Product Portfolio Planning
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1. DON'T DILUTE RESOURCES

Don’t bite off more than Engineering can chew when developing products, which drastically decreases the success rate of all products.

The best Product Portfolio Planning case study shows:

The book, Fast Innovation, (by Michael L. George, et al., 2005, McGraw-Hill; p. 167) presents a case study at Motorola Computer Group which clearly shows how too many projects diminish the chances of product development success.

Effect of Engineering workload on product development success:

  • In 2002, Motorola’s Computer Group tried to develop 120 products, but resources were spread so thin that no products were introduced at all!    
     
  • The next year they cut the workload was reduced to 22 projects and they were able to introduce eight products in 24 to 28 months
     
  • In 2004, as they got more focused on only 20 projects, they were able to launch 14 products in 12 months.

Thus they were able to successfully launch almost twice as many products in half the time!

Effect of number of products sold on product development success:

     The Motorola case study also correlated project success with the total number of products being sold:

  • The year when they had no products introduced, this division had to support the sale of 3500 existing products, which a burden on manufacturing people (who should be helping teams develop new products) and also a burden on design engineers (who get drained away to help figure out how to build "products revived from the dead")
     
  • After the number of products sold dropped to 2,000, they were able to launch eight products.
     
  • After Motorola dropped the number existing products to one seventh (500), they were able to launch 14 products.   This shows the value of Product Line Rationalization, which not only improves product development but also several elements of corporate performance:

The results of focusing product development and rationalizing away most existing products:

    During this time span of three years:

  • manufacturing productivity tripled,

  • early life failures decreased by 38 times,

  • customer satisfaction rose from 27% to 90%,

  • revenue increased by 2.4 times, and

  • operational earnings increased from -6% to +7%.

2. PRIORITIZE RESOURCES

Concentrate Resources on the Most Profitable Products

“Most complex organizations spread rather than concentrate resources, acting to place and pay off internal and external interests.” - “Good Strategy, Bad Strategy,” 2011 by Richard E. Rumelt, UCLA Professor of Strategy at the Anderson School of Business

Scrutinize proposed NPD projects that have a low ratio of return/effort. Good total cost measurements would be need to quantitatively compute this ratio. Until this becomes available, qualitatively scrutinize projects that:

• have lower-than-usual volumes or future potential

• need a lot of overhead support to launch, debug, issue change orders, and get the ramp up to target.

• are difficult to customize without mass customization techniques

• first, steer customers to the closest standard product

• second, give customers a choice of approved, pre-engineered customizations.


Before acceptance or even offering to customers, these projects should require signatures from the heads of Engineering, Manufacturing, Purchasing, and pivotal projects whose resources may be affected. Properly estimate the total cost and extra resource need – then hire more people to do the extra work or free people who can.

    These are the general principles. Pass around this article or URL to educate and stimulate interest

    In customized seminars and webinars, these principles are presented in the context of your company amongst designers implementers, and managers, who can all discuss feasibility and, at least, explore possible implementation steps

    In customized workshops, brainstorming sessions apply these methodologies to your most relevant products, operations, and supply chains.
     

    Call or email about how these principles can apply to your company:

    Dr. David M. Anderson, P.E., fASME, CMC
    www.HalfCostProducts.com
    phone: 1-805-924-0100
    fax: 1-805-924-0200
    e-mail: anderson@build-to-order-consultingl.com

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