Strategic Portolio Management Methodology

Mr Cem Tanriover Brussels

Zebrafish International 2011 ©

Strategic Portfolio Management Replacing the “White Elefants” with “Pearls”

Transparency in

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2 Zebrafish International 2011 ©

Objective

Key informa,on and technology (Por$olio Navigator™) Ø Por$olio Navigator™ solu1on provides vital informa1on to teams, managers and execu1ves to accelerate decisions that op1mize the economic value of projects and por$olios.

Ø This is a web-‐based system that may be accessed in real-‐1me anywhere there is a connec1on to the Internet.

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How? Two types of portfolios to be managed

Economic Portfolio (strategic)

• Selecting valuable projects • Feeding winners and killing losers • Optimizing economic value

Resource Portfolio (tactical) • Allocating resources • Meeting budget goals • Meeting time to market

requirements

RPM Portfolio Navigator™

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Proposed Approach

Optimized Scenario # 1


Value analysis results returned to SAP RPM


Value optimization results can be used to allocate resources to the most important projects

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Value Maps guide project evaluation

Value maps, jointly developed by our team and client teams, describe the factors that drive project value.

The maps represent a powerful underlying mathematical engine that calculates expected NPV, including adjustments for risk and uncertainty.

Portfolio Navigator™ enables users to interact with value map models via easy-to-use input screens. Users see instant results of their changes at project and portfolio levels.

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Portfolio Navigator™ calculates value

Technical Issues

Commercial Issues

Cost Issues

Calculations

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Value map templates calculate the impact of uncertainty on NPV

“Tornado Charts” developed from Value Map analytics show the impact of uncertainty on NPV, identifying the most important drivers of upside value and highlighting downside risks.

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The “tornado” chart identifies the three most important factors that drive value

Challenge: mitigate downside — apply resources to drive to the upside.

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Portfolio Navigator™ addresses the “social” side of decision making

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Scenario 1: Evaluating a current portfolio

The portfolio contains 10 projects.

How do these projects contribute to portfolio value?

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Innovation charts compare the risks and rewards of each project

The vertical axis shows the Probability of Technical Success

The horizontal axis shows the Expected Commercial Value given technical success.

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CFO charts show an optimized portfolio based on contribution to value

The CFO chart shows the relative “bang for the buck” of each project from the highest return for the investment (CP50) to the lowest return (CP06).

If forced to cut budget and retain as much value as possible, you might cut CP06 and CP11, the least valuable projects. The balance of the projects would return portfolio value of around $270 million.

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The system automatically calculates cash flow reports

Portfolio Navigator™ computes portfolio cash flow

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Managers have objective information to guide optimization decisions (1)

The Innovation Chart encourages conversation around portfolio optimization issues

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Managers have objective information to guide optimization decisions (2)

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Scenario 2

Scenario 2 illustrates how you can quickly and easily update and evaluate the impact of new information on project/portfolio value.

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Scenario 2: Updating project/portfolio value when you have new information

1.  R&D discovers a formulation problem that will delay development. They are confident they can produce results but it will take more time and money.

2.  Focus groups reveal that initial market acceptance will be more difficult and, therefore, will delay penetration and impact market share.

3.  Delay in launch time causes rethinking about price and margins given the uncertainty that a competitor may enter the market first.

You receive information that causes you to re-evaluate Project CP50.

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Revise probability of technical success

R&D discovers a formulation problem that will delay development. They are confident they can produce results but it will take more time and money.

The team lowers the Probability of Success factors.

Overall Probability of Technical Success drops from 51% to 27%

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Revise market share data

Focus groups reveal that initial market acceptance will be more difficult and, therefore, will delay penetration and impact market share.

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Revise the project business model

Delay in launch time causes rethinking about price and margins given the uncertainty that a competitor may enter the market first.

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Review impact of uncertainty

Initial Business Plan

Revised Forecast

Combined Uncertainty

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Review impact on value

Initial Business Plan Revised Business Plan

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Review changes on “value on investment”

Initial Business Plan

Revised Business Plan

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Review affect on value, cost, and productivity

Initial Business Plan Revised Business Plan

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Assess the impact on risk vs. reward

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Do we have the resources to address the three critical factors?

Value Optimization Resource Optimization

Portfolio Navigator™ RPM

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Value analysis results returned to SAP RPM


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Who is available to work on the project?

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Resources allocated: Review results one quarter later

Portfolio Navigator™ RPM

Value Optimization Resource Optimization

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Assess impact on decision-making

1.  Even though project value decreased from $189 million NPV to $133 million NPV

2.  Project cost increased from $1.0 million NPV to 1.34 million NPV

3.  CFO and Innovation charts reveal that CP50 remains the most potentially valuable

product in the portfolio

4.  The tornado chart indicates a need to focus resources on solving the formulation

problem to penetrate the market as quickly as possible

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Benefits

1.  Brings teams, experts and managers into the decision-making process 2.  Provides transparency to business cases 3.  Accelerates decision-making 4.  Facilitates collaboration and buy in by stakeholders 5.  Provides clear understanding of key value drivers and the impact of risk and uncertainty 6.  Eliminates re-working spreadsheets, saving time and money + maintaining version control 7.  Provides instant on-line web access

8.  improving portfolio value over time.

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How

''Dummy'' Project/Portfolio Demo:

To organize a demo, we invite you to participate in a 1 hour-webinar.

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Enterprise References

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Workshop References

1 SESAR Performance Assessment Workshop 08-09-10/05/07, Paris, FR 2 NATS ADS-B RAD Workshop, 11-12/07/06,Fareham, UK 3 MATS ADS-B NRA Workshop, 06-07/08/07,Valetta, Malta 4 LVNL ADS-B RAD Workshop, 03-04/09/07,Maastricht, NL 5 DHMI ADS-B NRA Workshop, 16-17/10/07,Trabzon, Turkey 6 AENA SESAR Workshop 30/10/07, Madrid, Spain 7 HCMI Workshop 17-18/04/08,Rhodes, Greece 8 AENA ADS-B Workshop 12-13/08/08,Granada, Spain 9 Air Europa Business Case Workshop 25-26/11/08, Majorca, Spain 10 Munich A-CDM Business Case Workshops 22/06/09 Brussels,Belgium 11 Gatwick A-CDM Business Case Workshop 17/03/10 London, UK 12 DFS A-CDM Business Case Workshops 09/09/10 Frankfurt, Germany

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Expected Results for Decision Makers

Harvard Business Review ©

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Questions ?

Harvard Business Review ©

Documents

Strategic Portolio Management Methodology