1. 4 May 2011
Beyond Projects: Creating
A Winning Product
Portfolio
PREPARED FOR SVPMA
Management
Consultants
Where Innovation Operates

2. Agenda
Introductions
Portfolio Management Overview
Key Elements of Effective Portfolio Management
Common Implementation Challenges
Benefits of Portfolio Management
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 2

3. PRTM Overview
Product Innovation Thought
 Over 35 years of operational strategy
Leadership
and innovation
 600+ consultants worldwide
 19 offices worldwide
 Major commercial and government
sectors:
Aerospace and Defense, Automotive
Chemicals and Process Industries
Consumer Goods
Financial Services
Government
Life Sciences and Healthcare 1,400
1,200
1,250 innovation
Private Equity
transformations worldwide
Cumulative
Experience
1,000
Energy 800
Electronics, Computing, and Software 600
400
Communications and Media 200
0
'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 3

4. Portfolio Management – A Process For Prioritizing
Across Broad Range Of Competing Opportunities
Maximize long-term portfolio value—deliver near-term commitments
Align to strategic vision
Product strategy
Characterize markets
Maximize value
Portfolio Achieve balance
management Maintain strategic fit
Assign resources
Pipeline management
Manage bottlenecks
Product development Drive from concept to market
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 4

5. Poor Portfolio Management Can Lead To Chronic
Problems In Product Development
Are your projects Do weak projects persist in
predominantly short-term & your portfolio; are there few
reactive? project cancellations?
Do you have resource
Do you have gaps relative to overload and skill set
strategic priorities; unmet shortages?
revenue plans?
Are there project slippages
and delayed product
launches?
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 5

6. What Does Portfolio Management Accomplish?
Identifying high-priority product development opportunities
Aligning product pipeline with business strategy
Assessing the impact of product launches on revenue and profits
Managing the R&D investment mix
Assessing the revenue impacts of changing the R&D investment mix
Making shifts in strategic allocations of funding across markets and/or
businesses
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 6

7. Six Key Elements of Effective Portfolio Management
Each element must be carefully considered and implemented
1. Governance 2. Portfolio 3. Decision-Making
Architecture Framework
4. Process and 5. Resource Balancing 6. Decision Data
Linkages and Pipeline Loading and Systems
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 7

8. 1. Governance
What is Portfolio Governance?
 Agreement on the roles and responsibilities of various participants in the portfolio
management process to execute objectives and optimize outcomes
Effective Portfolio Governance is characterized by the following attributes:
 Multi-level cascading decision-making
Example:
 Organizationally aligned with P&L
accountability and/or decision authorities Enterprise
 Clearly defined decision points
portfolio performance
Portfolio investment
Accountability for
Business Business Business
 Tops-down portfolio investment decisions Group Group Group
decisions
 Bottoms-up management of portfolio
performance BU BU BU
 Bi-directional interactions to inform decisions
Investment Investment Investment
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 8

9. 2. Portfolio Architecture
Different portfolio segments are generally driven by different priorities;
therefore, a structure of sub-portfolios is used to allocate investments
Example:
Portfolio
Sub-Portfolio 1 Sub-Portfolio 2 Sub-Portfolio 3
New products Enhancements Maintenance
Prioritization based on the overall strategy,
and expressed in relative investment levels across sub-portfolios
Criteria Criteria Criteria
 ROI/NPV/expected share  Revenue/market share  Key customer satisfaction
 Initial investment opportunity  Open defects by level
 Technology readiness  Competitive position  Compliance/regulatory risk
 Execution risk  Opportunity cost and exposure
Individual Programs Individual Programs Individual Programs
Criteria-driven Criteria-driven Criteria-driven
prioritization prioritization prioritization
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 9

10. 3. Decision Making Framework
Effective portfolio analysis relies on three complimentary techniques
PURPOSE EXAMPLES
Strategy Strategy
Ensures Total R&D Investment Total R&D Investment
Strategic Buckets strategic
alignment
Break-
Market
Market Incre- Through
B Market New Radical
A C Markets mental
Risk-Adjusted NPV
Net Revenue
Launch
Ensures
Portfolio Views investment
balance High Low
30 27 24 21 18 15 12 9 6 3 0
Composite Risk Remaining TTM—Months
Weights Category Criteria
Market Segment Size
Market Segment Growth
Attractiveness/Fit
2x Opportunity Revenue Impact or Cost Reduction
Attractiveness Potential Gross Margins
Maximizes value
Development Cost
Alignment with Strategic Initiative and Priorities
Market Impact
1.5x
Scoring Models through
Strategic Fit Capability Leverage
Competitive Advantage
Proprietary Position
prioritization
Technical Change
Composite Risk Probability of
1x Technical
Program Complexity
Availability of Skills/Resources
Success
Platform/Product Leverage
Business Model Change
1x Probability of Market Maturity
Commercial
Competitive Intensity
Success
Commercial Assumptions
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 10

11. 4. Process and Linkages
Integrate the portfolio management process with other key business
processes and establish a regular cadence of portfolio reviews
 Strategic priorities  Project priorities, selection,
 Product/technology and staging
roadmaps  Project scope and charters
 Value drivers  Plan change requests
Strategy Portfolio Pipeline/Project
Development Management Execution
 Need for change in
plans/roadmaps  Release roadmaps
 Master project list  Project attractiveness
 Performance to target  Resource needs
 Strategic  Current
 Project timing and
priorities operating  Resource
progress needs
plan  Resource
assignments
 Performance to target  Project
 Master project list priorities Functional
Revenue Planning
Resource
and Budgeting
Management
 Investment targets by  Headcount needs
strategic bucket  Resource supply
 Return targets
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 11

12. 5. Resource Balancing and Pipeline Loading
Resource balancing and pipeline management picks up where portfolio
prioritization leaves off
Strategic Priorities Resource Supply/Demand Throughput
Align programs Manage overall resource Manage critical
in the portfolio needs versus availability bottlenecks to optimize
with strategic priorities flow of programs
Strategic Resource
Portfolio Management Tactical Resource
Pipeline
Management Supply-Demand Balancing Management
1 2 3 4
Know your Know what Know what Identify, assign,
program priorities resources you resources you monitor, and adjust
and investment need to do have available to program resources
allocation the programs do the programs effectively
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 12

13. 6. Decision Data and Systems
Project and Portfolio Management (PPM) systems—key elements
Real-time support for
phase review decisions
Decision Teams
New Product Revenue
$40,000
Commitments Pipeline Stakeholders from
based on actual management
Portfolio mix and Other Functions
Revenue (000s)
$30,000
Executives Original
resource
what-if analysis $20,000
$10,000 Revised availability,
Product
Product
Support
5%
$0 project, and
Improvement
5%
Strategic +1 +3 +5
Year
+7 +9
pipeline status Greater visibility
Major
Products
investment of for
15%
resources, downstream
visibility to the functions
New
Platforms
75%
entire pipeline
Portfolio +
Financials Project
Resource planning, Teams
allocation, and Resource
assignment tracking Managers Integrated
Simplified
Data
Regressi
Results
Testing
HTML
Status
tracking of
XML
Test
on
Resource Profile
progress and Less time spent
1400
1200 Resource Projects issues tracking
Better use of
Resource Level
1000 and
800 resource pool, Templates for communicating
vii. Training Requirements
vi. Product Configuration
v. Technical Documentation
iv. Voice of Customer Analysis
iii. Product Requirements
ii. Product Overview
i. Introduction
Product Specification
600
400
bottleneck project plans progress
200 management and
0
1 2 3 4 5 6 7 8 9 10 11 12
deliverables
Period Process management
ensures alignment between
systems and process
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 13

14. Common Implementation Challenges
Organizations don’t agree or follow through on
Discipline
tough portfolio decisions
More behavioral
Portfolio decisions cut across managerial
Politics
responsibilities, threatening power and control
A lack of ownership of process at required levels of
Ownership
organization impedes resolution of portfolio gaps
No one agrees on how to estimate the value of
Point-of-view
projects
More technical
Inconsistent views on platform, product, program,
Data
project terminology to structure the portfolio
Product and roadmap interdependencies render
Complexity
simple risk-reward analyses inadequate
Without a good tool, bringing the data and analysis
Bandwidth
together takes too much time and effort
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 14

15. Benefits of Portfolio Management
PRTM’s benchmarking show that improvements in product development
practices drive top- and bottom-line growth
Stage 4
PRTM Product Development Maturity Model Stage 3 Extended
and Benchmarking Enterprise
Portfolio Excellence
Stage 2 Excellence
Core processes
Project and Processes aligned linked across
to achieve platform internal and
Stage 1 Product
leverage, portfolio external business
Excellence balance, and partners for
Functional
Stage 0 Functions aligned excellence in maximum leverage
Excellence project selection
for effective
Informal Excellence within execution from and execution
Management functions, but not concept to market
Informal practices across functions
based on individual Managing Across
experience Managing Managing
Portfolios and
Across Functions Across Projects
Partners
* Data for companies Revenue Growth*
representing the top 20% of
19% 19% 32%
development practices
scores
EBIT Growth* 8% 23% 54%
Source: PRTM’s Global Product Innovation Benchmark
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 15

16. PRTM Contacts
Walter Sun
Principal
T +1 650.864.3545 444 Castro Street
F +1 650.967.6367 Suite 400
M +1 510.366.1151 Mountain View, CA 94041
USA
wsun@prtm.com www.prtm.com
Beyond Projects: Creating A Winning Product Portfolio —4 May 2011 | © 2011 PRTM Proprietary CONFIDENTIAL | 16