I recently did some research on how companies can take a practical path to improve PPM decision-making. I won’t keep you guessing (if you were), there are some VERY good best practices that have been developed by the new product development (NPD) community. The research consists of interviews with three distinguished manufacturers in different industries, and they all concurred that the best approach is to start small with PPM and grow over time. The report, Improving Portfolio Decision-Making: Marrying PPM Best Practice Processes and Technology to Drive ROI, provides an overview on the value of PPM in addition to laying out a practical plan to leverage best practices tools and techniques to driver better portfolio decision-making and drive up company profitability. Here’s more on best practices for product portfolio management.
During the research I had the pleasure of talking to several very knowledgeable PPM practitioners:
- Don Kingsberry, Enterprise PMO, Green Mountain Coffee Roasters (the man should really write a book, I told him I thought so)
- Ian McKenna, IT Business Partner, Infineum (a joint venture between ExxonMobil and Shell)
- The Manager of Quality Management, R&D, and Legal Applications for a medical device company (who unfortunately was not permitted to share his company name in the report, but I promise you I didn’t make him up!)
The Value of Improving PPM
The first thing I discussed with them was why they invested in PPM in the first place. I had done some past research in this area, including Issue in Focus: The ROI of Product Portfolio Management, and thought it was important to start with the business in mind. I was very impressed with a statement from the participant from the medical device company. He saw PPM as his responsibility to be a steward for his company. How many companies would love to have that form of dedication, work ethic, and contribution from their employees? He offered that “PPM processes and tools help us be good stewards of our business. It costs a lot of money to develop products and we should do what we can to select them right and do them right — because then we have more money to invest.”
Mr. Kingsberry of Green Mountain Coffee Roasters (GMCR) has implemented PPM multiple times, and shared experiences from GMCR as well as past experiences where he says PPM has a “profound effect” and “each time I have found the return to exceed our expectations.” He shared the history from one of his past experiences in a very large, well respected company saying “we cut millions of dollars of projects that were wasting time and we shouldn’t have been working on. We got clarity on that immediately and had a huge multi-million dollar return in 6 months. PPM software and process help bring visibility to those things.” What more can I say when people that have “been there and done that” are so positive on the value they received?
Taking the Practical Approach
One of the other key findings of the report is that too many companies overthink their PPM implementation. For some of you that know me, you might be falling out of your chairs! I am always a proponent of a well-planned, well thought out implementation. And my PPM benchmark research at Aberdeen Group showed that business processes and metrics were even more crucial to best in class PPM performance than in any other enterprise technology I have researched. So what gives? People need to understand that the goal of PPM is to provide better information, in a standard way, so people can make better decisions about product investments. Too often, even in my own experience when I ran product management for a software company, I have had people want a scoring algorithm to magically spit out an answer. Don’t get me wrong, the metrics and analysis are very important. But they are just one input into a decision making process. As such, it’s important to find out what information and metrics the decision-makers will actually use and trust (think simple versus black box voodoo) to make decisions.
In fact, the companies interviewed used some really straight-forward metrics that helped them make decisions. “We implemented fairly standard calculations, NPV (net present value) being an example,” explained Mr. McKenna of Infineum. Don Kingsberry also suggested that based on his experience companies need to strive for simplicity, particularly as organizations get bigger.
The other aspect of simplification was to start small and grow. I heard this from every company I spoke with, they all agreed that you shouldn’t do too much at once and go “big bang” with your PPM implementation. This is particularly true because companies are now integrating and extending PPM processes further into the front end of innovation and trying to develop a more integrated, streamlined innovation process. Now this is where I get back up on my soapbox about planning ahead. Just like with my “PLM Program Approach,” you can start small and build — but you had better have a plan for the bigger picture you are trying to achieve. You should also partner with a software company that can help provide the path to your larger objectives as you mature and improve. Don’t paint yourself into a corner, you want to make sure your initial investments and learnings serve as a foundation for even move value over time.
Implications for Manufacturers
So what does this mean to manufacturers? First, there is a lot of value to be had from PPM. Second, you don’t have to reinvent the wheel. There are very good methodologies and metrics available, and software solutions that encompass and enable them. Third, don’t spend months trying to invent a process or algorithm that automatically makes portfolio decisions. That is not realistic and likely won’t be used. Take the time to provide good, trusted, simple information in a consistent way so decision-makers can compare “apples to apples” when reviewing portfolios.
So that was a quick peek into some recent research on product portfolio management, I hope you found it interesting.
Note from Planview: If you would like to read Jim’s full report, it is available here: Improving Portfolio Decision-Making: Marrying PPM Best Practice Processes and Technology to Drive ROI