Preparing for an upcoming portfolio review? Engaging in strategic portfolio planning? Then it is important to check whether sufficient progress has been made on the top innovative initiatives. Or has development been slower than planned, because the targets set in the strategic portfolio have been affected by the leakage of resources to other activities? Let's examine briefly the problems that may be encountered and look at how these may be prevented by appropriate resource prioritization.
The Strategic Portfolio
During strategic portfolio planning, corporate management concentrates on those innovative initiatives which will help achieve high growth, whether of turnover or market share, in new or existing markets. These initiatives will be selected according to how much value they deliver, whether they are a balanced set and according to how well they reflect the corporation's strategy. These initiatives are expected to come high on the Vitality Index.
Portfolio planning at this level will accordingly include a general top-down confirmation that the corporation has sufficient resources to work on these. The resource buckets awarded to each business unit will assume that they have enough resources to execute these projects as well as the others for which they are responsible.
Figure 1: Prioritization of projects in resource buckets based on Cooper, Edgett, Kleinschmidt Portfolio Management for New Products
In Figure 1 above, each business unit (BU) has a bucket of resources for the execution of their projects. The highest priority within each bucket is for the key project(s) tracked by the corporate board. The resource for these is guaranteed, even if this means that the business unit has less resource available for the other projects. As an example, the corporate priorities may be named platinum projects, whereas the others are named gold or silver projects. The higher levels can take over the resources of the lower levels, which means that the silver projects may well come up short of resource.
Investment Buckets and Top-down Resource Planning
As the resources per bucket are limited, the planners within each BU will have a relatively detailed calculation of how they are assigned to the various projects. In his inKNOWvations posts on resource planning, Gerard Ryan has described the use of shirt sizes and other more detailed classification methods that can be used to assess requirements. The resource planners at the BU level need to be aware of the availability of specific R&D, engineering or marketing technicians and when they must be assigned.
These are typically the people whose time is planned using resource planning software and tracked using time-sheets. Resource planning is carried out in particular for the highly innovative projects, as well as for the remaining incremental improvements. It is quite usual, therefore, for hours to be planned and tracked for the top 60%-80% of projects, particularly those following the full Stage-Gate or fast-track processes. It is a simple action to link time-sheet systems to individual projects.
More Detailed Levels of Resource Usage
There are however some activities which are not necessarily estimated in detail before being executed, nor are they always tracked with individual time-sheets:
- The set of small technical project enhancements/improvements requested by specific customers. These requests are often submitted by account managers or technicians who are communicating with the customers. They may be small changes which can be relatively easily carried out by tweaking the production process, or doing a calculation in the lab. The engineer or R&D person carrying these out may well estimate that they will require very little time. The difficulties arise when these small tasks occur more commonly that originally calculated, or turn out to be more time-consuming than originally thought;
- The “must do” improvements required in order to keep up with FDA, safety or other types of regulations, particularly if we do not locate precisely where they will apply in order to make early estimates;
- Small “fixes” required when products are working less well than expected, or there are minor problems and it is important for our brand reputation to keep customers satisfied.
The resources required for these activities are rarely planned at the individual level. There is usually an overall estimate of how much time is available for services, calculations or small “fixes” at a general level, but this is hard to confirm and to track over a period of time. The danger is therefore that the resource usage becomes excessive, and starts to affect the higher priority projects. Many of our clients track some of these activities in separate systems, so that it is hard to estimate their share of resource usage.
Tracking Resource Usage
Taking into account the aspects discussed above, we can summarize the tracking of resource usage at three levels:
The Detailed Services Level: Where separate systems have been used to date, we can set up links which display the calculated totals in reports enabling management to check when this expenditure is becoming excessive. Obviously the older these systems and the greater their number, the more complex and expensive this solution is. It is generally more effective to create new time-sheet systems within the process management tool, distinguishing the services per BU, service type, resource pool, etc. Scott Bader were among our earliest clients to set up a mini-process within the process management tool, where both the estimates and the actuals could be followed by management.
The BU Level: This is of course the level where resource planning and time tracking fit most neatly with the projects in the portfolio and agreed levels of prioritization can be applied. It is at this level that the platinum projects are protected, and limitations may be applied to the resource allocation for gold and silver projects.
The Corporate Portfolio Level: At the portfolio level, senior management are primarily interested in the outcomes of the platinum projects and are not in the first instance expecting to be confronted with resource shortages there. They will also expect the BUs to have complied with the limitations of their buckets, and will only be prepared to discuss new resource needs if unexpected external developments have occurred in connection with the market or as a result of new regulatory requirements.