R&D Portfolio Management Archives

12 01, 2016

When Gantt Charts Fail: Use Flag Charts to Show Upcoming Events

By Rich Sonnenblick|2017-05-23T15:42:00-08:00January 12th, 2016|Blog|0 Comments

You’re probably familiar with Gantt charts, which show project tasks, their duration, and their completion dates. For a specific project, project managers and executives use Gantt charts to quickly review upcoming activities.

When reviewing a portfolio of projects, project managers sometimes continue to use Gantt charts, adding upcoming tasks for all projects to a single chart and sorting by task start date. These consolidated Gantt charts are sometimes referred to as ‘key event maps’, because they show key events across a portfolio.

Excerpt from a key event map; when key event maps go on for rows and rows, they are difficult to read.

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14 09, 2015

It’s 2015, why is everyone still using NPV?

By Rich Sonnenblick|2017-05-23T15:42:00-08:00September 14th, 2015|Blog|0 Comments

Watching Back To The Future again recently, I was horrified to realize that, at the end of the movie, the professor and Marty use their time machine to travel from 1985 to…wait for it…2015. They traveled 30 years into the future, and I’ve aged 30 years since last seeing the movie.

Robert Zemeckis’s vision for The Future doesn’t exactly match the real 2015. There are no flying cars or hoverboards. But he did get some things right: we do have wall-sized televisions, tablet computers, and video conferencing. All in all, things have changed a lot since 1985.

But one thing hasn’t changed: firms are still using net present value (NPV) as a metric to evaluate the potential of R&D initiatives. NPV was first mentioned in the literature in 1907, according to historians. It’s survived 108 years because it does have its uses—as an indicator of investment potential and a summary of an initiative’s cash flow impact.

But for R&D evaluation, NPV is sometimes misunderstood and frequently misused. Let’s look at the good, the bad, and the ugly:
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7 09, 2015

Upcoming Conferences on PPM and Innovation

By Rich Sonnenblick|2016-03-09T17:44:30-08:00September 7th, 2015|Blog|0 Comments

Fall and winter is high season for conferences, and we’re excited to be sponsoring five different events across North America and Europe between now and March 2016. We recommend all of these conferences as excellent opportunities to network, learn from your peers, and share your own wisdom on innovation and portfolio management.

Boston, October 6-7: 8th Project and Portfolio Management for Pharma & Biotech Conference at the Hyatt Regency Boston. Organized by American Leaders. We sponsored their spring conference in San Francisco and found the conference not too big, not too small, and full of industry veterans doing great work at small- and mid-sized firms.

Amsterdam, October 12-13: Product Innovation Process 2016. This is our first experience with this cross-industry event, focusing on portfolio management and other methods that create R&D value.

Philadelphia, November 2-3: Cambridge Healthtech’s Strategic Resource and Portfolio Management Conference at the Hilton Philadelphia, Penn’s Landing. This is the biggest life sciences event we attend in North America. Usually there are 150-200 attendees at these back-to-back events, with a majority attending both of them. When you bring the resource planning and portfolio people together at one venue, good conversations ensue.

NYC, January 20-21, 2016: EBCG’s Pharma PPM Toolbox North America, This is EBCG’s first version of this conference in the US, in the middle of Manhattan. We’re excited to be part of the inaugural event.

Basel, March 3-4, 2016: EBCG’s Pharma PPM Toolbox Europe, Our new favorite conference in Europe. Basel is a great venue, and EBCG brings together 150+ delegates from leading life sciences companies all over Europe.

11 08, 2015

The R&D executive read the first slide of the portfolio review; you won’t believe what happened next!

By Rich Sonnenblick|2017-05-23T15:42:00-08:00August 11th, 2015|Blog|0 Comments

It’s every portfolio manager’s nightmare.

The annual portfolio review is about to kick off. Hundreds of hours of preparation have gone into the main presentation’s PowerPoint deck, and hundreds more into each of the backup decks, readied in case management asks about the details of any of the projects under discussion. Information encompassing over a hundred different initiatives has been painstakingly compiled and distilled into slide after slide. The portfolio team is ready to review the current budget and the changes in the portfolio since the last review, and to make recommendations for adjustments to keep R&D activities aligned with strategic goals. Everything is in place. Or so the manager thinks.

Then, the first slide goes up on the wall, summarizing spending since the last review meeting and listing the estimated total value of each division’s initiatives. The manager highlights key milestones each division has met, and heads all around the room nod.

Except one.  The leader of one products division is clearly not happy. His expression sours as he looks at the slide. “You’ve understated the value of our projects by at least $400 million,” he complains.

“But we took these figures directly from your product team summary spreadsheet,” says the portfolio manager.

“Which one?” the exec demands. “We updated that spreadsheet last week based on the market research report from last quarter.”

“Oh that explains it,” the manager says, relieved. “We began building this deck four weeks ago, and we took the latest spreadsheet available at that point.”

The exec is not mollified. “I don’t think this meeting is an effective use of my time, or anyone else’s for that matter, if we don’t have current information.” He begins gathering up his things. “Let’s postpone until you can get all your ducks in a row.” The meeting is over before it has begun.
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21 03, 2014

Pharmaceutical Portfolio Management Primer

By Dan Smith|2017-05-23T15:42:01-08:00March 21st, 2014|Blog|0 Comments

Why is Portfolio Management So Successful in the Pharmaceutical Industry?

R&D portfolio management has been embraced by the pharmaceutical and biotech industries more than any other because of the unique characteristics of drug development: Huge investments, long development timelines, extremely high risk, and a large number of products in the pipeline. Other industries possess some of these characteristics, but it is the combination of all of them that provides both ample time and motivation to actively manage the portfolio. For example, airplane manufacturers have both long lead times and high investment requirements, but they only develop a few planes at a time, so managing the “portfolio” is primarily achieved by managing the individual projects.

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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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16 10, 2013

Portfolio Management Can Be a Six Year Journey, Here’s Why

By Rich Sonnenblick|2017-05-23T15:42:02-08:00October 16th, 2013|Blog|0 Comments

The September-October 2013 issue of Research Technology Management Journal includes a case study on portfolio management written by our own Dan Smith and yours truly: “From Budget-Based to Strategy-Based Portfolio Management: A Six-Year Case Study”. In it, we describe the journey of a life sciences company as it transitioned from a conservative, somewhat disordered investment process to one that was in better alignment with the long-term growth aspirations of the firm.

You might be saying “Six years to a better process? That seems an awfully long road.” The plain truth is that effective portfolio management doesn’t happen overnight, especially in mature companies. Portfolio management involves a diverse set of stakeholders across the firm, and therefore everyone involved in R&D spending must be engaged in the process overhaul, from project champions to the head of R&D and the CFO. Bringing transparency to the discussions of each project’s value will threaten project teams unaccustomed to justifying their funding to management. At the same time, management may be unaccustomed to basing, and explaining the rationale for, funding decisions in the context of information gathered through the portfolio process. So, the barriers to overnight success in portfolio management are largely organizational, rather than technological or scientific.

The good news is that benefits of implementing even a few portfolio management best-practices accrue almost immediately. The key to long-term success is to build stakeholder consensus around a clear but cautious road map for improving your portfolio management process. Each step should bring more rigor to the process, while conferring tangible benefits to both management and product teams. Be careful not to add too much sophistication to valuation or portfolio analyses in any one portfolio cycle. One team we worked with never showed more than two novel analyses to management in a portfolio review. This slow-but-steady process improvement mindset helped all involved stay focused on the funding decisions rather than drowning in methodologies or fancy visualizations. It also ensured that management had sufficient time to learn about and assess the value of new analyses brought to each review.

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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6 11, 2012

Avoiding R&D Portfolio Management Jeopardy

By Rich Sonnenblick|2017-05-23T15:42:03-08:00November 6th, 2012|Blog|0 Comments

Here is an uncomfortable reality in all but the smallest firms during their R&D portfolio management processes: Between the staff running each R&D initiative and the executives making project and portfolio decisions, there’s usually a division. Maybe it’s the gap between headquarters and lab, upstairs/downstairs, east coast/west coast, London/Singapore, or even a generation gap. At the very least, it’s an information gap, and one that can transform a portfolio review into a detailed project Q&A session.

At one firm we worked with, it played out like this: Each executive arrived at the portfolio review meeting with 3-5 questions about various projects:

“Please explain the market segmentation.”
“Why did the NPV of this project double since the last meeting?”
“How does the introduction of XYZ by our competitor affect our market share for ABC?”

These questions, in turn, led to additional questions and extended discussion. With more than a dozen executives in the room, the questions easily filled all the available time (hours and hours). At the end of the meeting, a few projects had been canceled because the science or the market seemed insubstantial, but most projects passed through the executives’ gauntlet. However, with all the attention paid to individual projects, there was no opportunity to consider the portfolio as a whole.
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22 10, 2012

Eight Rules of Effective R&D Portfolio Management

By Rich Sonnenblick|2017-05-23T15:42:03-08:00October 22nd, 2012|Blog|0 Comments

Dan Smith and I have written a white paper on strategic R&D portfolio management that summarizes many of the lessons and insights we’ve gleaned during twelve years of client engagements. The white paper is organized into eight ‘rules’:

Avoid incomplete strategies
Build an actionable strategy
Don’t buy in to bubble plots
Move beyond prioritization
Present decision-makers with 3-6 compelling portfolios
Use a variety of project selection methods
Ask the right question
Build risk into your forecast

If you are a regular reader of this blog, you’ll no doubt hear echoes of previous posts in some of these rules. So, what do all these rules have in common? When heeded, they guide project teams and decision makers to the hard-but-essential conversations about key project risks and portfolio trade-offs. Those conversations are sine qua non of successful R&D decision making.

Here is the link to the white paper. Enjoy!

PS: We welcome your comments and suggestions for the next eight rules…