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apqcPortfolio Management: Optimizing for Success

American Productivity & Quality Center (APQC), Jan 2007, Pages: 125

There are two ways for an organization to succeed at product innovation: doing projects right and doing the right projects. Most product innovation prescriptions focus on the first route via a better innovation process, from effective project management to using cross-functional teams and building in the voice of the customer. Portfolio management, the topic of this study, focuses on the second route, namely on doing the right projects. Effective portfolio management has become an important competitive weapon that can used to achieve a strategic advantage in today's tough business environment.

The key puzzle of portfolio management is how the organization can most effectively invest its R&D and innovation resources. This is what portfolio management is all about: resource allocation to achieve corporate product innovation objectives. Much like a stock market portfolio manager, those senior executives who optimize their R&D investments-defining the right product innovation strategy for the firm, selecting the winning projects, and achieving the ideal balance of projects- will win in the long run.

Doing the right projects is more than simply individual project selection; rather, it's about the mix of projects and new product or technology investments that your business makes. The challenge, of course, is how to do this effectively. In this study we have attempted to identify what best-practice organizations are doing-how they have been able to develop a portfolio management process that delivers the results needed to better manage their organizations. To answer these and other questions, we looked at several key areas including portfolio alignment with business strategy, governance roles, communication, project selection, and resource allocation approaches.

The results present an interesting picture of what these organizations are doing and how they went about developing a process that works within their organizations. We hope that you will find some interesting and helpful best practices to enable your organization to improve its performance in this important topic of portfolio management.

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