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What product managers need to know about selecting and managing projects

This is the next episode in the series on a product management body of knowledge I’m doing every-other-week. We are exploring the Product Development and Management Association’s (PDMA) guide to the body of knowledge for product managers and innovators. If you are unfamiliar with PDMA, they are the longest running volunteer led professional association for product managers, existing since 1976. We’ve had an introduction to the body of knowledge in episode 307, explored strategy in episode 309, and today we explore portfolio management. 

Our guest, who also authored the portfolio management chapter of the PDMA BoK book, is Steve Atherton. Steve has over twenty years of professional experience in product management and related roles for some of the world’s largest industrial technology companies. He currently serves as the senior product manager for Fujifilm’s inkjet technology integration group, which designs and produces Nano-technology products for industrial applications. 

Summary of some concepts discussed for product managers

[2:23] What is a product portfolio?

A product portfolio is a set of products an organization is investing in that have certain trade-offs. Like an investment portfolio, a product portfolio should be balanced and diversified.

[3:19] What is the purpose of portfolio management?

• Choosing the right group of products to achieve balance.
• Aligning with your business strategy.

[4:51] What’s an example of a portfolio that reflects the strategic objectives?

All the techniques for developing a portfolio involve metrics that reflect the strategy. For example, if you’ve been working on cash cow products, and you want to be more innovative, you need a metric that captures innovation. That could be a simple pass-fail scoring or a more complex system.

[8:21] Who is involved in portfolio management?

Cross-functional involvement in portfolio management is very valuable, in order to…

• Capitalize on the organizational knowledge, allowing business leaders to make decisions by tapping into the knowledge and experience of everyone in the organization.
• Keep everyone informed and motivated, because they can see how their contribution fits into the big picture.

The level of complexity of the portfolio management system needs to line up with the decision-making pace of the organization. In some cases, a simpler system is better than a complex system.

Portfolio management includes choosing projects to put into the portfolio and managing projects while we’re working on them. We might slow down a project and use resources for something more important, or we might even kill a project in order to focus on better projects.

A facilitator is important to remind people of the context of portfolio management and understand that their individual projects fit together to move the organization forward in the direction aligned with the strategy. We can get protective of our work, so the facilitator helps us be objective and make good business decisions.

[16:59] How are portfolios created to reflect the strategy of the organization?

One approach is the three horizons. We might put 70% of our money toward making current products better, 20% to adjacent but new areas, and 10% to work that’s really outside the box.

A top-down method would be deciding that 80% of any new products must be strongly innovative, or 80% of new product development dollars need to go toward innovative projects.

A bottom-up method starts with setting goals. Then your innovation mechanisms come up with ideas, which are reviewed against the goals, and some projects may be cut to align with the goals. If you’re focusing on innovation but have a lot of cash cow projects, you might cut one.

Ideally, have a mix of top-down and bottom-up. Allocate portions of your spending to finding projects and opportunities; then have review on top of that. This starts people off the right way and confirms that what’s produced aligns with strategy. It’s all about prioritizing limited resources and deciding how much you can give to each project.

[20:57] What are some tools for selecting projects for the portfolio?

One of the arts of portfolio management is selecting the right metrics that line up with the goals you’re trying to achieve. There are two broad categories of doing this. To use judgement-based criteria, choose a criteria that aligns with your strategy, and assess projects based on a simple high/medium/low or pass/fail test. If you’re trying to do more innovative projects, judge whether a proposed project stretches you to be more innovative. The other option is more sophisticated metrics like engineering economics, financial metrics, or return on investment. You must pick the right metric that aligns with your strategy and has the appropriate level of complexity for your organization. If you’re starting a portfolio management system from scratch, start with something simple—perhaps just a list of opportunities.

[26:31] What are some tools for resource allocation?

Resource planning is a discipline of its own, and it’s especially difficult when you’re looking at new opportunities because there’s so much uncertainty. One simple technique is for the facilitator of the portfolio management system to communicate closely with the manager of the resources, who already has experience and will likely be happy to help because it will help them with their job. Resource management can also be daunting because it’s multi-dimensional; you have to consider number of resources, time period, skills, scenarios, etc. Understand that estimates don’t have to be perfect; sometimes simple estimates are better than something more sophisticated that will take too much time.

[30:58] What metrics are helpful for managing projects?

You need to use performance metrics to manage your projects. The metrics you used for selecting projects for your portfolio won’t always work for determining how your portfolio is performing.

Action Guide: Put the information Steve shared into action now. Click here to download the Action Guide.

Useful link:

• Connect with Steve on LinkedIn

Innovation Quote

“There are two ways to succeed with new products: There’s doing the right projects, and there’s doing projects right.” – Paul Belliveau

Thanks!

Thank you for being an Everyday Innovator and learning with me from the successes and failures of product innovators, managers, and developers. If you enjoyed the discussion, help out a fellow product manager by sharing it using the social media buttons you see below.