Portfolio Management for New Products
Encyclopedia
Portfolio management for new products is used to select a portfolio of new product
development projects to achieve the following goals: Maximize the profitability
or value of the portfolio, provide balance and support the strategy of the enterprise
.
development methods. Product software is defined as software with accompanying materials which is sold in a particular market
. Examples of product software are ERP
software, office software and software development
tools. This article is about portfolio management for new software products.
effectively? And how should it prioritize its development projects and allocate resources among them?
These are crucial issues in new product portfolio management. A company who is able to optimize its R&D investments will have success in the future.
Portfolio management is a critical management challenge for three reasons:
Firstly, a successful new product effort is fundamental to business success. This translates into portfolio management: the ability to select projects today that will become new product winners tomorrow.
Secondly, new product development is the manifestation of the strategy of the enterprise.
One of the most important ways for a company to operationalize its strategy is through the new products it develops. If new product initiatives are wrong, either the
wrong projects or the wrong balance between projects, the company fails at implementing its strategy.
Thirdly, portfolio management is about allocation of the company’s resources. The goal of a company should be to create value for the shareholders. Technology
and marketing
resources simply are too limited to waste on the wrong projects. The consequences of poor portfolio management are clear: A company spills the limited resources and as a result does not give deserving projects a chance.
Much research has been done to discover the reason of new product success: Research (Cooper et al., 2000) has led to many reasons. Studies on why new products succeed show that there are ten critical success factors
:
. Product lining is the marketing strategy of offering several related products individually (Ardis, M., Daley, N., Hoffman, D.M., Siy, H. and Weiss, D., 2000). A line can comprise related (software) products of various functionalities, qualities or prices (Brownsword, L. and Clements, P., 1996). Line depth refers to the number of product variants in a line. Line consistency refers to how closely related the products that make up the line are.
. A complementary activity, application engineering, then takes place to produce the requirements document, design, and software components for a specific member of the family. Application engineering can be linked to product lining, when various similar software products are created from domain-applicable software components.
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
development projects to achieve the following goals: Maximize the profitability
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
or value of the portfolio, provide balance and support the strategy of the enterprise
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
.
Product software development
Method engineering focuses on product software and information systemsInformation systems
Information Systems is an academic/professional discipline bridging the business field and the well-defined computer science field that is evolving toward a new scientific area of study...
development methods. Product software is defined as software with accompanying materials which is sold in a particular market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
. Examples of product software are ERP
Enterprise resource planning
Enterprise resource planning systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application...
software, office software and software development
Software development
Software development is the development of a software product...
tools. This article is about portfolio management for new software products.
Portfolio management
How should a company invest its product development resourcesFactors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
effectively? And how should it prioritize its development projects and allocate resources among them?
These are crucial issues in new product portfolio management. A company who is able to optimize its R&D investments will have success in the future.
Portfolio management is a critical management challenge for three reasons:
Firstly, a successful new product effort is fundamental to business success. This translates into portfolio management: the ability to select projects today that will become new product winners tomorrow.
Secondly, new product development is the manifestation of the strategy of the enterprise.
One of the most important ways for a company to operationalize its strategy is through the new products it develops. If new product initiatives are wrong, either the
wrong projects or the wrong balance between projects, the company fails at implementing its strategy.
Thirdly, portfolio management is about allocation of the company’s resources. The goal of a company should be to create value for the shareholders. Technology
Technology
Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The word technology comes ;...
and marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
resources simply are too limited to waste on the wrong projects. The consequences of poor portfolio management are clear: A company spills the limited resources and as a result does not give deserving projects a chance.
Much research has been done to discover the reason of new product success: Research (Cooper et al., 2000) has led to many reasons. Studies on why new products succeed show that there are ten critical success factors
Critical success factor
Critical success factor is the term for an element that is necessary for an organization or project to achieve its mission. It is a critical factor or activity required for ensuring the success of a company or an organization. The term was initially used in the world of data analysis, and business...
:
| Nr | Description |
| 1. | Seek differentiated, superior products. |
| 2. | Do your up-front homework. |
| 3. | Take the voice of the customer into account. |
| 4. | Demand a clear and early product definition. |
| 5. | Plan and resource the market launch early. |
| 6. | Build strict go/kill decision points into your process. |
| 7. | Organize around cross-functional project teams. |
| 8. | Attack from a position of strength. |
| 9. | Build an international orientation into your new product process. |
| 10. | The role and support of top management is central to success. |
Product lining
Portfolio management is linked with product liningProduct lining
Product lining is the marketing strategy of offering for sale several related products. Unlike product bundling, where several products are combined into one, lining involves offering several related products individually. A line can comprise related products of various sizes, types, colors,...
. Product lining is the marketing strategy of offering several related products individually (Ardis, M., Daley, N., Hoffman, D.M., Siy, H. and Weiss, D., 2000). A line can comprise related (software) products of various functionalities, qualities or prices (Brownsword, L. and Clements, P., 1996). Line depth refers to the number of product variants in a line. Line consistency refers to how closely related the products that make up the line are.
Domain and application engineering
Recently several organizations have promoted the idea that systems should be developed using domain analysis to generate a domain-wide model of requirements, followed by a domain-wide architecture, followed by domain-applicable software components. This activity is called domain engineeringDomain engineering
Domain engineering, also called product line engineering, is the entire process of reusing domain knowledge in the production of new software systems. It is a key concept in systematic software reuse. A key idea in systematic software reuse is the application domain, a software area that contains...
. A complementary activity, application engineering, then takes place to produce the requirements document, design, and software components for a specific member of the family. Application engineering can be linked to product lining, when various similar software products are created from domain-applicable software components.