Project Portfolio Management for New Product Development: Tracking the Project Cycle from Idea to Launch
Written By: Neil Stolovitsky
Published On: January 6 2006
Besides being relevant to professional services organizations (PSO) and internal information technology (IT) departments, project portfolio management (PPM) software is applied in multiple vertical markets in the area of new product development (NPD). In industries ranging from manufacturing and high technology to consumer goods and biotechnology, PPM solutions help manage the corporate objectives associated with NPD projects.
PPM for NPD and research and development (R&D) projects addresses the needs of organizations seeking to maximize resource utilization for a portfolio of projects. PPM software empowers decision makers to select, evaluate, and prioritize their NPD and R&D projects. Furthermore, existing projects can be accelerated, terminated, or de-prioritized by the allocation or re-allocation of the resources that deliver project tasks. In the area of NPD, the primary objective of a PPM solution is to facilitate strategic and financial control throughout the project or product lifecycle.
The following article will examine the features and benefits of PPM in the NPD arena, as well as some of the vendors that provide specific functionality for this growing market segment.
Challenges in NPD
PPM is a key component of an organization's NPD strategy. The main challenge faced by managers and executives tracking NPD projects is the identification of bottlenecks within the NPD process that are relevant to their unique function within an organization. For instance, at any given time, project managers need to identify the short term availability of resources in relation to the requirements of a portfolio of projects. Vice presidents (VP) and "C" level executives, on the other hand, need to identify mid-term and long-term viability, return on investment (ROI), and strategic business decisions regarding their resource investments.
According to the Product Development Institute (http://www.prod-dev.com), organizations apply PPM methodology to address the following three critical issues in NPD and R&D projects.
- Maximizing the value of portfolios by effectively managing and allocating resources to optimize profitability, maximize ROI, and reduce risk. This is achieved through the financial controls and scoring models offered by PPM solutions.
- Achieving balance between business goals, risks, vertical markets, business strategies, and technologies. PPM solutions offer bubble diagrams, histograms, and other graphical reports to assist organizations in benchmarking their balance.
- Aligning portfolio spending with the organization's business strategy. This can be achieved by implementing a PPM solution that provides strategic cross-referencing between projects, as well as a "gating" process, which enforces checkpoints to evaluate the viability of projects.
It is important to note that PPM solutions help provide the streamlined system that is necessary to address these critical issues by centralizing the information needed to track and evaluate NPD and R&D projects from idea to launch.
PPM Phases for NPD
Traditionally, organizations have focused on capturing and organizing documents, content, bill of materials (BOM), and specifications for new products. In contrast, PPM emphasizes the human resources (HR) component of NPD, which can drive the success or failure of projects. PPM software uses the following phases to address NPD projects.
- Planning. Planning enables an organization to share and prioritize ideas, ensure projects are aligned with business and financial goals, and determine resource capacity. PPM solutions facilitate planning by offering Web-based bubble diagrams, "what-if" scenario reports, and collaboration or repository applications to help rank and share ideas.
- Development. This phase allows managers to build resource teams based on templates; provides quick access to information and collaboration capabilities for team members; and allows access to forecasting, scheduling, and costs reports. PPM solutions contribute to development by providing resource planning tools, dashboard capabilities for visibility and collaboration, and real time executive reporting.
- Delivery. The delivery phase helps organizations to successfully launch a product by improving collaboration between production and marketing, optimizing marketing by providing a single repository for consistent information, and managing product engagements and installations. In aid of this, PPM solutions provide collaboration tools, workflows, and dashboard technology to view and control all aspects of the product delivery process.
Supporting Stage-Gate with PPM
Though tools that gauge the aforementioned NPD and R&D project phases are important, implementing a best practices framework is also a critical factor in the success of a project. According to Robert G. Cooper's 2001 book, Winning at New Products: Accelerating the Process from Idea to Launch, Stage-Gate is one of the more popular NPD methodologies adopted by organizations seeking to closely monitor the progress of their projects.
Stage-Gate is a best practices road map that divides NPD projects into distinct stages in order to formalize the careful evaluation of projects by management. As the above diagram shows, each stage is divided by decision gates where key decision makers can impose a go or kill command or determine the prioritization of the project at hand.
From the inception of an idea to the launching of a product, a gate acts as a decision point for key decision makers in an organization. Acting as a funnel to determine where resources are best allocated, the gate allows management to confirm if project deliverables are met based on predetermined qualitative and financial criteria. The output of the gate review will determine whether NPD or R&D projects will continue, be cancelled, be placed on hold, or be reprioritized (these outcomes are also known as go, kill, hold, and recycle, respectively). Furthermore, the gate review sets the plan for the next stage in the process.
During these various stages, tasks are executed by project managers and staff. Each stage costs more than the preceding stage, and project commitments are incremental. The following list catalogs the five stages of the Stage-Gate process.
- Stage one involves scoping. This is an assessment of the market adoption and technological merits of the projects.
- Stage two involves building the business case. Stage two is a critical decision point for moving forward with a project based on the product definition, justification, and plan.
- Stage three is development. Plans are translated into actual deliverables, where manufacturing or operations map out marketing, operating plans, and testing.
- Stage four involves testing and validation. This step requires total validation of the product, production process, customer acceptance, and financial viability.
- Stage five is the launch—the complete commercial launch and production of the product.
Stage-Gate imposes discipline on the rather chaotic processes typically found in NPD projects. Stage-Gate also clarifies requirements and manages business risk by breaking resource commitments into stages, thus greatly improving the success rate of NPD projects.
PPM Vendors for NPD
As PPM becomes increasingly important in NPD projects, numerous PPM vendors have extended their offerings in this area. Organizations looking for a PPM solution for their NPD projects should consider the PPM vendors below.
Niku's Clarity solution provides the tools that are necessary from the decision stage to the development and delivery stages of NPD. Niku provides reporting tools (bubble diagrams and histograms), as well as collaboration and decision support applications to support PPM for NPD and R&D projects. Key to Niku's offering is its People Powered Innovation concept, which provides companies with tools to facilitate collaboration and to gain increased visibility into people-related processes such as idea development, resource capacity planning, and project staffing.
Planisware's OPX2 NPD solution targets NPD projects based on Stage-Gate best practices. OPX2 NPD offers a single system with four strategic tools for product development. These include project management, NPD process management, collaboration, and project information management tools. Planisware plans to include its Project Intelligence application, which improves predictability, collaboration, and visibility of NPD projects, as a part of OPX2 NPD in the future.
Pacific Edge's NPD solution seeks to align NPD projects with corporate strategies. At the core of its solution lies the Pacific Edge Mariner product. Pacific Edge Mariner provides users with a Web-enabled solution built on portfolio management functionality. For NPD projects, Pacific Edge adopts a stage-gate approach, providing tools to monitor lifecycle, resource, financial, and project data in an integrated decision support framework where trade-offs are examined, impacts are analyzed, and performance is tracked and optimized.
Artemis Software's NPD solution focuses on the manufacturing, high technology, life sciences, and consumer goods markets. Artemis for NPD delivers PPM, lifecycle management, financial management, idea management, project management, and resource management components. Artemis also incorporates stage-gate processes, and has recently introduced an idea management module to capture, manage, and route multiple ideas for NPD projects.
Augeo Software handles the production side of R&D projects with Augeo 5, its NPD solution for the pharmaceutical, automotive, and high technology sectors. For NPD, Augeo's PPM solution focuses on resource allocation and project lifecycle functionality. However, Augeo lacks functionality in the areas of idea generation and product launching.
Sopheon is a best-of-breed vendor that offers a PPM solution uniquely for the NPD market. Sopheon Accolade integrates the stage-gate process (as well as other phase-based processes) into its offering to allow tracking of NPD projects from both a day-to-day activity and a business strategy point of view. Sopheon delivers dashboard technology, customizable portals, centralization of project phase data, and alignment monitoring functionality.
Realization offers a PPM solution that is specifically designed for NPD in the IT, defense, and manufacturing sectors. Realization's product, Concerto Engine, adopts the "critical chain" concept, factoring in the uncertain elements that are prevalent when managing multiple projects. Concerto Engine facilitates management by level loading resources based on the pipeline of projects and providing buffer management to calculate unscheduled time and resources when uncertainties arise during project execution. This is all achieved in a single relational database.
Primavera is an important vendor in this space. With a project management core, Primavera's PPM solution for NPD offers resource management, financial management, portfolio management, process management, project management, and demand management components. Its demand management, process management, and collaboration functionalities support stage-gate methodology for NPD and R&D projects.
Integrated Development Enterprise (IDe) offers a best-of-breed solution specifically aimed at the NPD market. IDeWeb provides a product development information repository with resource management, portfolio and pipeline management, and phase review management that employs stage-gate methodology. IDe focuses its efforts in the manufacturing sector and provides idea generation, program execution, and performance evaluation functionalities.
SAP offers decision support tools for NPD and R&D projects that are based on pre-built cubes in its Business Information Warehouse (BIW) solution. These provide a wide range of scenario testing against various assumptions about cost, time, and market potential. SAP also provides collaboration support with its SAP Collaboration Folders (cFolders) solution, which supports both PPM and product lifecycle management (PLM) business processes.
Resource allocation and phase-based processes (like stage-gate) are key features to consider when selecting a PPM solution for NPD and R&D projects. Manufacturing organizations seeking specialized solutions specific to NPD projects should initially evaluate niche vendors such as Sopheon, Realization, and IDe. Organizations seeking more comprehensive PPM solutions (that offer functionality beyond NPD projects) should consider traditional PPM vendors like Primavera, Niku, and Pacific Edge that can provide PPM functionality for projects across the entire organization.
Finally, and most importantly, NPD projects demand a best practices framework for their success. PPM solutions that provide the flexibility and tools to support phase-based processes like stage-gate will maximize the ROI of a portfolio of projects. The challenge is to differentiate the multitude of vendors that support the full NPD cycle from idea to product launch from those vendors that provide only partial functionality.