For Application Development & Program Management Professionals

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1 It s Time To Revisit PPM For Product Development More Application Options Emerge To Help Manage R&D Pipelines by Roy C. Wildeman with Mary Gerush and Adam Knoll Executive Summary Research and development (R&D) pipelines are the innovation and financial lifeblood of many organizations, yet product development executives report ongoing challenges prioritizing their investments in R&D projects and the resulting products. Recently, however, Forrester has been seeing a significant increase in interest and investment in project portfolio management (PPM) tools for product development to help address two persistent information challenges: 1) obtaining an accurate picture of resource utilization, and 2) aligning investment with the business strategy. Recognizing the market potential, vendors from familiar partners in the enterprise resource planning (ERP), IT PPM, and product life-cycle management (PLM) domains as well as heritage pure plays and innovative startups are investing in solutions to meet the unique needs of managing R&D pipelines by increasing support for product and technology strategy and product-line engineering processes. When evaluating PPM for product development options across the various vendor segments, be sure to look at characteristics beyond functional fit and consider criteria including integration, product strategy, flexibility, and cost in your selection process. R&D pipeline MANAGEMENT IS A MUST FOR SUCCESSFUL NEW PRODUCT DEVELOPMENT Across the product life cycle, few processes have as much impact on a company s product innovation efforts and financial performance as managing the R&D project pipeline and resulting new products. A recent stream of Forrester inquiries on this topic indicates, however, that product development executives face persistent challenges prioritizing their R&D investments. Many state that they: Face a murky view of resource utilization. Numerous senior managers claim that they continually face the difficulty of having too many product development projects but seemingly never enough resources to do them all well. In the words of a few Forrester clients: Our resource assignment is ineffective, oftentimes overcommitting and overloading our pipeline. (Manager, process and reporting, communications service provider) Fundamentally, all I m looking to do is get better visibility into my development activities and resource allocations. (Manager, PMO, semiconductor manufacturer) We have known limitations in our stage gate review process. We have inconsistent engagement and no visibility into resource assignments. (Senior program manager) Headquarters Forrester Research, Inc., 400 Technology Square, Cambridge, MA USA Tel: Fax:

2 2 Have to assign project priority without solid information. Without well-qualified and substantive assessments of market viability, technical feasibility, and strategic priorities, managers find it impossible to prioritize R&D projects against one another, much less stop development work on a product. Timely information is critical during early concept work and in periods of significant market change, yet Forrester consistently hears that quality reports on the R&D portfolio are elusive or burdensome. In the words of a few of our clients: We lack consistent, real-time portfolio metrics and reports. Our process is highly manual and is constantly out of pace with the business. (Vice president, product development, manufacturer) I d love to be able to reduce my time and the resources it takes to gather my program information. (Engineering manager, high-tech manufacturer) We lack a top-down method to track alignment of strategic priorities with investments. We can only track total dollars spent, limited to certain critical resources, like development budget and capital. (Manager, PMO, semiconductor manufacturer) Increased Interest In PPM Apps Indicates Strong Value For Product Development Although commercial project portfolio management (PPM) software has seen only modest adoption in product development, Forrester has seen a significant increase in interest and investment in PPM tools among product development teams. In fact, respondents to Forrester s most recent November 2008 Global State Of Product Life-Cycle Management Online Survey ranked PPM as one of the top PLM investment priorities (see Figure 1). Why the recent surge in interest? Because PPM apps can help solve several persistent pain points for those managing R&D pipelines by: Introducing structured resource capacity analysis. By quantifying the demand for people and financial resources versus their availability, applications can help product development executives know if they have enough of the right resources to handle the current pipeline and achieve their development goals even if it means saying no to some worthwhile projects. Fixing the quality of information problem. Prioritization decisions and go/no go calls are only as good as the information on which they are based. By standardizing data-gathering efforts and reducing the associated legwork, applications can generate data that is more reliable, trustworthy, and actionable. Formalizing and aligning product development strategy. By prompting R&D stakeholders to agree on and define strategic goals and corresponding KPIs for new product development such as the expected percent of sales from new products, technologies, or markets applications can help clarify and align product development strategy with the core strategy of the business.

3 3 Figure 1 PPM Emerges As A Top PLM Investment Priority For Product Development Teams For each of the following PLM processes, which are likely to be included in your immediate, midterm, and long-term deployment? Immediate Midterm Long-term Not planned Project and portfolio management 46% 33% 15% 6% Quality and regulatory compliance Configuration management Idea management Product publishing Aftermarket support End-of-life management Material sourcing Manufacturing process management 43% 30% 19% 8% 44% 29% 10% 17% 14% 38% 29% 19% 18% 24% 33% 25% 10% 33% 18% 39% 9% 29% 30% 32% 9% 21% 29% 41% 10% 23% 19% 48% Base: 79 product development professionals Source: November 2008 Global State Of Product Life-Cycle Management Online Survey Source: Forrester Research, Inc. specialized APPLICATION support emerges to improve R&D PIPELINE management Just as product development teams have increased their attention to and investment in PPM, PPM vendors have also invested in their solutions to meet the unique needs of those managing R&D pipelines. In fact, Forrester s latest review of PPM for product development tools and their functionality uncovered specialized features for: Managing product and technology strategy. To support executive governance boards, the latest PPM applications can help chart business investment alignment (e.g., formalized business goals aligned to investment buckets by products, resources, and programs), product or platform technology road maps (e.g., long-term planning and what-if scenarios), and external environment maps (e.g., analysis of expected future competition, substitute or enabling technologies, and relevant regulations). Supporting product-line engineering. For example, Sopheon s Accolade product now offers variant management functionality to help evaluate the financial impact of a single product variant or an entire product-line family and to support variant-specific product plans and approval workflows. 1

4 4 Managing product portfolios. Most vendors offer a variety of methods to evaluate R&D pipeline health using financial measures (e.g., net present value, return on investment, and productivity index), portfolio maps or bubble charts, and configurable scoring models. Some offer more-advanced functionality, such as Planisware s portfolio optimization, sensitivity analysis, and what-if scenario builder, providing differentiating value for more-mature users. Managing programs. Most vendors offer core capabilities such as project schedulers (e.g., visual Gantt charts and critical path analyses), cost and progress tracking (e.g., earned value, actual costs, and estimated budget versus budget at completion), resource management (e.g., capacity and utilization analysis), and project manager dashboards (e.g., budgeting and status across stage gates). Importantly, most offerings we reviewed also included a bidirectional interface with Microsoft Project. Facilitating ideation. Historically, idea management functionality provided basic capabilities to collect ideas from contributors and route them to reviewers and management gatekeepers. Today, this is just the starting point; vendors are broadening their value proposition to include dynamic idea evaluations and content-based routing, incentives and financial tracking for submitted ideas, guided innovation or brainstorming functionality, enterprise social networks or expertise location systems, and community collaboration platforms. 2 Managing product requirements. From their origins in software development, vendors including Accept Software, CA, and Planview have extended their functionality downstream to include capabilities for capturing and maintaining product features, prioritizing requirements against a backlog, and aligning requirements to product release road maps. Application Options Abound From Familiar Vendor Partners A variety of vendor segments serve the market for PPM for product development applications many that already have stalwart relationships with business and IT software decision-makers making a R&D-centric selection decision that much more complex (see Figure 2). The major vendor segments with relevant offerings include: Enterprise resource planning (ERP) vendors. Targeting existing customers with prior investments in their ERP suites, vendors such as SAP and Oracle position their PPM offering as a lower-cost alternative to best-of-breed approaches and are investing heavily in crossapplication synergies such as product analytics and integrations to financial modules. IT PPM vendors. With solid growth in the IT management domain, market leaders such as CA and Planview offer a wide choice of mature PPM features and functions suitable for enterprisewide deployments in a variety of industries and sectors. While success in the IT domain boosts vendor viability, some IT-centric functionality such as integrated IT

5 5 management (IIM) and comprehensive project management will be of little value to product development organizations, allowing nimble software-as-a-service () players such as Daptiv and PowerSteering to enter the market with strong value propositions. PLM leaders. With an orientation toward product data management, CAD vendors such as Dassault Systèmes, Parametric Technology Corporation (PTC), and Siemens PLM Software have historically led the PLM market but have not had equivalent focus on portfolio decision support, intelligence, and reporting functionality. However, all three of these vendors are actively building out their PPM capabilities and will leverage their strong ties to the business and some data synergies with legacy PLM systems to increase market share. Pure-play vendors. Players such as Planisware and Sopheon have built their businesses around the product development space and are the clear market share leaders. Look for these vendors to differentiate themselves from the other market entrants by offering high-value product technology strategy capabilities, portfolio analytics, and other executive-decision-support features.

6 6 Figure 2 PPM For Product Development Application Options Abound From Familiar Vendors Segment Vendor PPM for product development product(s) Licensing Model Industry focus ERP IFS IFS Applications Primarily engineer-to-order industries Infor PLM 8, PLM Optiva, PLM Runtime All manufacturing and services industries Oracle Agile PLM Primarily high tech; some medical devices and consumer products SAP Resource and Portfolio Management (RPM) All manufacturing and services industries IT PPM Accept Software Accept Portfolio Software and high tech Artemis Artemis 7 NPD on demand CA CA Clarity PPM, Financial, software, telecommunications, media, CPG high tech, medical devices, and biotechnology Daptiv Daptiv PPM Instantis EnterpriseTrack, Planview Enterprise Product Portfolio Management, General manufacturing industries PowerSteering Enterprise PPM PLM Dassault Systèmes ENOVIA Program Central All manufacturing and services industries Parametric Technology Corporation Windchill ProjectLink, hosted Auto, aerospace and defense, CPG, industrial equipment, high tech, and fashion and apparel Siemens PLM Software Teamcenter Auto, aerospace and defense, CPG, industrial equipment, high tech, medical devices, and retail Source: Forrester Research, Inc.

7 7 Figure 2 PPM For Product Development Application Options Abound From Familiar Vendors (Cont.) Segment Vendor PPM for product development product(s) Licensing Model Industry focus Pure play Enrich Consulting Enrich Portfolio System General R&D portfolio Planisware Planisware 5 Life sciences, aerospace and defense, automotive, energy, financial, transportation, and electronics Sopheon Accolade Chemicals, food and beverage, consumer goods, aerospace and defense, automotive, high tech, and services Source: Forrester Research, Inc. Recommendations USE a comprehensive set of criteria when selecting your application VENDOR When evaluating PPM for product development options across the ERP, IT PPM, PLM, and pureplay segments, be sure to look at decision criteria beyond functional fit during your selection process. In particular, consider including the following additional criteria to maximize the value of your investment: Integration. If your product development staff members are like most, they will adamantly resist entering information into a new system. To avoid this pitfall, be sure your application of choice has robust integration features including built-in connectors to interdependent authentication directories, desktop apps, and enterprise systems as well as a healthy ecosystem of service partners to help. Flexibility. To avoid an ongoing support and upgrade burden on your IT staff, be sure system workflows, reports, and user interfaces can accommodate change over time through configuration, not software development. Product strategy. With significantly different requirements from other PPM domains, product development professionals should make sure that their vendor s future enhancements, implementation services, and ongoing support have a major degree of product focus. Cost. While including offerings from incumbent IT PPM, PLM, or ERP partners on your shortlist is a sound way to analyze low-marginal-cost scenarios, don t overlook smaller players who can offer competitive, on-demand pricing that scales with your user base.

8 8 Supplemental Material Methodology The November 2008 Global State Of Product Life-Cycle Management Online Survey utilized 130 companies that were either members of its internal research panels or extended contacts. The survey was fielded in October and November 2008 and did not motivate respondents with an incentive. Exact sample sizes are provided in this report on a question-by-question basis. Panels are not guaranteed to be representative of the population. Unless otherwise noted, statistical data is intended to be used for descriptive and not inferential purposes. If you re interested in joining one of Forrester s Research Panels, visit us at Panel. Companies Interviewed For This Document Accept Software Daptiv Oracle Planisware PowerSteering SAP Sopheon Endnotes 1 Services firms in particular tend to offer families or lines of products that are largely similar and only differentiated by a few features. By examining these variable and common product requirements across a given product line, leading firms organize and establish reusable product structures that product managers can quickly repurpose for use in new markets so that they don t have to start from scratch. See the April 10, 2009, Forrester s Best Practices Framework For Adopting PLM In Services Organizations report. 2 Forrester surveyed 11 vendors with support for idea generation, brainstorming, communities, and events to give readers a starting point for their tools selection. For more information, see the March 2, 2009, Vendor Landscape: Innovation Management Software report. Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 20 key roles at major companies providing proprietary research, customer insight, consulting, events, and peer-to-peer executive programs. For more than 26 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit 2009, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To purchase reprints of this document, please For additional information, go to

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