Executive Summary

Competitive global pressures and growing consumer expectations make innovation a requirement for today’s

leading companies to be able to survive and grow. The ability to adapt quickly to changing market conditions and

global opportunities - and repurpose resources adeptly - becomes more challenging every year. Without a

consistent and comprehensive view of the innovation portfolio, and without tools to quickly model new

information, innovators are now at a disadvantage with their competition.

In his highly acclaimed book, Portfolio Management for New Products, Stage-Gate International founder and

industry expert Dr. Robert Cooper outlines the tools, guidelines, and strategies that corporate executives need to

effectively manage product portfolios, optimize R&D investments, and prosper in the competitive environment of

product development. However, to this day, portfolio management often remains a struggle for organizations to

execute in practice.

Planisware offers both the requisite tools to aid innovative organizations in managing their strategy, portfolios,

and projects, as well as practical guidance to help organizations actualize these best practices. With Planisware’s

portfolio management tools and guidance, organizations are able to:

Make fact-based decisions using transparent, knowledge-based data

Show impact of risks on future project and portfolio values

Define the strategic and high value projects

Gather high quality, consistent data across projects

Allocate resources to prioritized projects

Report objectively and consistently across projects

Support the portfolio process with trusted information

Maximize return on investments

This white paper outlines the logical path an organization can take to instantiate and then improve portfolio

management practices utilizing Planisware. This journey relies on practical, adaptable steps where value is added

every step of the way.

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Figure 1: The journey to portfolio planning excellence begins with an

accurate list of portfolio projects and data.

BARRIERS TO SUCCESSFUL PORTFOLIO MANAGEMENT

The race to develop and deliver viable new products is more competitive than ever. For organizations to keep pace and ensure

that only the best mix of projects proceeds along the development chain, they must implement strategies and solutions that

allow them to quickly evaluate all ideas and potential projects.

When consistent data is collected for each project in the portfolio, organizations can build accessible business cases that

provide the backbone for objective portfolio evaluation. Inputs such as project scores, financials resource requirements,

market opportunities and supply chain risks, provide invaluable insight at both the project and the portfolio levels.

However, when such information exists only in silos - as is often the case - portfolio managers are left with an incomplete

picture, often resulting in the sub-optimal allocation of resources. This can mean resources are underutilized or else spread

too thin, which can in turn cause slippage in launch dates and a downturn in the quality of execution for new product

development. Departmental thinking and siloed information can also obscure the vision of strategic versus non-strategic

projects, resulting in poor execution against long-term strategy.

This document outlines a practical path your organization can take to standardize the business case for projects, and build an

effective prioritization and selection process. When supported by effective governance processes, these tools and adoption

path can help organizations excel in portfolio management.

THE PATH TO MATURITY IN PORTFOLIO

MANAGEMENT

The path to fully optimized portfolio management is not an

easy one. The subsequent sections of this white paper

outlines incremental steps an organization can take to

improve their processes, and increase their confidence in

decisions. Each step provides value in and of itself and

serves as a building block to enable the next step.

Step 1: Obtain an accurate view of new product

development projects

The objective of this step is to be able to gather all

existing projects and new potential opportunities in a

single system. In order to provide any value, however,

organizations must first define and communicate

guidelines necessary for thoughtful evaluation.

Step 2: Gain an accurate view of the current portfolio

Once all projects and potential projects are gathered in a single system, the next step is to view the information in its

entirety to understand what the organization is working on, and how the organization is currently doing. The value

gained in this step is a comprehensive and objective view of the entire portfolio, and an understanding of portfolio health

and progress.

Step 3: Maximize portfolio value

When an organization has achieved an accurate depiction of their current portfolio and a clear view of potential new

projects, the next step is to assess how the value of the portfolio can be maximized. At this point, projects can be

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compared against each other according to the criteria and metrics at hand. This section will describe tools that can use

this intelligence to aid in the evaluation of potential investment scenarios to maximize portfolio value.

Step 4: Balance the portfolio

In addition to maximizing portfolio value, it is important to take a step back and inspect the balance of the portfolio.

Planisware provides diagrams and assessment reports that enable organizations to understand how the portfolio is or is

not balanced, and shed light on how the portfolio makeup might be re-arranged to target long term success.

Step 5: Account for corporate strategy

Key to organizational success is the inspection of portfolio make-up with respect to the dictates of corporate strategy.

Planisware enables organizations to define and communicate strategy in no uncertain terms, and then empowers

organizations to analyze how the existing portfolio, as well as potential investment scenarios, would stack up against the

organization’s goals and targets.

Step 6: Analyze the Book of Business

In this final step, organizations are recommended to regularly review the book of business as a whole. Planisware

includes the right toolset to provide additional insights into strategies for optimizing the portfolio.

The result is an organization well-equipped to select the optimal mix of projects to feed the project pipeline.

STEP 1: CONSISTENT EVALUATION OF PROJECTS

Building a Business Case

Many organizations struggle to standardize business case development; financial models can be tweaked to better fit a

business case, and scoring and ranking criteria are not uniform across the entire portfolio. As a result of subjective and non-

standard variances among projects and opportunities, portfolio managers struggle to choose the right ones to prioritize.

Projects must be properly evaluated on an even plane so that organizations can choose the right projects to best fit corporate

strategy, and to justify continuation of projects within the development pipeline.

Planisware enables organizations to gather the same information about each project and each potential project in a single

system, so that they can be evaluated consistently. The first step is to establish standard portfolio definitions and project

evaluation criteria – both within the system, and throughout the organization. The system can then be utilized to help users

build and assess the business case for each project in qualitative and quantitative terms.

Defining Portfolios

Portfolios can be defined in a variety of manners. Diverse ways to define portfolios include considering product line,

business unit, division, project type, market segment, and region in any combination. Because portfolio definitions change

quickly in today’s fast paced environment, Planisware enables the ability to define your portfolios, and then refine these

definitions over time so that organizations can adapt in real-time to market events and opportunities, and communicate the

results automatically in a transparent environment.

The next step is to define and communicate the qualitative and financial criteria for evaluation.

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Figure 3: Financial factors provide key quantitative KPI used for cross

project evaluation. Here, revenue and investments have been entered.

Financial modeling equations in Planisware compute the company P&L.

Figure 2: Scorers enter values for projects according to pre-defined

criteria. In a multi-scorer environment, values are averaged, and

may be corrected to produce a final score. Clearly defined scoring

criteria are used across the board to determine the qualitative KPIs.

The scores for a particular opportunity or project can be viewed

against the portfolio average as a point of reference.

Qualitative Scorecard Evaluation

Planisware allows individuals, groups, and committees to score new ideas and projects based on pre-defined qualifiers. This

ensures that all options are scrutinized and evaluated according to the same standards before any development costs are

incurred. Each score card is comprised of customer-defined key criteria that can be adjusted for each organization.

Criteria include factors to determine the business strategic fit, probability of commercial and technical success (PCS, PTS),

reward, and leverage. These scores can be compared both intra-opportunity (how did a subject matter expert score this

opportunity compared to my score?) and inter-opportunity (how did a project rank against all the others?) to help achieve a

uniform scoring approach and provide transparency through an organized ranking system.

While departments often require one-off specific criteria, a standard set of cross-organizational criteria can often be

determined. Such criteria must be clearly defined and clearly communicated with context across the organization, for

successful scoring to occur.

Quantitative Valuation

Using Planisware, organizations can define and track key factors determining project valuation. For instance, factors like

sales and revenue (market size and share, unit price, cannibalization, and patent expiry), development costs (schedule,

resource, and cost), and recurring costs (cost of goods sold (COGS) and advertising) are often considered in the valuation

process.

Once the proper data is entered in the system for a given

project, a set of key performance indicators (KPIs), such as

net present value (NPV), expected NPV (eNPV), internal

rate of return (IRR), return on investment (ROI), and

profitability index (PI) are automatically computed by the

solution based on the company's desired financial models.

Organizations may also choose to risk-adjust each

development phase based on the estimated probability of

technical success (PTS), perform a sensitivity analysis, or

use techniques such as the productivity index or options

pricing theory to further refine valuations. Note that after a

project has been started, sunk costs can be removed from

project valuation reports.

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Figure 5: Dashboard views are valuable tools in assessing

portfolio health and tracking progress of projects.

Creating Scenarios and Managing Risk & Uncertainty

Before defining the final business case to publish for review,

users may first choose to test various scenarios for different

outcomes, to exercise prudence in building the best business

case for a particular opportunity. Through Planisware’s what-if

capabilities, users can create multiple versions of an

opportunity with which to apply various assumptions.

For example, organizations may find it useful to test the effect

of a variety of revenue distributions or risk profiles on the

eNPV. The review of the different scenarios can be used to

support decision-making and provide insight as to the key

success factors.

Organizations with well-defined risk profile definitions can also take advantage of Planisware’s Monte Carlo Simulation

capabilities, entering risk profiles and running simulations to generate confidence intervals on selected KPI, like eNPV. Such

investigation at the project level helps organizations define strategy on a project by project basis at the operational level, but

also enlightens portfolio managers at the portfolio level, to understand the risks inherent in the makeup of the portfolio.

STEP 2: GAINING AN ACCURATE VIEW OF THE PORTFOLIO

Insight from a Comprehensive View – What are we doing? And how are we doing?

Gathering key intelligence on each project in the organization’s portfolio of work can be a daunting notion and a time-

consuming endeavor – but one worth the effort. The standardization of the business case definition process, financial model

and scoring criteria within Planisware brings all defined opportunities and projects to a unified framework. The ability to

view the entire portfolio of projects in real-time, within a single system, provides the foundation for effective portfolio

management, and for some firms, provides a major step forward.

To answer the second question, “How are we doing?” Planisware provides dashboards and reports that offer a

comprehensive, global view. Dashboards that monitor the portfolio help organizations to understand the full body of the

organization’s work, and assist them to understand both the health and the progress of the current portfolio.

Monitoring Portfolio Activity

Planisware offers basic monitoring dashboards to help organizations

follow the progress of portfolio activities. They give a general

overview of the progress of the active portfolio, and provide insight

into potential trouble areas, buying managers more time to pursue a

proactive course of action before risks become issues.

Such dashboards allow managers to manage by exception, focusing

immediately on areas that need attention. Once a view of what

projects are in the pipeline has been achieved, the next logical step is

to ask, what projects should be in the pipeline.

Figure 4: Different scenarios can be tested within the system. To the

right, several scenarios testing different project assumptions are

considered and then created as versions in Planisware. Below, the

resultant cash flow of a selected version is compared with that of the

base case.

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Figure 6: Planisware provides evaluation reports to illustrate the

economic potential of portfolios and portfolio scenarios. For

example:

An area chart can provide information on the value of the current

portfolio over time. This is commonly viewed in a variety of

dimensions, such as: project type, market, business unit, division,

product line, etc.

A pipeline funnel shows the value of the NPD portfolio by project

stage in order to assist in identifying gaps in the NPD funnel.

Profits and growth are compared to target revenues for short and

long term targets. Launched projects are green, current-blue,

opportunities-orange, while the target is a blue line. By changing

the selection of opportunities to include, users visualize the

outcome of different investment scenarios.

STEP 3: MAXIMIZING PORTFOLIO VALUE

Insight from a Comprehensive View – What are we doing? Versus what should we be doing?

A comprehensive view of the portfolio also affords organizations the ability to make more effective project selection and go-

no-go decisions. Once data has been entered for active projects and project proposals, an organization is armed with the

proper information for objective portfolio evaluation. A single source of truth allows managers to understand the full demand

on resources, and how resources are really being utilized. For some companies, again, to simply understand all of the work

that is currently being done within the organization can be highly enlightening and lead to important questions. Where did all

these pet projects come from? How did this potentially economically rewarding project get killed? The next step is to assess

which pieces of work are most worthy of investment.

During the project selection process, organizations can compare and contrast alternative investment scenarios within

Planisware and weigh the outcomes to help with portfolio decisions. Investment scenarios are easily created in Planisware by

selecting the mix of projects and proposed projects to inspect as a potential portfolio. The potential investment portfolios can

then be viewed and assessed in a series of dashboard reports and diagrams. Example reports will be described in the

subsequent sections of this document.

Measuring the Portfolio’s Economic Value

For most organizations, the first goal of portfolio management is to maximize the value of the portfolio of new product

development projects. However, value can be considered against multiple business objectives. How should the value of a

portfolio be measured?

Organizations often place high value on key financial measures with the main objective of building an economically

attractive portfolio. Common methods for identifying financial portfolio value are accomplished by inspecting KPI such as

NPV, ECV and PI. Planisware provides dashboards and reports that illuminate the economic return of your current portfolio

of projects, and enable you to envision the returns of alternative investment portfolios, with a view over time.

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Figure 8: The demand of an investment scenario on resources is

considered during project selection. Bottleneck analysis identifies

areas where resources would be understaffed or poorly utilized.

Figure 7: Opportunities and projects are compared visually against each

other by qualitative (Total score, via PTS, PCS, Reward) and

quantitative (NPV, IRR, ROI) KPIs.

Prioritization and Ranking by Multiple Objectives

However, the value of a portfolio can be measured along any number of other relevant business objectives. For example,

qualitative considerations provided by scorecard criteria measure other key aspects such as strategic importance, ease and

speed, probability of technical success and other desirable

project characteristics.

At this point of the journey, quantitative and qualitative

measures have been defined and qualified for each project,

so the evaluation process can be relatively straight-forward.

Providing a variety of portfolio assessment reports,

Planisware enables decision makers and managers to

compare projects along consistent data points and valuation

measures gathered through the business case building

process.

Planisware supplements portfolio assessment reports with

a number of techniques that facilitate the ranking process,

including forced rankings, cross-functional scoring, and

the ability to relate different portfolios (corporate vs.

business unit or division) with particular ranking and

weighted scoring models.

Such tools enable multi-dimensional views of the portfolio, and empower organizations to focus on multiple business

objectives (profitability, acceptable risk, attractive market, etc) concurrently. Due to the configurability of the tool, the set of

client-defined metrics for project selection can be incorporated into customer-defined views to ensure that the ranking and

selection process is both seamless and effective for the organization.

By properly prioritizing and communicating project priorities – whether absolute, or by tier – leaders know where to invest

their resources and when, and teams know they are working on the right things.

Considering Portfolio Limitations

Without the complete picture, organizations are prone to

engage in too many projects, overburdening their resources,

and producing poor results. All too often, lack of tough Go-

No/Go decisions results in too many projects in the pipeline,

with valuable projects poorly staffed.

It is important to take a hard look at organizational limits to

determine how many, and which mix of projects can

reasonably execute successfully. Once a list of high value

projects have been ranked and prioritized, the viability of the

portfolio should be inspected by considering one of your

organization’s key delimiting factors - resources.

Efficient frontier views inform which projects may not make the cut when targeting particular objectives in the ranking

process, while resource bottleneck reports with drill-down capabilities illuminate when resourcing issues will occur.

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Figure 9: Diagrams are used to

illustrate portfolio balance along

different dimensions.

STEP 4: BALANCING THE PORTFOLIO

During the portfolio evaluation and review process, a first cut at project selection that focuses on maximizing value can be

enhanced by a second round that inspects balance in the portfolio.

Organizations often fall prey to tendencies that lead to imbalances in the portfolio – for example, accumulating portfolios

skewed toward short term achievements, or inadvertently favoring particular business areas over others. A balanced portfolio

includes projects that can sustain the long term growth of the company, and serves to manage risk by diversification.

While the means and goals of achieving balance vary from company to company, Planisware provides diagrams that can alert

organizations to imbalances within the portfolio.

STEP 5: ALIGNING THE PORTFOLIO WITH STRATEGY

Communicating Strategy and Tracking Alignment

The alignment between corporate objectives and portfolio execution is a challenge many organizations face. In previous

sections of this whitepaper, you have seen how organizations are able to qualify proposed projects against corporate strategy

through scorecards and test balance in accordance with general company objectives by analyzing portfolio balance reports.

However, without a means to clearly define strategic objectives in terms of time and investment objectives, portfolio

management organizations are at a loss for measuring strategic compliance. Further, without the ability to communicate

product strategies, organizations are not able to make real comparisons between strategy and execution, which makes it

difficult to identify the source of the gaps. Planisware can help organizations address these challenges through roadmapping

and strategic bucket functionalities.

Roadmaps

Planisware’s roadmapping feature helps organizations clearly articulate strategic intent within the context of time. An

important step toward achieving a well-balanced, healthy pipeline is to define and communicate the Strategic Roadmap for

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the organization. Which kind of acquisitions should be made? What markets should we target and when? What countries

should we expand to? What is our recruiting plan? It is important for an organization to answer to these types of questions to

provide direction and influence portfolio evaluations. Planisware’s quick-to-build roadmapping user interface, featuring drag

and drop functionality, enables upper level management to create strategic roadmaps directly in the system, and then share

them with portfolio management, marketing and product leads, in real time.

Once a Strategic Roadmap has been defined and communicated,

portfolio management, marketing, and R&D leads can use these

targets to inform project and portfolio decisions, structure

optimal product roadmaps and eventually use these to measure

development performance.

Defining visually clear, concise product roadmaps in the system

enables management to both report “up” to executives, as well

as articulate timeline objectives for R&D teams. When a project

is in development phase, synchronization and tracking features

close the loop by offering transparency between original

objectives and progress of execution.

Strategic Buckets

Management can define clear budgetary objectives by defining strategic buckets, or budget envelopes, across dimensions

such as project type, business unit, or therapeutic area. The definition of clear budgets within the system provides portfolio

management clear guidance to consider in the portfolio selection and optimization cycle.

The utility of top-down strategic buckets becomes apparent when viewed in comparison against the aggregation of the cost

estimates of a selected portfolio of projects. First, the multi-dimensional resource and budget constraints should serve to

guide the project selection process. Then, the comparison of resultant portfolio estimations against objectives provides a

measure of adherence and alignment with corporate goals as projects progress. Views comparing objectives vs. active

portfolio values available within Planisware alert portfolio managers to potential problems, and can indicate the necessity of

the re-evaluation of a project, or portfolio of projects. See Figure 11 in Project Selection and Ranking for a visual

representation of top-down, bottom-up strategic buckets.

A successful portfolio must align with the high-level strategic

objectives of an organization. While senior-level managers may have

insight to the strategic vision for their organization, portfolio

managers may not know how their opportunities fit within corporate

business initiatives.

Roadmaps and Strategic Bucket functionality within Planisware

enable upper management to clearly define corporate strategy to

portfolio managers, facilitate further communication both top-down

and bottom-up, and measure, anticipate and understand discrepancies

between strategic vision and project execution.

Figure 10: Roadmaps provide a visual means to quickly convey

scheduling information. In this product roadmap, key milestones across

R&D, Regulatory, Marketing and Manufacturing, including product

launches and patent expiries can all be seen at a glance.

Figure 11: Pie charts comparing the allocation of currently

selected projects (bottom) with the strategic vision (top) for

three different dimensions. The comparison of portfolio

estimated costs versus budgeted costs against the various

buckets identify strategic alignment compliance or

discrepancies.

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STEP 6: ANALYZING THE BOOK OF BUSINESS

Maintaining a Healthy Portfolio

These days, Go-No/Go reviews of live projects in the course of development are standard practice, and it is becoming

increasingly apparent that continual reviews of the portfolio as a whole contribute greatly in nurturing a healthy portfolio.

Rather than aggregate data and evaluate the portfolio as a part of a time-consuming yearly or quarterly event, organizations

that upkeep project data in Planisware are able to rely on the real-time availability of transparent data in order to facilitate the

re-evaluation process on a regular basis.

An analysis of the book of business as a whole lets portfolio managers understand progress toward strategic goals, and

enables them to continually improve portfolio management processes. Through book of business analysis, managers can

inspect alignment between portfolio progress and business objectives, and check that projected spending, work, and activities

are line as well. As new facts emerge from the marketplace, and as underlying data and assumptions are fine-tuned for

maturing projects, portfolio reassessments highlight emerging issues and identify room for improvements.

Testing Investment Scenarios

The portfolio evaluation and re-evaluation processes are made possible through a variety of portfolio assessment reports that

visually compare projects and opportunities against one another, and also compare the results of potential investment

scenarios as a whole, against each other.

These reports, as described in steps 3-5 aid in the

assessment of portfolio value maximization, portfolio

balance, and strategic alignment.

However, during evaluation, questions may emerge that

can be difficult to answer without understanding the

operational impact of decisions.

Planisware provides portfolio simulation capabilities that

enable portfolio managers to test different assumptions and

envision the impacts in a sandbox environment, before

committing to a direction.

Through use of portfolio simulation tools, portfolio

managers can manually play with different mixes of

projects, different timings, and set different financial

assumptions to discover how resource levels, strategic

alignment, and investment returns will be impacted.

Figure 12: Planisware’s capability to perform multi-level analysis across

multiple dimensions, while factoring constraints such as resources and risks,

provide for valuable analysis all from a single tool

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Figure 13: The Efficient Frontier engine plots out step percentage

changes and displays the projects that produce the maximum NPV

with each incremental budget allowance.

Utilizing Optimization Tools

Stakeholders are often tasked with considering alternative

strategies to potentially improve the book of business. This

evaluation can be difficult without the proper tools in place to

effectively examine all possibilities. Traditionally, inspection can

be achieved through a variety of methods such as chart plotting,

performing sensitivity analyses, and running maximization

Solver functionality in standalone tools, like Microsoft Excel.

Assessment by these methods can be time-consuming: difficult to

set up and tedious to transfer the data. Planisware provides

preconfigured screens and capabilities to address these various

needs - within a single tool.

Sensitivity Analysis functionality offered in Planisware, such

as the Efficient Frontier and the Tornado Chart, are designed

to facilitate portfolio optimization.

Efficient Frontier functionality can be used to compute a list of

projects that maximizes a specific factor, given a specific

constraint. For example, a user may ask the system to compute

the list of projects to maximize the NPV, taking into account a

specified budget or the current organizational staffing limitations.

For each additional increment of the constraint, or budget, the

system computes the list of projects that will add the most value.

The Tornado Chart computes the optimized list of projects under

multiple constraints. In addition to an optimal project list, the

Tornado Chart highlights the most important, or sensitive,

constraints on the portfolio and illustrates how an incremental

change on each constraint can affect the portfolio value.

In the end, Planisware’s sensitivity analysis tools help stakeholders gain confidence that the selected set of projects will

achieve the best portfolio value given organizational limitations. These tools provide insight as to the best strategy for

adjusting variables to get the most bang for the buck, further maximizing portfolio value.

Figure 14: The Tornado Chart takes into account constraints

whilst calculating an optimized portfolio set. Here, bolstering

Manufacturing resources will pay off by improving the Total Score

of the portfolio; supplying too few resources for Support will

quickly become detrimental.

Planisware is the leading global provider of world-class product and

project portfolio management solutions. Planisware’s acclaimed

configurability accommodates the company’s global customers across a

variety of industries and empowers users to align the solution with key

business programs and portfolio management processes.

With more than 250 customers worldwide and a 99% customer retention

rate, Planisware has been recognized as an industry leader by several esteemed analysts and has achieved Stage-Gate Ready© and SAP®

integration certifications.

CONCLUSION

No matter where your organization is along the portfolio management maturity curve, Planisware can support your portfolio

management needs as they evolve. For organizations that are just beginning to put processes in place, Planisware’s portfolio

management tools enable you to establish basic portfolio definitions and create common business case criteria.

As ideas and projects are compiled in the system, the benefits of a global, transparent view become instantly apparent. By the

end of the first step, organizations have gained an improved understanding of what is really being done within the

organization and which resources are doing what. When data is consistently updated, the organization can continue to track

progress and understand portfolio health.

Organizations whose portfolio processes are evolving toward standardized, structured project prioritization can leverage

Planisware to support scoring and ranking exercises. The tool also offers dashboards and simulation capabilities to aid

organizations in weighing the value, balance, and strategic alignment provided by different investment scenarios. Finally,

advanced simulation and risk assessment capabilities offer value to organizations that require additional portfolio

optimization techniques.

Regardless of where an organization starts, Planisware provides the framework and functionality to help improve portfolio

management processes.