Innovation Portfolio and Pipeline Management

Transcription

1 Innovation Portfolio and Pipeline Management March 12, 2013 Locations: BOSTON DUBAI LONDON SHANGHAI SÃO PAULO SEOUL TORONTO

2 Objectives Objectives of the Seminar Learn about: - Innovation portfolio management - Innovation pipeline management Have Q&A 2

3 Innovation Portfolio & Pipeline Management Does this happen in your company? 3

4 Innovation Portfolio & Pipeline Management Overview Let s talk about the importance of defining the Strategy, and Strategic Portfolio Management (SPM) and Dynamic Pipeline Management (DPM) Strategy Strategic Portfolio Management (SPM) Concept to Customer Process Fuzzy Front End Concept Development Dynamic Pipeline Management (DPM) Execution + Implementation 4

5 Innovation Strategy Innovation Portfolio & Pipeline Management Overview SPM works together with DPM and a clear business/innovation strategy to achieve high performance Developed High Performers Aligned Business / Innovation Strategy Strategic and Platforms Portfolio Management Aligned Business / Innovation Strategy &Platforms Do the Right Things Dynamic Pipeline Management Poor Low Performers Low Innovation Efficiency Do Things Right High 5

6 Innovation Portfolio & Pipeline Management Overview Strategy, SPM and DPM answer different questions, are used by different people, for various activities and measured at different time periods Question Who What When Strategy Do we know where we want to play? CEO / Senior Leaders Define strategic direction Yearly Strategic Portfolio Management Do we have the right projects? Senior Leaders Approve budget, manage pipeline Quarterly Dynamic Pipeline Management Are we doing each project the right way? Project Managers Push & manage projects Weekly / Monthly 6

7 Innovation Portfolio & Pipeline Management Strategy Are your projects aligned with the strategy? Strategy 7

8 Innovation Portfolio & Pipeline Management Strategy Define the strategic direction of the company by agreeing on the areas where the company will play Strategy 3. Opportunity 4. Field-of-Play 2. Industry Definition and Beyond 1. Company Sandbox 5. Actionable Field-of-Play 6. Growth Platform 8

9 Innovation Portfolio & Pipeline Management SPM How is your Strategic Portfolio managed in your company? Strategy Strategic Portfolio Management (SPM) 9

10 Innovation Portfolio & Pipeline Management SPM Strategic Portfolio Management is key for aligning projects to strategy and for making mid-course corrections to meet business goals Strategy Strategic Portfolio Management (SPM) Concept to Customer Process Fuzzy Front End Concept Development Dynamic Pipeline Management (DPM) Execution + Implementation 10

11 Innovation Portfolio & Pipeline Management SPM Relationship to Strategy Strategic Portfolio Management answers key questions Do we have a complete list of all innovation projects and activities? Are projects characterized sufficiently to understand their impact on the business and innovation strategy? Is this the right mix and balance by focus area, stage, type, risk / reward and timing? Do we have the right type of resources and investment levels for each project? Are there projects which we should accelerate, decelerate or kill to increase overall portfolio value? Is the revenue forecast sufficient to fill the growth gap? Is each area delivering according to its benchmark growth rate? 11

12 Innovation Portfolio & Pipeline Management SPM Case Example Real case example: Reduce complexity and higher value portfolio Evolution of Number of Projects Evolution of RANPV (R$ million) 120% 250% 100% 100% 200% 200% 210% 80% 60% 65% 10 New Projects 150% 100% 100% 40% 34% 50% 20% 0% Initial Diagnostic Actual 0% Initial Diagnostic Actual Risk Adjusted 12

13 Innovation Portfolio & Pipeline Management SPM Benefits Benefits expected from implementing a high performance Strategic Portfolio Management Optimized and BALANCED strategic portfolio CLARITY of overall risk adjusted value of portfolio and timing of future cash flows HIGHER VALUE projects portfolio and REDUCED NUMBER of projects FASTER SPEED to market and failure HIGHER RETURN on innovation investment TRANSPARENCY of decision through visibility of projects CLEAR METRICS for increasing effectiveness of innovation ALIGNMENT of individual activities to business strategy 13

14 Innovation Portfolio & Pipeline Management SPM Challenges to Implementation Strategic Portfolio Management is difficult to implement and there are critical factors that must be considered Portfolio Balancing Resource Balancing Fit to Strategy Managing Process Project valuation Project Scope Challenges Interface to Other Business and Decision Processes Project Interdependencies Critical factors Must be understandable by the users Clearly identified decision body, e.g., Business Team Easy to assemble information Timely Must enable consideration of multiple objectives Must recognize the uncertainty level of the information Must be integrated with other business processes 14

15 RESULTS PROCESS Innovation Portfolio & Pipeline Management SPM Approach A five-step approach is used to develop a customized High Performance SPM for your organization High Level Strategic Portfolio Management Process Develop / Revise Recommend Project Characterize Review Project Review Strategy Portfolio Evaluation Projects Portfolio Adjustments Criteria Clear business and innovation strategy Agreement on portfolio balance Defined strategic design for strategic portfolio management system Metrics for performance assessment identified Trained project leaders All project data inserted in the strategic portfolio management system Validated project data High impact Portfolio maps Preliminary recommendation for SPM Refined recommendation for SPM Key decisions on resource allocation Metrics for performance assessment evaluated 15

16 Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXAMPLE Portfolio Pipeline of a wireless handset manufacturer Do we have a complete list of all projects and R&D activities? Idea Concept Prototype Feasibility Manufacturing Launch Health Monitoring Military Tactics Device No Re-charzzze Voice Recognition Handset Basic Research Digital Camera Handheld Teacher OLED One Time Use Pocket Navigator Construction Management Tool MPEG Creation / Transfer Process Development / Scale-up Video Camera Phone Wireless Portable Gaming Device Internal Equipment Re-use Pilot Keyboard Handset Pilot Scale Test of New Process Equipment Wireless Device with Emergency Feature Wireless Weather Digital Recorder GPS Locator Service Investigating Byproduct Applications New Color Cell Phones Pollution Abatement Improve Product Yield New Backlighting Color Phones Research Faster Output for Cell Phones Tech Service / Support Wireless TV 16

17 Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXERCISE Now let s examine a hypothetical portfolio Review the Portfolio Discuss Potential Improvements We will take a look at the results of a portfolio assessment for a wireless handset manufacturer For each portfolio chart, we will discuss how the portfolio could be adjusted to improve results for the company What questions would you have for the company management? What recommendations would you make? 17

18 # of Projects Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXERCISE Does this pipeline look right? Does the distribution by stage make sense? What would you change? Pipeline Looks more like a tunnel than a funnel? Stage 18

19 # of Projects # of Projects Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXERCISE Is this the right mix and balance by program and benefit? What is the strategy of this company? How different is this from your company? Program Type Expected Outcome Should we be doing more of this? Should we be doing less of this? Are we taking on too much risk? Should we not focus more on Defense and costreduction? Product Process Marketing Technology Proactive Reactive 0 New Sales Production Defense Cost Reduction Proactive Reactive Program Benefit 19

20 # of Projects Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXERCISE What is the strategy? Is this right? How do competitors look like? Market Position Innovator Fast-follower Laggard New Entrant Type of Project 20

21 Product/Market Segment Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXERCISE Are they covering the appropriate technologies and products/markets? New Application New to World Market Segment vs. Technology Type Market Maker New to Geography New to Company Positive RANPV Negative RANPV No info on RANPV Current Core Business Current New to New to Company Geography Technology Type New to World Disruptive Technology 21

22 Competitive Position Market Attractiveness Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXERCISE Are they doing the right projects? How should their portfolio look? Can we add more resources to these projects to help speed them up? Competitive Position vs. Market Attractiveness Strategic Fit vs. Market Attractiveness Leader High Equal Closing Gap Minor Gain Medium Low Low Medium High Low Medium High Market Attractiveness Strategic Fit Why are we doing these projects? Positive RANPV Negative RANPV No info on RANPV 22

23 Technical Impact Market Attractiveness Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXERCISE Are they doing the right projects in terms of technical and market attractiveness? What is the ideal portfolio? Technical Attractiveness vs. Impact Overall Attractiveness Emerging High Pacing Medium Key Base Low Low Medium High Technical Attractiveness Low Medium High Technical Attractiveness Positive RANPV Negative RANPV No info on RANPV 23

24 Revenue US$ (in 000s) Revenue US$ (in 000) Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXERCISE Is this revenue forecast sufficient to fill the growth gap? Is each area delivering according to its benchmark growth rate? After risk adjustment we are far short of what is being asked for by shareholders? Revenue by Program Risk Adj. Revenue by Program Time Time Product Marketing Process Technology Product Marketing Process Technology 24

25 # of Projects # of Projects Innovation Portfolio & Pipeline Management SPM Portfolio Assessment Exercise EXERCISE Do you know where ideas come from? Are ideas proactively generated or driven by competitors? Projects by Source of Idea Projects by type of Idea Idea Source 0 Proactive Type of Idea Reactive 25

26 Innovation Portfolio & Pipeline Management Questions Let s review what we learned, select the best answer Strategic Portfolio Management is the alignment of projects and programs to an organization s strategic objectives to maximize the value of the project portfolio a) True b) False 26

27 Innovation Portfolio & Pipeline Management DPM How is the project pipeline managed in your company? Concept to Customer Process Fuzzy Front End Concept Development Dynamic Pipeline Management (DPM) Execution + Implementation 27

28 Innovation Portfolio & Pipeline Management DPM Dynamic Pipeline Management addresses root causes to optimize innovation to deliver higher value and faster project pipelines Leverage intelligence and enhance insight into customers and markets throughout the process Align to strategy and involve a broader set of assets, both across and beyond the organization Increase flexibility and maintain discipline throughout the process to speed time to market Assess and manage risk for more consistent performance and more accurate valuation Concept to Customer Process Fuzzy Front End Concept Development Dynamic Pipeline Management (DPM) Execution + Implementation 28

29 Innovation Portfolio & Pipeline Management DPM Types There are three types of pipelines, each one with a different time frame, sponsors, resources, decision rights and investment needed Type of Pipeline Time Frame Sponsors Resources Decision Right Investment Just do it Days weeks Individual Individual / self forming teams Individual Time Incremental Weeks months Manager Assigned teams within a function Manager Time + nominal budgets Breakthrough / Radical Months - years CEO / Board Dedicated crossfunctional business teams BU heads Time + cutting across multi budget periods 29

30 Innovation Portfolio & Pipeline Management DPM Types EXERCISE Are you managing these three type of projects? How many of each one do you have? Type of Pipeline Number of projects Just do it? Incremental? Breakthrough / Radical? 30

31 Innovation Portfolio & Pipeline Management DPM Pipeline Issues Companies often feel that their project pipelines are not fast, miss opportunities, under deliver on value and / or cost more than planned Issue Examples Too slow in Getting Products to Market Slow vs. company s own expectations or vs. competitor best practice Lose first-mover advantage in the market Missed Opportunities Too few innovations Fail to generate and commercialize breakthrough products Fail to identify additional markets and segments Fail to commercialize risky technologies through licensing & partnering Revenues Consistently Below Expectations Slower than expected adoption by customers and channels Forecasts inaccurate Market won t bear desired price Investment and Cost Consistently > Plan Can t make product at expected cost, with quality Development costs higher than expected Capital investment exceeds appropriation request 31

32 Innovation Portfolio & Pipeline Management DPM Common Pitfalls Root causes for the underperformance are typically not addressed Common Pitfalls Root Causes Too slow in Getting Products to Market Miss Opportunities There is no sense of urgency, or perceived consequences to being late The stage-gate process is done within functions and the handovers slow down the process Gate decisions are bureaucratic and inflexible Development and launch resources are not dedicated or ring-fenced The organization is not prepared to commercialize opportunities which have a longer timeframe than 2 years We rarely license-out technologies we do not commercialize ourselves We don t manage the process to ensure a rich inflow of good ideas Revenues Consistently Below Expectations We don t understand the market or our customer segments well enough, and often we significantly overestimate the appeal of the product Product launch is seldom well-designed and managed We don t anticipate how our competitors will react Customers tell us the price they ll pay, but then won t sign the check Investment and Cost Consistently > Plan By the time we get to launch, the cost to manufacture has often increased Pilot plants always cost more than we expect We build in the cost structure appropriate for the $750M drug we think we ve developed, and then we only sell $250M 32

33 Innovation Portfolio & Pipeline Management DPM Role in Optimizing Innovation Pipeline management addresses root causes to optimize innovation to deliver higher value and faster project pipelines Align to strategy and involve a broader set of assets, both across and beyond the organization Increase flexibility and maintain discipline throughout the process to speed time to market Assess and manage risk for more consistent performance and more accurate valuation 33

34 Innovation Portfolio & Pipeline Management DPM Role in Optimizing Innovation Companies have achieved significant benefits through a high performance dynamic pipeline management process Reduced time-to-market (40-70%) Improved product development productivity (20-35%) More output for same headcount or same output for lower headcount Increased revenue From earlier introduction (10% - 80%) From a better designed product that meets market needs (10-30%) Significant ROI More revenue, less cost, higher ROI Reduced product lifecycle cost (10-40%) Improved design quality and reduced design changes (ECOs, etc.) during early manufacturing (10-80%) Other qualitative benefits, such as better executive management leadership in product creation, efficient decision-making, etc. 34

35 Innovation Portfolio & Pipeline Management DPM Best Practices Companies have achieved significant benefits through a high performance dynamic pipeline management process Solid Link with Strategy Integrated System View Discipline Speed Flexible and not bureaucratic process consistently used Effective and complete Implementation 35

36 Innovation Portfolio & Pipeline Management DPM IXL Center s Point of View IXL Center s point of view includes a few more insights and includes nine core characteristics that are key to pipeline value maximization Intelligence and Insights Strategic Alignment Discipline Flexibility Risk Management Higher Value Concepts Extended Enterprise Speed Valuation 36

37 Innovation Portfolio & Pipeline Management DPM Pipeline Value The challenge is to increase pipeline value by managing speed and risk and sourcing high value concepts PIPELINE VALUE n = i = 1 PROJECT VALUE PROJECT VALUATION = RISK x n i = 1 (REVENUES i - COSTS i - INVESTMENTS i ) (1 + WACC) i RISK = % Capturing Relative Risks of Projects (e.g. Technical, Market, Implementation, etc.) Speed Management Risk Management High Value Concepts Sourcing Intelligence and Insights Discipline Flexibility Partnerships Alignment to Strategy 37

38 Innovation Portfolio & Pipeline Management DPM Your company s pipeline TEMPLATE What do you need to improve in your pipeline management? Speed Management Risk Management High Value Concepts Sourcing Topic 1 Topic 2 Topic 3 Topic 4 Topic 5 We re great We could be better We need to improve 38

39 Innovation Portfolio & Pipeline Management DPM Gates Drive ideas to launch while diminishing manageable risk first before unnecessary expenses 7 Reduce risks and uncertainties Avoid unnecessary spending to improve valuation Scale-up (high resources) 6 Launch (high resources) Risk Project Life 5 Development (mid-high resources) Resources Characterize the idea (low resources) 1 Preliminary Analysis (low resources) 2 Project Screening - Prioritization Macro resource allocation 3 Feasibility study (low-mid resources) Project resource allocation (in time) 4 Keep resource spending on track Compress project time to market to enhance speed IDEA 39

40 Innovation Portfolio & Pipeline Management DPM Gates - flexible and gates have to be designed to be flexible without compromising discipline Results (Categorized according to the criteria) Must and should have: Previous stage work quality control Business logics (is the project still attractive, regarding economic and business issues?) Action plan for next stage: When is the next review and which criteria should be used to conduct the review? What are the milestones (e.g. critical experiments, main events) for the next stage? Are the resources needed and actions proposed reasonable? Kill Hold (prioritization) Rework or bundle Go, accelerate When passing a review, the responsible people must check if the resources needed for the next stage are aligned to what was previously defined in the SPM prioritization Place projects in fast-track mode, or tag them as market development, R&D projects, etc. 40

41 How Innovation Portfolio & Pipeline Management DPM Process Elements Process elements and characteristics of a Dynamic Pipeline Management Main Aspects Definition Fast Track Risk management allows bypassing gates and grouping stages Uncertainty and need for information will determine which steps and stages can be omitted or must be conducted GROUP GROUP Fuzzy Gates Conditional approval of an activity in the review, to be completed and reviewed afterwards Preliminary Analysis Gate 2 Gate 3 Fluidity Start of an activity of the next stage before review approval (risk management) Feasibility Study Development 41

42 Innovation Portfolio & Pipeline Management DPM Using Teams Team-based organizations are used to support the DPM process Leadership Business Management and strategic decision making Leadership Project Team Functional Areas TS Cat Pilot MKT Project Team Project Management Functional Areas Management of functional areas 42

43 Innovation Portfolio & Pipeline Management DPM Your company s pipeline EXERCISE Do you know your company s innovation pipeline? 5 min 10 min Define the Pipeline Draw the Pipeline 1. Split into teams of 2 or 3 2. Answer the questions on the Design Pipeline template 3. Share and combine your answers with the team 1. Draw your company s pipeline including: Stage name Reviewer Team Members Gate Criteria Activity 2. Present Back to the Group 43

44 Innovation Portfolio & Pipeline Management DPM Your company s pipeline TEMPLATE Do you know your company s innovation pipeline? How many stages are there in your innovation process? What are their names? What is the criteria to pass each gate? Who decides for each gate? 44

45 Innovation Portfolio & Pipeline Management DPM Your company s pipeline TEMPLATE Draw your company s pipeline Stage Name Reviewer Team Members Gate Criteria Activities 45

46 Innovation Portfolio & Pipeline Management Questions Let s review what we learned, select the best answer These are all benefits of having a dynamic pipeline management process EXCEPT: a) Reduced time-to-market b) Increased revenue c) Missed opportunities d) Reduced product lifecycle cost e) Efficient decision making 46

47 Innovation Portfolio & Pipeline Management Q&A Questions? Q & A 47

48 Thank you Hitendra Patel Managing Director