The three main goals of portfolio management are: -



1. Maximize value: allocate in an organization's resources to maximize the value portfolio of products of the portfolio in terms of some financial metrics, such as long- or services term profitability or return on investment (ROI).

2. Balance: diversify and create a mix of projects by considering project duration, development and commercialization risks, market mixes, technologies and project types.

3. Strategic direction: align the portfolio around a technology or market central to the organization's strategic plan.

Some common development activities to support these goals include cost reduction, process improvement, customer oriented product or service enhancements, new products or services created along existing technology lines and new platforms or services based on fundamentally new technologies.

There are several problems that may arise if the portfolio management process is ineffective. The organization may:

• Be reluctant to kill development activities for ongoing projects.

• Lack focus due to too many projects.

• Suffer from poor profitability due to too many low risk projects or too many high risk projects.

• Not be able to properly penetrate the market due poor link age between development and market research.

The 12-Step Method

DFSS project selection is built on the following 12-step method:

1. Understand the organization's strategic plan.

2. Make a list of the current and future design projects under consideration.

3. Estimate the net present value, development cost, commercialization cost, probability of technical success (standard), probability of technical success (DFSS) and probability of commercialization success for each project. Involve the appropriate finance, R&D and operations managers.

4. Rank the projects based on the change in expected commercial value (ECV).

5. Meet with all stakeholders to discuss the results of the ranking process. Perform a sanity check and rerank the projects.

6. Based on the final ECV results, choose the projects that are the best candidates for DFSS implementation based on value to the portfolio or other qualitative criteria. At the core team level, the steps to identify engineering activities for DFSS application are:

7. Understand the ECV method and the results from the portfolio analysis.

8. Make a list of all engineering activities that must be done before the product development project can be completed.

9. If it hasn't been done already, estimate the probability of technical success for the normal development process, the probability of success for the DFSS process, the development time, the available resources and the cost for each activity in the overall schedule.

10. Rank all engineering activities according to the difference in the probability of technical success versus the cost of the effort.

11. Meet with all stakeholders to discuss the results of the ranking process. Perform a sanity check and rerank the activities.

12. Based on the final probability estimates, costs and other resource constraints, choose the engineering activities that will contribute most to the overall probability of technical success for the development project.

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