Chapter 10

Balancing Portfolios

© David O’Sullivan

10-1
Reflections
 Explain new product development.
 What are the main sources of funding for
new product development?
 List the ways in which new product
innovations can be protected.
 What are the key features of a market
launch plan?
 What is the commercialization of new
products?
 What are the main traits of an
entrepreneur?

10-2
Activities
[Discussion of selected student
‘Activities’ from previous chapter]

10-3
Learning Targets
 Explain the main ideas behind project portfolio
management
 Describe four key strategies used in portfolio
management
 Name a number of tools that can be used for
portfolio management
 Explain the use of bubble diagrams as a means of
evaluating portfolios
 Understand the difference between the portfolio
dominant and project dominant approaches
 Discuss why organizations often have a mix of low-
risk and high-risk projects

10-4
Portfolio Approaches
 Portfolio management is about
continuously choosing, managing, and
adapting the mix of projects to match
resource availability and contribute to
organizational goals
 Key approaches include:
 Maximizing the value of a portfolio
 Creating the right mix of projects
 Maximizing alignment with goals
 Optimizing resources

10-5
Portfolio and Project
Management

Goals
Portfolio Statements

Management
Requirement
s
Strategies Projects
Measures Specification
Ranking
Schedules
Deployment
Results
Status
Innovatio Scorecard
Trends
ns
Stimuli
Creations
Project
Problems
Ideas Management
Team
s
Individual
s
Teams
Skills
Learning
Review
Maximising Value

10-7
Creating the Right Mix

10-8
Right Mix > Quadrants
 Pearls
- Low risk and high reward projects.
 Oysters
 Risky projects with potential of high reward
 Bread and Butter
 Often small, simple projects – high likelihood of
success, but low reward.
 White Elephants
 Low probability and low reward projects. One
third of all projects and about 25% of spending
are White Elephant.

10-9
Right Mix > Types of Bubble Diagrams
 Risk Vs. Reward
 Technical Newness Vs. Market Newness
 Ease Vs. Attractiveness
 Strength Vs. Attractiveness
 Cost Vs. Timing
 Strategy Vs. Benefit
 Cost Vs. Benefit
 Etc. etc.

10-10
Right Mix > Examples
Risk
Low

Uncertainties

High Low

Reward

High
10-11
Risk-Reward

10-12
 Actions
“Expenditure of your effort”
(what are your major current
and planned activities?)

Results
“Outcome of your effort” Results
(what is the current status of
Goals your ‘goals’ and ‘actions’)
“Objective of your effort”
(what do you want to
achieve in the future?)

Relationship

(which goals have no

10-13
Scope Matrix

10-14
Maximizing Alignment With Goals

10-15
Optimizing Resources
 Optimizing resources is the process of
balancing the
 Funding
 Worker hours
 Skill
requirements of the project portfolio
with the resources available over a
period of time

10-16
Portfolio Resource Loading

10-17
Portfolio Budgeting
 Budgeting is an important mechanism
for controlling and reviewing the
progress of an innovation plan
 Allocated budget will determine the
overall investment in terms of
resources and commitment
 Common budgeting methods
 Top-down budgeting
 Bottom-up budgeting

10-18
Balancing the Portfolio
 Maximizing contribution based solely on
financial methods can lead to short-term,
low-risk projects.
 A solely strategically aligned portfolio, may
not yield any short-term benefits necessary
to maintain momentum.
 Too rigid pursuit of the screening process
can result in behavior such as:
 Abandoning the more radical of proposed
innovations
 Focusing too heavily on a particular technology
 Concentrating too much on existing markets

10-19
Dominant Assessment Approaches
 Gates dominant
 Focus on reviewing each stage gate within the
individual projects in the portfolio
 Suitable where portfolios are static
 Portfolio dominant
 Favors a portfolio view over an in-depth review
of individual projects
 Suitable in fast, dynamic organizations where
projects are changing regularly and where the
business environment is fluid

10-20
Classification of Projects

10-21
Summary
 Explain the main ideas behind project portfolio
management
 Describe four key strategies used in portfolio
management
 Name a number of tools that can be used for
portfolio management
 Explain the use of bubble diagrams as a means of
evaluating portfolios
 Understand the difference between the portfolio
dominant and project dominant approaches
 Discuss why organizations often have a mix of low-
risk and high-risk projects

10-22
Activities

10-23
Search Online
 www.mindtools.com
 www.ideo.com
 www.management.about.com
 www.inventors.about.com
 www.mindtools.com
 www.mycoted.com/Category:Creativi
ty_Techniques
 www.blueoceanstrategy.com/

10-24