Project Portfolio Management
EIRMA Working Group 59, 2002; Available to IRI and EIRMA members from EIRMA, 34, rue de Bassano 75008, Paris, France, www.eirma.asso.fr
This report by an EIRMA Working Group (chaired by A.V.A. Lombard, division vice president research, Nalco Europe BV) evaluates cross-functional processes for effective and efficient project portfolio management. Best practices are analyzed: for defining and selecting the right portfolio; for managing alignment with company strategy and balancing this with available company resources and core strengths; for integrating key competitive signals; for smoothly transferring know-how between projects and technology to production sites; and for managing personnel. These best practices provide the basis for an organizational and process model that the Group developed.
Examples and case studies highlight how some companies currently manage their portfolio. These offer a framework that can be adopted and modified, and illustrate potential pitfalls for the unwary. The Working Group argues that each and every project objective must reflect the high-level strategies. Otherwise, the portfolio as a whole will suffer misalignment, thereby wasting time, energy and resources. The Group's portfolio alignment model depicts the phases and issues that need to be considered when looking at the alignment process.
The next step is implementation within the project portfolio, aligning R&D strategy with corporate and business strategies. A number of tools are discussed in detail. Roadmapping is considered a powerful way to develop common language between different functions and for exploring possible future scenarios. Transferring the portfolio projects into the production and marketing environment is a further challenge.
Portfolio Balancing is defined as "the activity by which individual R&D projects and products are distributed in different categories in the proportion that is determined by strategic objectives and criteria." The goal is to obtain an appropriate breakdown of R&D spending across markets, project types, technologies, time scales, uncertainties, etc. in order to better manage risks, threats and opportunities through diversity, giving planned outcomes as well as serendipity a chance.
Many tradeoffs are possible and tools for managing these tradeoffs are available and used by EIRMA member companies. Parameters for balancing the portfolio include risk versus reward, feasibility of a project versus importance, durability of competitive advantage versus cost, time-to-market versus quality, novelty of innovation versus novelty of markets. …