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Product Portfolio Management (PPM) & New Product Introduction (NPI). Presenter: [email protected] Purpose: In-company Improvement Progamme PPM final year project for MSc Technology Mgt (UCD) Material Based on: works of Cooper, Edgett & Kleinschmidt; AD Little, Urban & Hauser. - PowerPoint PPT Presentation
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Portfolio Management
Pat Scanlan
Product Portfolio Management (PPM)& New Product Introduction (NPI)
Presenter: [email protected] Purpose: In-company Improvement Progamme PPM
final year project for MSc Technology Mgt (UCD) Material Based on: works of Cooper, Edgett &
Kleinschmidt; AD Little, Urban & Hauser.
Portfolio Management
Pat Scanlan
New Products Challenges
• In last 10 Years New Products’ Slice of Companies SALES revenues have increased from 33% -> 50% and PROFIT from 22% -> 40%
• EXPECT to increase rate of product introductions by 21% over next 5 years.
• Innovation drives companies’ investment value….
• Cooper’s studies with 35 leading firms in various industries...
Portfolio Management
Pat Scanlan
Some Bad News too ! New product management is in trouble !!
• 46% of product development resources goes on “losers” and “no-brainers” projects
• 1/7 Concepts are Winners• 1/3 of new products fail at launch (e.g. Iridium, Edsel)• 66% of CEOs “somewhat” or “very disappointed” with their firms
new product performance.
Portfolio Management
Pat Scanlan
8 Critical Success Factors(CSF) (Measurement Criteria) in product development life-cycle
• 1. Product (uniqueness & superiority)-> 7 ingredients in recipe• 2. Strong Market Orientation • 3. More Spending Pre-development work - “Up front Homework”• 4. Sharp & Early Product Definition (Voice of Customer)• 5. Appropriate Organisational Structure (X Functional Teams)• 6. Sharper Project Selections Decisions ( Hi Focus )• 7. Speed => competitive advantage (Reduce cycle time)• 8. Hi Q, Disciplined & Systematic New Product Process.
Portfolio Management
Pat Scanlan
PRODUCT CSF#1the 4 peas !
PricePromotion
PlaceProduct
• list price• discounts• allowances• payment period• credit terms
• promotion•advertising•sales force•public relations•direct marketing
• channels• coverage• locations• inventory• logistics
• Features• Design• Variety• Packaging• Services• Warranties
Portfolio Management
Pat Scanlan
PRODUCT Doughnut (CSF#1)
Additional Software
Standards & Procedures
Additional Hardware
System Integration
Installation &Debugging
Cables &Equipment
Training &Support GENERIC
PRODUCT
Portfolio Management
Pat Scanlan
PRODUCT Differentiation CSF#1 & MARKET Studies CSF#2
• What is customer doing when using product ?
• How ?• Where ?• Who ?• What ?• When ?
Portfolio Management
Pat Scanlan
CSF#1 Product Superiority (7 Ingredients)
• 1. Meets customer needs better than competitors• 2. Is better quality than competitor’s ( from customer view )• 3. Has Unique benefits/feature for the customer (Differentiated)• 4. Solves customers problems• 5. Reduces customers costs ( better value in use )• 6. Has highly visible benefits• 7. Is innovative or novel
Portfolio Management
Pat Scanlan
PRODUCT CSF#1 & MARKET CSF#2 Technical Products : Adoption Life Cycle
3.5%
13.5%
33%
17%
33%
Techy’sInnovators
try it !
Visionaries !Get ahead of the herd
Early majorityPragmatists
Stick with the herdLate Majority Conservatives
LaggardsScepticsNo Way !
CHASM
In the chasm => (OS/2, NeXT, AI, OCR, CASE Tools, ISDN, Video Conferencing )
Portfolio Management
Pat Scanlan
Market Orientation CSF#2
• Increased Market Knowledge, Research & Contact– user needs and market need satisfaction
• Key FAILURES Reasons : “poor market research & analysis”• Idea generation : 75% of success products come from customer
generated ideas• Product design : Market Research is input into Product Design• Development : constant customer contact• Post Development : trials, test markets to verify/tweak market
acceptance• Launch : well designed, targeted, resourced guided by good
marketing plans based on solid market information.
Portfolio Management
Pat Scanlan
CSF#3 More “Up front Pre Development Work”
• Screening • Market Studies• Technical feasibility• Business Case Development
• Economically Attractive ?• Target Customer• Positioning • Features, attributes,
performance• Can it be done ? Cost ?• HOW ?
Better Project Definition Better Speed of Development
Portfolio Management
Pat Scanlan
CSF#3 Typical role of CEOs in new product programmes (Ed Roberts. Technology Review 1977)
Study Design Develop Production Marketing
Activity profile of typical CEO
Ability to influence product outcome
Portfolio Management
Pat Scanlan
CSF#4 Sharp & Early Product Definition
• Target Market Definition• Product Concept & Benefits to be delivered (in language of
customer) • Positioning Strategy ( including Price )• Features, Attributes, requirements & specifications…(what’s
new ?)
Portfolio Management
Pat Scanlan
CSF#5 Organisational Structure
• Cross Functional Teams• Team Empowerment• A defined and accountable Team Leader
Portfolio Management
Pat Scanlan
CSF#5 Leverage of Resources/Skills (Assess Position)
TechnologySignificance Leader Strong Favourable Tenable Weak
Base
Voice switching ALARM-> WASTEDRESOURCES
ALARM signal for “Survival”
Key
Mobile/IP Opportunity for PresentCompetitive Advantage
ALARM signal for “Present”
Pacing
Value AddedServices
Emerging
“3G”
Opportunity for FutureCompetitive Advantage
INDUSTRYAVERAGE
ALARM Signal for “Future”
Portfolio Management
Pat Scanlan
CSF#6 Predictable New Product Success !
• Sharper Project Selection Decisions : SCORECARD to yield better focus.
• Classic Problem : Too Many Projects and Too few resources• Why ? A Failure to Focus• We need “Funnels” not “Tunnels”
Idea Pre-study Feasibility Develop Launch
Portfolio Management
Pat Scanlan
CSF#6 Focus on Successful Projects
• Use Score Card Technique with round table assessment & agreement ( e.g. business, r&d, market, finance )
• Apply a standard criteria at all decision gates using scorecard• Include more quantifiable financial criteria e.g. forecasted sales,
ROI, payback period, NPV, IRR, DCF as a judgement criteria.• Assess Risk e.g. probabilities of technical, commercial success
Portfolio Management
Pat Scanlan
R&D Portfolio CSF#6
Embryonic Growth Mature Aging
Dominant
Strong
Favourable
Tenable
Weak
Pro
bab
ility
of
Te
chni
cal S
ucce
ss
Technological Uncertainty & Uniqueness Increases
Technical Competitive Position
Portfolio Management
Pat Scanlan
Scoring & Ranking CSF#6
Project Name NPV Prob TS Prob CS Dev Cost Comm Cost ECV Total Score IOTA 30 0.8 0.5 3 5 5 68NoClue 22.5 0.5 0.8 5 6 19 60Plutonius 3 0.75 0.75 2 1 2 80Saturn 44 0.6 0.7 1 0.5 1.5 21Venus 5 1 1 5 3 2.3397 48.6
Ranking of Projects on Financials & Non Financial Indicators
Dimension….Probabaility of Commercial SuccessRating Scale Rating Comment
Key Factor 1 4 7 10
Tachnical Gap Large Gulf Big Change Step Change Incremental 1 big learning curve !Complexity Difficult Many Hurdles Do-able Straightforward 1
Skill Base New Some experince Practiced widely known 4Resouce availability
must hire/ build known shortage
resources tied up
resources available 7
13 total score 13/40
Example Scoring Template
Portfolio Management
Pat Scanlan
CSF#6 R&D Portfolio for Ericsson A Personal View of How we can view our products !
DATA
TELECOM / VOICEMOBILITY
Where we want to beNew Telecoms World
Where we are, maybe !
More products & combined solutionsfor mobility, voice and data
communication
Portfolio Management
Pat Scanlan
CSF#7 Speed !
• But not at the expense of quality of execution !
• Speed yields Competitive Advantage : beat competitors to market
• Speed yields higher profitability:– revenues are realised earlier ( time value of money )
– more revenues are realised
• Speed means fewer surprises– reduces odds that the market environment has changed
Portfolio Management
Pat Scanlan
Use PROPS = CSF#8Overlay Stage Gates (Go/Kill) Decision Points• R&D + Marketing + Finance participants at each decision meeting• Senior Management buy-in• “non subjective criteria” SCORING MODEL at Gates• Financial => Estimate Commercial Value of Projects• ECV = { [ (NPV x Pcs x SI) - C ] x Pts} - D • Non financial ( 5 dimensions )
– 1. Probability of Technical Success– 2. Probability of Commercial Success (product c.a & market attractive?)– 3. Reward (NPV,return,payback time,certainty,cost+TTM)– 4. Business Strategy Fit– 5. Leverage of company’s resources & skills
• (Idea Selection)Index Attractiveness= (PROBtechsxs x PROBcommsxs x Profit )/Devcost
Portfolio Management
Pat Scanlan
The Project Plan of Action
• Interview / Survey analysis of current/past methods (8 CSFs)• Propose agreed changes/improvement on specific CSF• implementation plan (extent which are priority factors ? what
CSF needs fixing ?)
• Make fixes and implement a specific scoring technique for problem CSF areas
• Record changes
• Note changes/improvements• Post interview/survey (relevent CSF’s)