Larry Pendergrass has been a leader in the high tech industry for over 30 years, with 17 years in management and 14 years in science and engineering, working for companies such as Hewlett-Packard, Agilent Technologies, Keithley Instruments and Tektronix. He has worked in a wide range of industries such as Semiconductors and other Discrete Devices, Materials Research, Test and Measurement, Wireless, Medical Products and Software. His experience spans a diverse set of technologies such as Electronics, Optics, Acoustics and Magnetics. He has spent much of his career in Research and Development, but has also worked many years in Manufacturing and Marketing. learn more
While studying physics as an undergraduate in San Diego, I had the great pleasure of working as an intern for 4 years, nearly full time for the Naval Ocean System Center (NOSC, now called SPAWAR: Space and Naval Warfare Systems Command). This was a research lab staffed mainly by civilians, and run by Navy top brass. The projects on which I worked cannot be fully discussed even today. I had a Secret Clearance and worked in one of those vaults like you see in the movies. It was a concrete building with no windows (at least in the lab areas). The only entry was a large bank-like vault door with a grim security guard closely scrutinizing each person as they approached.
I have seen such a situation, when a newly-hired manufacturing expert applied lean principles directly according to the theoretical ideals, to a high-tech, high-mix, low-volume operation. The result was a near shut-down of the manufacturing operation for three months while “save-the-company” modifications to processes and tools were made. Thankfully, when the dust settled we had a balance of lean and other manufacturing philosophies that was more appropriate to the business. The same could happen to a product development processes if care is not taken. These roll-outs need to be done carefully, with skill, respecting the past, the company culture, the needs of the customers, and the market and industry, balancing various philosophies to create the best optimization for your business.
Tenet #10: Institutionalize learning.
My previous blog dealt with the need for rigorous monitoring. This monitoring is of two types:
- Monitoring by the PPM team of the execution of projects, and of the markets they will serve, taking corrective actions in the face of new data to make sure the company’s goals are met.
- Monitoring by the leaders sponsoring the PPM team of the effectiveness of that team and the processes they use, and taking corrective actions to assure team and process effectiveness.
Without careful and rigorous monitoring, and with the ever changing climate of business need, it is quite easy for projects to get off track and for PPM teams to become ineffectual.
Tenet #9: Monitor rigorously.
In my last blog I encouraged you to recognize that the PPM team with the associated processes has in its hands the largest lever to improve product development flow, that of the number and type of projects in the pipeline at any given time. Most firms tend to push the utilization levels up above 100%, believing that this is the best path to superior economic efficiencies. But in reality, our greater understanding of traffic flow and similar phenomenon has shown us that this will cause a system to slow down and eventually come to a complete stand-still. The PPM team must pay careful attention to these utilization levels and reduce them (to around 80%) if maximum flow of new products is expected. Since utilization and queue levels are directly related and since queues are often more easily measured, many firms choose instead to measure queue levels at critical points in the product development, pulling pre-arranged corrective action triggers as queue levels exceed an acceptable level.
In this blog I would like to discuss the need for rigorous monitoring of the PPM process and its results. This admonition has two parts:
- Monitor portfolio progress: The PPM team must be chartered to dig deep into project execution details, to revisit market assumptions regularly and in general never assume that what is started will hum along as expected without occasional nudging. This nudging may include reprioritization of certain projects, or more drastic action.
- Monitor the PPM team and process: The leader or leaders sponsoring the PPM team must regularly evaluate the charter, goals processes, and the performance of the PPM team to assure that the team is effective and accomplishing the current business goals.
Tenet #8: Improve flow.
In my last blog, I spoke of the need create a tiered set of portfolios and associated roadmaps, to pay careful attention to supporting frameworks such as technology, process and competency roadmaps. The PPM team must insist on, and have personal involvement in the creation of these ancillary portfolios and roadmaps. They are feeders into your PPM process, and directly into your project roadmaps.
In this blog I would like to discuss the need to act to continuously improve the flow of projects through the pipeline. The PPM team has the capability through its decisions to improve or completely shut down the flow of projects through the new product development process. At first, many may not see the direct contribution of the PPM process to project flow; however, the PPM team has perhaps the largest lever available to radically change the flow, that of choosing the number and type of projects in the pipeline at any one time. Thus, the balance chosen between “trying doing too much” and “doing too little” is an essential decision-point for the firm.
Tenet #7: Design tiered portfolios
In last week’s blog, I wrote about the value of using visual methods to cut, examine and present the data in many different ways. Visual methods have the advantage that you can quickly see large, complex data sets on a single page and perhaps best of all, can compare projects easily. This is essential as you are striving for a balance portfolio.
But a balanced project portfolio is fed by and in turn feeds other portfolios. While the exact list may vary with industry, included are typically:
- Technology Portfolio – Before you can successfully create that breakthrough non-invasive glucose monitoring unit, you need first to develop the technologies for miniature Raman spectroscopy, low noise signal detection, wireless communication and data management. You need to decide which technologies will be developed and which will simply be bought from others. The best new product development organizations are able to recognize key technologies, especially those that present high risk and pull them off of the critical path of a particular project. Running parallel then to the project roadmaps should be another roadmap for the needed technologies beyond the current product roadmap. This requires vision, insight and highly skilled decision-makers. You need to create a Technology Project Portfolio along with processes to balance, authorize and manage these projects, and then have these technologies intersect your product roadmap.
- Process Portfolio – In order to design and fabricate a new line of high speed semiconductor devices based on 10 nanometer gates, you need processes for ultra-fine line lithography, deposition, etching, and many other processes. Or before you begin that new business in high volume, low mix manufacturing (where all previous products required low volume, high mix) you have much work to do in altering manufacturing processes and/or identifying manufacturing partners. These efforts require projects and roadmaps, and should use portfolio management to balance, authorize and manage the projects.
- Competency Portfolio – Before you are able to enter a new market like RF test equipment or Pulsed Radar equipment, you need to decide which competencies will be core to the business and therefore owned, and which will be needed on a temporary basis and are candidates for open innovation. Developing the competencies for new areas of business require a plan. They require an inventory of current skills, and a roadmap to get where you need to go. They require development of more than just the product development department competencies, but may also require development of the sales force, application engineering, marketing, manufacturing and other functional areas. Your competency portfolio may at any time require minor or very significant work.
Tenet #6: Use visual analysis.
In last week’s blog, I wrote about the crucial need to balance your project portfolio along many dimensions, in careful alignment with top leadership in your firm. While this seems like common sense, many firms do not take the time to explicitly call out specific areas to balance, and gain clear guidance from top management to help in PPM decision-making.
In this blog, I would like to turn our attention to what seems to be a more tactical subject – that of using visual tools to both analyze for decision-making, and for use in communication to others. While this tenet may seem like a tactical detail, I believe it is essential enough to rise to one of my ten tenets of PPM. While I have seen attempts (and failures) at PPM in other ways, I believe strongly that the only practical way to pull out the key information necessary for these tough decisions is through visual analysis using pictures and graphs. From my experience, the primary use of tables of numbers will cause the team stray from the main strategic questions and to degenerate into a group discussing and questioning the specific numbers. Cutting the data in key ways will reveal critical data that speak to the firms most vital issues.
Tenet #5: Balance goals.
In last week’s blog, the essential nature of uncertainty analysis in the PPM process was shown. While few companies are well practiced in uncertainty analysis, the use of uncertainties in PPM discussions can illuminate decision-making and prevent many ills that are often taken as “necessary evils” in product development. In this week’s blog, we will address the need to balance many goals through the PPM process, and speak specifically about some of these goals.
Every firm tries to balance a set of conflicting goals in its efforts to maximize stake-holder value. And each firm will choose a different balance based on many things such as the maturity of the industry, the nature of their customers and of their stake-holders, the general philosophies of the management team, the current economic climate both in and outside the company, the competitive landscape, and so much more. One firm’s risk-averse nature may be very appropriate for the setting where another’s high risk approach may be called for in a different setting.
The PPM process is that place where this balancing act is most active and essential. The PPM process is the bridge between the theoretical strategic discussions and the daily activities that are necessary to execute the plan. In the PPM team, real balancing takes place as the team struggles with such decisions as accepting new projects in the portfolio, cancelling projects that have become either ineffective or no longer support the strategy, and making tactical changes to resources to further the highest priority projects. The PPM process is that place where the conflicting goals of the organization meet the realities of implementation, and a balanced portfolio is the ideal output.
Tenet #4: Apply uncertainty.
In last week’s blog, the critical need to agree on one unit of measure, money, was addressed. Even the toughest qualitative concerns about a project can be reduced to an estimate of the financial impact on that project. And any estimate is better than none, since it will force the discussions the team needs to have. Without this discipline, advocacy for a given project can degenerate into debates where the winners are not necessarily the best projects. Insist on one common unit of measure, and that measure should be money.
In Tenet #2, I admonished you to insist on being presented with alternatives when offered an opportunity. An effective PPM process must have options from which to choose. In some cases, these options may be modifications of the scale of the project being considered. But Tenet #2 should not be confused with this tenet, Tenet #4, “Apply uncertainty”. In this new tenet, we have picked a project baseline from the alternatives presented. We plan an “expected outcome” in all of the project measures. Uncertainty analysis is then applied by looking at each major variable (project scope, project schedule, project cost, market acceptance and market share taken, etc.) in the project and stating a range of probable inputs. In the end, it is possible to show how the primary financial measures (like NPV of cash flows) change over the range from worst case, to expected value to best case. Note that this uncertainty analysis is not just done once during the proposal phase and then forgotten. It must be carried with the project throughout the execution phase, updated as necessary and used at any time to compare to other potential projects.
There are at least 3 reasons to apply uncertainty:
Tenet #3: Create common valuation.
In last week’s blog I discussed the need for alternatives to accompany an opportunity in which to invest. Require choices from your managers, rather than being put in the position to make simple yes/no decisions. In this week’s blog, I will show how money as a common unit is essential for good decision-making in any PPM process.
Through discussions with key thought leaders and from my own experience in high technology industries, I have developed the following Ten Tenets of Project Portfolio Management. These Tenets are the essential elements that I try to keep foremost in my mind when cultivating a new portfolio management process, improving or improving an existing process. These tenets are:
- Align strategy first.
- Demand alternatives.
- Create common valuation.
- Apply uncertainty.
- Balance goals.
- Use visual analysis.
- Design tiered portfolios.
- Improve flow.
- Monitor rigorously.
- Institutionalize learning.