sales
– Growth of R&D funds originating from
the public sector (CRAD)
– University performed basic research
– Industry employment of University
research personnel and PhDs
– Degree of trade openness with the rest
of the world
Growth Strategies International LLC Copyright © 2012
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“Other people see things and say why…
But I dream of things that never were and say why not.”
George Bernard Shaw (1856-1950)
Thank You
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