Restructuring A Project Portfolio with Qualitative Analysis

Let’s assume a company misses earnings and revenue due to a strategic miscalculation in its R&D allocation, and the need to focus on higher growth opportunities.

A new strategy is apparently required, as well as an improvement in the execution of the strategy.  Assuming a revised strategy, product management would therefore need to refocus R&D on a different mix of product development projects.

This article will therefore focus on the portfolio analysis component of lean product development.  Recall the objectives of Lean Product Development:

• Do the right projects (product, project and portfolio value analysis)
• Do projects right (minimize waste and rework)
• Level load the organization (minimize bottlenecks and resource constraints)
• Better understand the customer (maximize customer value)
• Create and re-use artifacts (standardize and sustain best practices)

Several articles on lean product development can be found in this article series:

What is Lean Product Development (Part I)?

What is Lean Product Development (Part II)?

What is Lean Product Development (Part III)?

Project portfolio analysis can continuously optimize the product development project pipeline and allocation of resources.

A relatively simple qualitative analysis can be performed on the project portfolio to prioritize the project mix, starting with some high-level assessment criteria:

• Strategic Importance – alignment with the business strategy.
• Competition – number and strength of competitors
• Market Attractiveness – market size and/or growth
• Competency – ability to execute the project
• Design Complexity – degree of design complexity, proven/unproven technology
• Financial Benefit – estimated product margins
• Customer Base – few or many customers
• Market Timing – aligned with market need or sometime after
• Lifetime Revenue – rough estimate in $
• Inventiveness – new to the world or derivative of an existing design
• Product Differentiation – different from competitive designs
• Manufacturing Complexity – degree of manufacturing complexity, proven/unproven feasibility

Of course, these criteria can be streamlined or customized according to the most important considerations. 

The project assessment criteria form the basis for a project scoring matrix.  Each of the assessment criteria is assigned a relative percentage weighting.  Also, each criteria has a qualitative scale with specific descriptions. Let’s use the example of market attractiveness with the 1, 4, 7, 10 scale descriptions as follows:

1. Small, declining or non-existent market, low growth expectations

4. Modest market, limited growth expected

7. Significant market, growth expectations

10.  Large, growing and attractive market 

Every project can be evaluated according to this criteria and the lowest priority projects canceled (in particular, a good goal is to eliminate rogue projects).

(Note that another consideration is to keep selected advanced development / research projects that aren’t commercial development projects, rather are meant to advance technology or platforms.)

It’s never too late to begin a project portfolio analysis process to realign and optimize the use of valuable resources. This qualitative (and somewhat subjective analysis) would be a first step in the right direction. A portfolio analysis team could perform the analysis and make the recommendations to the project approval committee as outlined in the lean product development project governance process.

Of course, a project profit and loss (quantitative) analysis is preferred with fairly elaborate estimating of sales, product and project cost, ROI, etc. This would be a logical next step in the evolution of your portfolio analysis process.

In summary, the lean product development process could save your company a substantial amount of money in development costs and/or avoid significant punishment by Wall Street if revenue and earning miss.