project prioritization Archives

18 05, 2017

Prioritizing Projects: Advanced Portfolio Management II (5 of 5)

By Rich Sonnenblick|2017-05-23T15:41:58-08:00May 18th, 2017|Blog|0 Comments

This is the fifth and final post in our series on doing more portfolio management with less project data. You’ll find the whole series here.

Data needed at each level of portfolio management. The only required data are the three items in the orange Beginner box. How much further you go depends on your people, your portfolio, and your goals. See the first post in this series for more information.

Prioritizing Projects: Advanced Portfolio Management II

Once you’ve collected project information and gathered some information about project value, whether through a simple scoring process or in the form of complex financial metrics, you have enough information to build a prioritization (what we call a “bang-for-the-buck curve”)—see below for an example. This analysis is helpful for prioritizing projects in terms of value for money. Our video on project prioritization has all the lurid details on prioritization methods, best practices, and pitfalls. (more…)

18 05, 2017

Driving Portfolio Value: Advanced Portfolio Management (4 of 5)

By Rich Sonnenblick|2017-05-23T15:41:58-08:00May 18th, 2017|Blog|0 Comments

This is the fourth post in our series on doing more portfolio management with less project data. You’ll find the whole series here.

Data needed at each level of portfolio management. The only required data are the three items in the orange Beginner box. How much further you go depends on your people, your portfolio, and your goals. See the first post in this series for more information.

Driving Portfolio Value: Advanced Portfolio Management

At this point, you’ve managed to collect key data about all of your projects and created some visualizations that show how those projects measure up against strategic goals and budgets. In other words, you have a good idea of what you are doing. But how do you figure out what you should be doing? That’s advanced portfolio management, and it begins with a clear picture of the value of your projects.

Not everything you work on will be of highest value, and therefore not everything you work on will be highest priority. Valuing your projects will help you prioritize projects and (perhaps more importantly) provide teams with a common understanding of the value each initiative is expected to deliver. The key word here is expected—at least initially, you don’t know if every project will live up to your expectations. For this post, we’ll put aside methods for estimating risk and focus on a few methods for calculating a best guess at likely value. There are a large number of approaches for estimating project value, so many that they represent a continuum of approaches, from simplest and broadest to most sophisticated and detailed, rather than a list. Here, I’ve highlighted a few points on that continuum. (more…)

28 03, 2016

Portfolio Prioritization Best Practices

By Rich Sonnenblick|2017-05-23T15:41:59-08:00March 28th, 2016|Blog|0 Comments

Our latest video covers prioritization by value metrics, when to use productivity metrics, how to build a frontier chart, and when to temper simple prioritization with more sophisticated methods. You can see it here, right now. As always, we’d love to hear your comments and suggestions on topics for future videos.

20 10, 2015

Avoiding King Kong Projects

By Rich Sonnenblick|2017-05-23T15:42:00-08:00October 20th, 2015|Blog|0 Comments

“Hey Percy, what happened to the two medical writers who were supposed to start work with us this week?”

“Oh, you didn’t hear, Luke? They were pulled to work on project PDE_311 at the last minute.”

“Ugh, just like the bio-statistician that we were supposed to have last month!” said an exasperated Luke.

“That’s the law of the jungle, right?” Percy returned. “PDE_311 is the top-priority project, and we are out-of-sight and out-of-mind.”

“So, what did it mean back in June when our project was ‘funded’, anyway? We never seem to get the resources we request, and you KNOW they’ll be all over us when we slip our deliverable dates…”

This company is making a critical resource planning mistake; have you experienced it yourself?

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30 01, 2014

Project Prioritization is Not Enough: Why No One Uses Optimization for R&D Portfolio Management, and Why You Should

By Dan Smith|2017-05-23T15:42:01-08:00January 30th, 2014|Blog|0 Comments

R&D-driven organizations face the constant challenge of deciding whether to continue funding existing projects and when to start new initiatives. The overwhelming majority of firms will use project prioritization to rank the opportunities as part of that exercise, with a small minority suspecting that optimization is better suited to the task of project selection.

So if is it so well-suited to the task, why isn’t optimization used and how should it be used?

Why (Almost) No One Uses Optimization

Optimization seems like something for hard-core geeks, a method that would be hard to understand and even harder to explain to management. How could we possibly explain something that throws around terms like ‘simplex’, ‘branch and bound’, and ‘simulated annealing’?

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3 07, 2013

To Make Effective Project Prioritization Decisions, Focus on the Portfolio

By Rich Sonnenblick|2017-05-23T15:42:02-08:00July 3rd, 2013|Blog|0 Comments

It seems almost a universal truth that resource allocation exercises use prioritization at some point in the process. Nearly every company we’ve spoken to or heard from over the past decade-and-a-half, in Pharma or other industries, relies on it. Project prioritization has several things going for it:

Mathematical simplicity: It’s very hard to quibble with the math behind project prioritization, and explaining division to executives or any other group of people is far easier than explaining genetic optimization algorithms. The simplicity also means that anyone with Excel can do the math, and since “anyone with Excel” is generally almost everyone, project prioritization is extremely egalitarian.
Limited data requirement: There are really only two pieces of data required, one each for the numerator and denominator.
Everybody loves a winner: It’s easy to see which is the “best” project and which is the “worst”, and the rankings in between. In the words of one client: “Everyone wants to know where their project stands.”

Prioritization using a “bang for the buck” metric has its place in the portfolio process

The table on the right is typical of how project prioritization results are presented. The projects are listed from best-to-worst, ordered by descending “Productivity”, which in this example is the ratio of rNPV (risk-adjusted Net Present Value) to the Requesting Funding in the budget year. (All units are in $M except for Productivity, which is dimensionless.) Beginning at the top of the list, projects are funded until the budget is met (in this case, $2,500), and the amount with which each project is funded is recorded in the “Allocated Funding” column. Funded projects receive an “x” in the “Included?” column. A running total of allocated budget is kept in the “Cumulative Funding” column. As the budget runs low and projects are not able to be funded in their entirety, they may be partially funded based on management discretion. In this example, both Mritigen and Zerxil have been granted partial funding.

So when is project prioritization useful, and when is it hindering good decision-making processes?

Project prioritization at its best: Tactics

Prioritization can be extremely useful to provide guidance for project managers scheduling work. In what we term operational R&D portfolio management (often referred to as project portfolio management, or PPM), it’s important to know the relative importance of projects. On any given day, as those responsible for getting projects done face the need to allocate their time and other resources, they should have clear guidance about which projects take priority. This may be expressed by ranking the entire portfolio or by putting projects in buckets by importance.

Project prioritization at its worst: Strategy

Many companies attempt to incorporate prioritization as the foundation of their decision-making processes. Prioritization can be a very useful tool, but at its heart prioritization is about competition, and competitive processes work best when there is only one winner. In the case of R&D portfolios, however, there are many winners in each resource allocation cycle, and the value of each project depends on the others included in the portfolio with it.

Consider this example: A high-tech conglomerate creates a new division to pursue solar panels. If the company allocated resources strictly using project prioritization, it’s likely that the solar panel projects—presumably riskier and longer term than projects in more-established business areas—would land near the bottom of the list. The leadership team may attempt to compensate by assigning a “kicker” to solar panel projects, increasing the scores of all such projects. (We’ve seen many companies in this situation do just this.) However, while the company may be interested in ensuring that 5 or 10 solar panel projects attain funding, they probably aren’t interested in funding 50. The value of the kicker doesn’t diminish as more projects are funded, though, and the utility of the project prioritization process diminishes.

In this example, artificially inflating the scores of solar panel projects is really a proxy for what the company truly cares about: ensuring that x number of solar panel projects are funded. A more strategic process that focuses on the set of projects chosen, rather than on the individual projects themselves, creates a much more direct relationship between the strategic objectives the organization cares about and the methods used for project selection.

Marimekko charts in the Enrich Analytics Platform highlight spending breakdowns across divisions and projects

The chart on the right presents data on a project-by-project basis, but does so in the context of the portfolio. It is immediately apparently how much funding is allocated not only to each project, but to each Therapeutic Area, making it much easier to judge whether or not certain TAs are under- or over-weighted.

Thinking about the portfolio in its entirety, and considering trade-offs among portfolios instead of projects, makes the impact of project selection decisions on corporate performance far more clear. Put another way, looking at the forest instead of the trees makes it much easier to determine the best path forward.

Each year, tens of billions of dollars in R&D investments are shaped, allocated, and refined with the help of Enrich’s EAP. Are you interested in learning how we can help streamline your portfolio reviews, turning months of long nights and frustration into a value-enhancing, confidence-affirming exercise for your R&D organization? Contact us, and learn what our clients already know about the value of the Enrich Analytics Platform.
See also:

A case of mistaken priorities

Eight rules of effective portfolio management

Avoiding portfolio jeopardy

5 02, 2013

Avoiding the Many Pitfalls of Project Scoring in Project Prioritization

By Rich Sonnenblick|2017-05-23T15:42:02-08:00February 5th, 2013|Blog|0 Comments

The portfolio review session is coming up, so you craft a list of questions about project value, cost, and risk that can be answered on a scale from 1 to 10. Your R&D project teams score their projects, add up the scores for each project, and voilà, you have a ranked set of projects, ready for your meeting. Yet you can’t shake that nagging feeling: Aren’t scoring models useless? Will the scoring process distract from the real goal of building a more valuable product portfolio?

I am here to testify that this bad reputation isn’t entirely deserved. In fact, there are many cases when a scoring model is an appropriate way to assess each project’s contribution to the portfolio. Scoring models have the potential to spark productive conversations among the project team, and they help differentiate projects across the portfolio.

So what is the source of their bad reputation? One recent engagement began with a client’s dismay that their scoring model failed to differentiate across projects. Their model consisted of 12 questions about value and 8 questions about risk, each scored on a scale from 1-10. The client hoped that a distribution of aggregate project scores would look something like this:

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5 10, 2012

A Case of Mistaken Priorities: Project Prioritization Gone Bad

By Dan Smith|2017-05-23T15:42:03-08:00October 5th, 2012|Blog|0 Comments

It’s no secret that projects in the earlier stages of the development lifecycle are evaluated and managed very differently than projects in the later stages. One major pharmaceutical company believed these differences to be so great, however, that they split their development organization in two. Over time, the structural gulf became a cultural gulf, leading to downright animosity between the early- and late-stage divisions. Making matters worse, both developed their own portfolio management processes that were not only distinct from each other, but also completely disconnected.

As projects were handed off from the early-stage side, the late-stage side perceived that they were receiving too many “low-value” projects. The late-stage side subsequently starved these projects of resources, which delayed them and reduced their chances for success. Diversion of resources, however paltry, to these “low-value” projects also impacted late-stage projects that the organization perceived to be valuable.
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28 05, 2012

One-pagers and playbooks

By Rich Sonnenblick|2017-05-23T15:42:04-08:00May 28th, 2012|Blog|0 Comments

Sample playbook (click to enlarge)

Over the years, we have seen again and again that how you present information is just as important as the information itself. Cram too much information on a screen or a page, combine nonessential and essential facts in one display, or fail to annotate a graph with important contextual information, and you have all the ingredients for an unproductive conversation.

Many of our clients need to quickly review summary information for a large number of opportunities. In these situations, distilling the most important information down to a single page can make all the difference. The one-pager should not only jog the stakeholders’ memories about each project, but also update them on the most important news and changes. After reading a one-pager, a decision making team should be able to place each opportunity in one of the following buckets:
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18 05, 2012

Portfolio Management, By the Numbers

By Rich Sonnenblick|2017-05-23T15:42:08-08:00May 18th, 2012|Blog|0 Comments

I was speaking with a client at a large government-supported research lab the other day, and he reminded me of the success we enjoyed deploying the Enrich Portfolio System to support their annual portfolio process. When this group approached Enrich, they asked for help picking the winners within their portfolio, and justifying budget increases to their sponsors in the federal government. The work was done in two six week phases.

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