In my last blog post, I wondered, if it's clear that project management won’t help you avoid product launch faux pas or innovation mistakes, why is there so much emphasis on Project Portfolio Management (PPM) to improve the results of your innovation?
In this article I’ll explore why Project Portfolio Management is misplaced for product, process and technology innovation and what does make your innovation perform well. Followed by a short test.
First, I should explain that when I talk about ‘innovation’ I think of more than idea creation and front-end selection. It’s also broader than New Product Development (NPD) or Stage Gate™. It’s perhaps better termed enterprise innovation and includes all threads of research, development and improvement that your company undertakes to win revenue, grow profits and increase market share. It includes brand management, technology programs and strategic initiatives. Innovation may be about a breakthrough product that puts your competitors on the back foot, but it may equally be a new technology to increase the effectiveness of your process upstream or an innovative solution to solve a component weight issue, ingredient replacement or distribution bottleneck. What I’m not focusing on are projects.
Your company is not a collection of projects; it’s a collection of processes. Projects are an artifact of business activity, scoped to deliver value in time and to a budget. And yet Project Portfolio Management is touted by some software vendors as a driving (or controlling) force for enterprise success, elevated to be a goal in itself. It loses sight of the fact that the operation of a company is different from the operation of an IT department, from where Project Portfolio Management originated.
If you’re an innovation process owner you’ll be acutely aware of this. A portfolio of projects is not the same as a portfolio of products or brands or initiatives, programs, platforms or other things that businesses processes really do.
The old adage is that you can’t manage what you can’t measure, so let’s illustrate measuring innovation success with an example. Take a new product development project, using Stage Gate, which delivers on time and to budget and results in a successful launch. How do you measure this success? The project management view will look at performance to plan (elapsed time and resource spend) – did we deliver on time and to budget without compromising scope? Perfectly reasonable questions to ask, but not the ones crucial to business success I would suggest. Ultimately the success of the project is in its ability to deliver to the market what the business needed. That might be market share or public perception or high margin growth. Which metric is appropriate will depend on the business need that the ‘launch’ was intended to address. Let’s consider a common measure – revenue performance versus forecast.
So we take the actual sales performance and we simply need to align it with the predicted financials in our project. However, here’s the rub. The diversity of items actually sold may contrast markedly with what was being estimated by the project. One SKU crosses a counter in store on the other side of the world as one part in a Christmas promotional bundle. How do I count it in the ‘actual sales figures’ for my project? Unless the project is fully aligned with product taxonomies (defined within an ERP system – from product line through commercial versions, market versions and SKUs) then it becomes almost impossible to evaluate the commercial impact of the original NPD project.
There are many clever IT firms who will offer a solution to my example, but therein they’ll miss the point. Because the problem is not just about master data management. It’s about process, behavior and culture and it’s about decision governance, accountability and consistency. This is what releases innovators to perform.
Innovation systems must be closely aligned to the real work of the organization – and to the real product life cycle. Where too much emphasis is placed on the 'project' as an object of business value, the distinction between project and product gets lost. Project control and regulation stifle an innovative culture and we risk losing the ability to measure our innovation against business targets, strategies, arenas and buckets.
So here’s the short test. “Ultimately, using Project Portfolio Management for innovation compromises a company’s competitive edge and invites a slow death. Discuss.”