Good Portfolio Management Needs a Great Front-end

Stage Gate Portfolio Management?

If you are interested in NPD and R&D portfolio management, here is an important insight: Most Portfolio Management discussions, presentations, and articles address only the management of those projects that are under development.

To state this in terms of process management, the insight is that portfolio management focuses only on those projects that are underway within the Stage-gate process. If you need evidence, simply look at a few conference presentations or search the web to check it out for yourself.

Where’s the Leverage?

Anyone new to product development cannot help but conclude that Portfolio Management is only about those projects residing within the Stage-gate process. But do not get fooled by this. Stage Gate & R&D Portfolio management is more than about just shifting resource on projects within the Stage-gate process.

Indeed, the greatest influence on the total value of the portfolio of projects under development is, in fact, the output of the Front-end of product development. In other words, what goes on in the Stage-gate process is important, but the quality of the output from the Front-end is even more important. If your organization wants to increase NPD and R&D productivity through Portfolio Management, you will also need to consider the impact of Front-end activities.

The following example helps explain the Front-end to Stage-gate relationship in Portfolio Management. Figure 1 below displays a four-project portfolio. Each project is at a different point in the development process (X-axis) and will be commercialized between eight and twenty-four months out (Y-axis). The size of the bubble represents the peak annual revenue that project should generate if it is successful. The text next to the bubble indicates the name of the project and the probability of success the organization calculated for each project (using RiskAssessor™).