The next step in the technology strategic planning process is to review the projects. One of the most important elements at this point is to divide projects into three categories: These are those projects in which the technology changes are incremental, those in which the technology changes are next generation, and those projects in which the technology changes are breakthrough. One of the common mistakes made in many corporations is to throw all projects into a single mix. Separating the process into three pathways at this point speeds the decision process and improves its quality.
Starting first with selecting incremental projects, this is best done with strong input from customers or clients. Incremental projects are those that require very little change in the technology and very little change in a consumer use of the product or service. They’re also projects for which both the technical and the product manager understand almost instinctively what needs to be done. The fastest and best way to rank these types of projects is to simply make a table what shows who is the sponsor, for what customer type (see below), and then estimate to return on the investment (ROI) made in the project. Most sales organizations have classified their customers into A, B, and C lists, or by whether they are devil or Angel customers, or more numeric ranking based on profitability per customer. Those customers that generate the most value for the corporation have their voice weighed the most. Typically a combined team of technical, sales, and marketing personnel can easily rank order the list of incremental projects by customer type and ROI.
Next-generation project priority is not only more complicated but it’s worthy of extra attention to detail because it’s the kind of project that most corporations face. In spite of the desire of many corporations to have breakthrough projects, truth of the matter is that the most solid business growth is often generated by next-generation research and development programs. Breakthrough projects are often best undertaken by firms being supported with venture capital money rather than by ongoing operations profits.
Setting the priority of next-generation projects involves evaluating projects on multiple attributes that fall under four main areas of evaluation. The first main area deals with the degree of strategic fit between the project and the corporation’s business interests. The second main area often involves assessment on multiple scales related to the business returns to the corporation when the project is successful. The third main area in which projects are evaluated is the degree of risk that the company is undertaking by moving forward with the project. The fourth main area that projects are typically evaluated on includes the company’s capability to do the project internally vs. externally and the company’s ability to knowledgeably license technology at an appropriate price point.
The purpose of using anchored scales for each of these attributes is to allow consistent evaluation by multiple individuals across various projects. In addition easy-to-use scoring and visualization tools allow the strategic planning team to make unbiased comparisons of projects and project ideas, as well as providing a means to communicate the strengths and weaknesses of the portfolio mix more effectively to fellow team members, to professional colleagues, and top management. In the following example each project and project concept utilize “star maps” as a visual communication tool to show eighteen project attributes, defined in three categories for each project (the main return and risk areas are combined into an “attractiveness” area), so that the strengths and weaknesses of the individual projects are identified.
Values plotted on Star maps are created for each attribute (under each of the three categories), by looking at the list of descriptions for that attribute, then choosing a numeric value representing the closest fit of the description to the attribute based on the team member’s knowledge of the project or project concept. These descriptions are referred to as anchored scales so that inputs from multiple individuals will more closely agree.
The Star map itself can be generated in Microsoft Excel. The star map is a spider chart (360°) plot where the numeric value assigned to each attribute is plotted.
Comparing Next-Generation Projects
Typical elements used to compare next-generation projects follow. For each attribute a set of anchored scales is also given. The first area is strategic fit:
I. STRATEGIC FIT
Division Strategic Plan Fit
5 = Essential To Division’s Strategic Plan: This is a major project for the division and the project’s success is critical to the division’s success five years out. The project is written into the division’s strategic and operating plans and is identified as one of the top 5 projects for this division. 4 =In Division’s Strategic Plan: The project is written into the division’s strategic plans and is identified as a future project for this division. 3 = Supported By A Divisional Group: The project has been orally discussed and supported by two or more Division functional group managers as important to the division. It could be in the division’s functional group strategic plans. 2 = Discussed By Divisional Head: The project has been orally discussed by a division functional group or head who would like to champion the project. 1 = Not In Division’s Strategic Plan: No functional manager is supportive of this program.
Corporation Strategic Plan Fit
5 = Essential To Corporation’s Strategic Plan: This is a major project for the Corporation and the program’s success is critical to the Corporation’s success five years out. The program is openly discussed in executive council presentations. 4 = In Corporate Strategic Plan: The project is discussed in executive council as a project important for the Corporation. Most top executives are supportive of the project. 3 = Supported By Corporate-Level Group: The project has been orally discussed and supported by 2 or more Executives as important to the Corporation. Other executives may not find value in the program. 2 = Discussed By A Corporate-Level Head: The project is championed by a Corporate-level functional head who would like to see the project commercial. 1 = Not In Corporate Strategic Plan: No Corporate-level support for this program. (Note however that a division may find that this project is essential to its strategic plan).
Time To Commercialization (Competitive Horizon)
We give a higher numeric value to those projects that will be commercialized faster as they will have more impact in a shorter period of time; longer term projects may have a greater impact but there is more uncertainty in the outcome
5 = 1 year until first commercialization of technology. 4 = 2 years until first commercialization of technology. 3 = 3 years until first commercialization of technology
2 = 4 years until first commercialization of technology. 1 = 5 years to commercialization
Technology Position (Intellectual Property Fit)
5 = Dominant: We are four years ahead of our competition in developing this technology and we will be able to patent the technology worldwide. 4 = Strong: We are one year ahead of our competition in developing this technology and we may or may not be able to patent the technology worldwide, but we will be able to patent the technology in the U.S. and a few other countries. 3 = Competitive/Pacing: We will be able to patent the technology only in the U.S. or in Europe. We will be blocked by other patents or prior art from broad filings. 2 = Weak: We are behind the competition in developing this technology and we will have to commercialize around other patents. We will have no, or just a niche, patent ourselves. 1 = Poor: We are behind the competition in developing this technology and we will not be able to commercialize without a license.
Product Base (risk)
The degree of risk (technical, financial, market) generally increases from Core to Breakthrough programs. Since there is a greater risk associated with being successful in developing a breakthrough product, we give a lower numeric value to this description.
5 = Core: Core businesses include the current growth and cash-cow divisions of the company. The Corporation has an interest in sustaining the business fueled by existing products by keeping up with new advances and new technologies to improve the profitability and market share associated with these businesses. 4 = Geographic Sector Expansion: New platforms are based on technology programs related to bringing derivatives of core business products into new geographic sectors. 3 = Market Sector Expansion: New platforms are based on technology programs related to bringing derivatives of our core businesses into a new market sector. 2 = New Platform: New platforms are based on new-to-the-company technologies that will change cost or product functionality by over 20% and allow market share change of over 10% in businesses which are related to our core business interests. 1 = Breakthrough: This technology will allow the Corporation to reach new customers and distinguish itself from the competitors by introducing “new to the world” technology which was unanticipated, unique and industry changing.
Reward Potential (Sales in year five)
We use this attribute to categorize the total sales associated with the project five years after the project technology has been commercialized by the Corporation. We assign a quantitative number to the sales figure to allow us to evaluate the impact of the project on the Corporation. The number used for each category is industry dependent. Projects which do not have sales that are expected to reach this number in year five are looked at with closer scrutiny. Projects which fall under the low number are nonetheless put into the portfolio if such a project supports a division which has small sales but high economic value (EVA).
5 = High (> $50MM). 4 = Strong ($40MM< X < $50 MM) 3 = Medium ($20MM < X< $40MM) 2 = Low ($10MM < X< $20MM) 1 = No sales (Below the waterline, < $10MM) Profit Potential (margin of base business)
The numeric value assigned to each category is industry or organization dependent. Numeric values are typically based on the CFO’s expectations for profit margins for the divisions with the strongest to weakest financial performance.
5 = greater than 20% 4 = 15%to 20% 3= 10%to 15% 2 = 5% to 10% 1= less than 5%
Performance/Cost Matrix Position Versus Nearest Competitor.
This attribute looks at the products which will come out of the project. The team member is asked to stand back, take a look into a crystal ball and try to critically compare the future product(s) versus what the nearest competitor is expected to be offering the market at that time of introduction of our product. The two areas that looked at for each level are: Performance and cost-to-produce/market.
5= better performance, lower cost. 4 = better performance, higher cost. 3 = equal performance, lower cost. 2 = lower performance, lower cost. 1 = lower performance, higher cost
Overall Market Growth Rate
This attribute is used to take a look at the market growth rate in the next five years for the anticipated products/process improvements that will come from the project.
5 = High: Market growth rate above 20% 4 = Medium: Market growth rate between 8% and 20% 3 = Low: Market growth rate between 4% and 8% 2 = None: Market growth rate between 0 and 4%% 1 = Negative: Market growth rate is below 0%
Life Cycle Position for Business Market Targeted
This attribute is used to take a look at the current maturity of the industry to be serviced by the proposed project’s products/services. Some of the issues that arise here are focused on whether the company should invest in a business that is declining or harvest what financial profits they can and then exit.
5 = Growth: Industry/business presents ample opportunities for new products, financial reward. Market growth rate over 2O% 4 = Growth, reaching maturity: Past inflection point of growth curve. Industry/business presents ample opportunities for new products, financial rewards. Market growth rate between 5% and 20% 3 = Mature: This business will continue to be profitable and investment should be made. Market growth rate between 0% to 5% 2 = Mature, beginning decline: This business will continue to be profitable and investment should be made. Market growth rate below 0% 1 = Declining: This market is in decline; this business should be harvested to extract financial profits and then exited. Market growth rate is below -3%
Environmental Impact Relative to Current Business Practice
5 = Positive: The new products/process improvements will be environmentally friendly. 4 = Significant: The new products/process improvements will have at least two environmentally friendly components. 3 = Some: The new products/process improvements will have at least one environmentally friendly component which is an improvement over existing products/process improvements. 2 = Neutral: The new products/process improvements will have the same environmental impact as existing products/process improvements. 1= Adverse: The new products/process improvements will be less environmentally friendly than existing products/process improvements.
This included items such as Customer Contacts, Sales Strength, Logistics Systems
Segment Share of The Company Vs. Its Largest Competitor.
The current market segment share for a particular market serviced by the Corporation and its nearest competitor are analyzed to see if: (1) the company has a segment share that is 1.5 times larger than the nearest competitor, (2) if the company has nearly equal share in the market or (3) if the company has significantly less of a market share than the nearest competitor.
5 = High (greater than 2.0 times) 4 = Large (between 1.2 and 2.0 times) 3 = Medium (between 0.8 and 1.2 times) 2 = Low (between 0.2 and 0.8 times) 1 = None (less than 0.2 times)
This attribute checks the Corporate knowledge of the market where the planned launch of the new product/process improvement is to take place.
5 = Core: We know this market well. Our marketing people are on a first name basis with the top 20% of market segment customers. 4 = Player: We are a player in this market. Our marketing people are on a first name basis with one or two of the top customers in this market segment. 3 = New but familiar: We haven’t sold products in this market before, but it is similar to other markets we have entered in the past. The marketing people know how to plan a product introduction. 2 = New, but know where to go for help: We haven’t sold products in this market before, but the marketing people know who to contact in order to plan a product introduction. 1 = Unfamiliar: This is a new market for the company with new rules and new players. Our marketing people are starting from scratch.
This attribute checks the Corporate knowledge of the technology related to the project concept.
5 = Core: We have corporate resources/experts familiar with this technology. We can quickly layout a solid research and development program. 4 = Player: We are a player in this market. We have one or two experts in this field. They can layout a solid research and development program after a quick refresher from the literature and personal contacts. 3 = New but familiar: We haven’t worked in this area before, but we have corporate resources or experts that have knowledge in a related field of science and this knowledge can be used as a foundation block. 2 = New, but know where to go for help: We haven’t done work in this area before, but the technical people know who to contact to plan a research and development program. 1 = Unfamiliar: We don’t have any technical knowledge developed in the corporation in this field of science or applied technology. We don’t have any immediate appropriate external contacts.
Correct Division Personnel Involved
5= Have full and appropriate resourcing by the division slated to commercialize the project: We have the right individual identified and assigned as the project champion in the division for which the project is targeted, the individual has agreed to be the project champion, other necessary resources are assigned to the project. 4= Have appropriate resourcing by the division slated to commercialize the project: We have the right individual identified and assigned as the project champion in the division for which the project is targeted, the individual has agreed to be the project champion, not all other necessary resources have been assigned to the project. 3 = Have some resourcing by the division slated to commercialize the project: We have the right individual identified and assigned as the project champion in the division for which the project is targeted, the individual has agreed to be the project champion. Other necessary resources have not been assigned to the project. 2 = Have divisional people signed up: We have an individual identified as the project champion in the division for which the project is targeted but the individual is not the best person to be the project champion. 1 = Have no commitment within divisions: We have not been able to identify a division champion, or get current or future resources identified.
Availability of Personnel (functional completeness of team)
Do we currently have the resources in house to do the project?
5 = Full resources are present: We are 100% resourced to run this project today. A cross-functional, cross-organizational team is in place. 4 = Almost all resources are present: We are 90% resourced to run this project today. A cross-functional, cross-organizational team is in place. One or two key functions or organizations are missing as active team members. 3 = Most resources are present: We are 80% resourced; we are missing one or two functions on our desired team, all other team functions will be filled by resources currently available in the Corporation. 2 = Some resources are present: We are less than 50% resourced; we are missing more than two functions on our desired team, half the other team functions are filled by resources currently available in the Corporation. 1 = Don’t have the needed resources: We have less than 20% of the human capital resources identified as critical to the success of the project; we will need to look outside of the Corporation for these resources.
Availability of Personnel (time until available)
This attribute is used to identify when the needed resources will be available to work on this particular project.
5 = resources available now: 95% to 100% of the resources are available now. 4 =resources available now: 80% to 95% of the resources are available now. 3 = resources available to work in 6 months. 95% to 100% of the resources are available in 6 months’ time. 2 = resources available to work in 6 months. 80% to 95% of the resources are available in 6 months’ time. 1 = resources not available for 1year. 80 to 100% of the resources are not available for one year or more.
Forecast Probability Of Commercial Success (Risk)
We use this attribute to measure the “betting-person’s” feel for commercialization of the idea/product.
5 =High: The betting-person would believe that this project has an 85% to 100% chance of successful commercialization. 4 = Good: The betting-person would believe that this project has a 60% to 85% chance of successful commercialization. 3 = Medium: The betting-person would believe that this project has a 40% to 60% chance of successful commercialization. 2 = So-So: The betting-person would believe that this project has a 15% to 40% chance of successful commercialization. 1= Low: The betting-person would believe that this project has a 0% to 15% chance of successful commercialization.
Project Completion Index
On-going projects are evaluated at the same time as new project concepts to ensure the on-going projects are still on the right track. This attribute is used to measure how much progress the project has made towards commercial success.
5 = In scale-up: Stage-Gate stage 4 4 = In development: Stage-Gate stage 3 3 = In feasibility: Stage-Gate stage 2 2 = In preliminary assessment: Stage-Gate stage 1 1= In idea: Stage-Gate stage 0
Project Velocity Index
On-going projects are evaluated at the same time as new project concepts to ensure the on-going projects are still on the right track. This attribute is used to measure how fast the project is moving towards commercial success.
5 = Less than 4 months average per stage . 4 = Between 4 months and 6 months average per stage. 3 = Between 6 months and 9 months average per stage. 2 = Between 9 months and 12 months average per stage. 1= More than 12 months average per stage
Graphic display of the above attributes can now be used to support the project selection process. This is done by constructing a visual image using Microsoft Excel or an equivalent program. The image is so constructed is shown in the “Star Map and Attributes” figure.
Each of the anchored scales is shown radiating from the center. The score for each attribute is marked as either being 1, 2, 3, 4 or 5. This particular graphic shape was developed by Betty White at California State University Long Beach. She found that the human eye and mind are very quick to process images that have filled and whitespace patterns. In the example shown one can see there is a high degree of commercial fit, a few holes in the technology position and return, as well as having capability gaps which would need to be filled to make the project successful.
This concept has been carried further by building out even more the number of axes to deal with the rewards, risks, and capabilities. Such an example is shown in the “Star Map and Attributes Detail” figure.
In the example shown there are some elements of risk in the lower left quadrant that need to be addressed and there will be some technical backfilling required to make the project successful. A better view of the attributes being analyzed as shown in the “Extended Star Map and Attributes” figure.
Anchored scales and attributes can be modified to align with any company’s needs and environment. Additional example attributes and their anchored scales are shown in the “Additional Anchored Scales for Fit and Attractiveness” figure and the “Additional Anchored Scales for Risk and Capability” figure.
It is also important to note that anchored scales need to be filled out not by a single person but by a team of people. The team should have a cross functional viewpoint. Marketing, technical, and business backgrounds are important to ensure that the answer is as unbiased and enlightened as possible. A common mistake to make in picking project teams is to pick those people who have hierarchical seniority within a company. What is better is to pick people who really have the best knowledge of the field and can best evaluate the projects. Often times this means gatekeepers, research fellows, senior sales people who are outside the traditional management structure. What is required is utilizing all those that have the needed background and experience to make the best evaluation of each attribute.
The above sections use visual displays to reflect information. It should also be noted that when they’re just a few projects to evaluate a management team can just look at them and determine the best fit for the corporation. There is no need to make something complicated that can be done simply.
For some individuals looking at so many anchored scales and star diagrams can be confusing rather than simplifying. Yet, because of the problems with using only a single project rating score, something in-between these two extremes was found to work best. Thus some companies have modified the Excel spreadsheets underpinning the star maps to create a simpler looking summary visualization. The intermediate step is shown schematically in the “Star Map Attributes Summarized For Strategic Fit, Attractiveness, And Competitive Position” figure.
The individual arm scores are then summarized in the areas of strategic fit, attractiveness and competitive position. Such summary value for each of these three areas allows the project worth to be projected a distorted triangle.
The advantage of the “R& D Project Action Based on Triangle Shape” figure graphic display is that after management teams are trained in looking at this visualization, they can see by the shape of the triangles what the appropriate R&D course of action should be.
If in the “R& D Project Action Based on Triangle Shape” figure an equal lateral triangle is present, then the best course of action would be to diversify the technology and spit it out is because it’s strong on all attributes. When the competitive position is weak yet strategic fit and attractiveness is good, it’s OK for a company to go ahead and invest in the technology either with its own resources or with a partner, but the technology has to create a significant consumer desired feature or the project should not be funded. Conversely if it’s the attractiveness axis that is weak yet strategic fit and competitive position look good the best thing to do is to re-target the project into markets where higher returns can be obtained, or kill the project.
Another approach is to pick projects to create a single combined score for each project and then rank order projects by this combined score. This is done by taking each anchored scale value and multiplying it by an attribute’s weighting factor to get a score for each attribute. These individual attribute scores are then subsequently summed with all other attributes scores to give an overall project value. Management teams can then evaluate projects based on those with the highest scores.
As mentioned before, Betty White at California State University Long Beach found however that it teams actually made better decisions if they could see the patterns rather than numerical sums. Buried in the patterns were nuances as to why one project might have hidden features or attributes that would make it a better bet for corporation over a project that might have a slightly higher numeric score. It is for this reason that several methods are mentioned in this section.
In choosing the best visual display of information it’s important to try several different approaches with a company’s management team and then use the one that provides the fastest, highest-quality, and stickiest decisions. There really is no one right answer. It depends upon the Meyers Briggs types of the senior management team. Since most executive teams are relatively small it’s appropriate and time effective to match decision-making style to executive team makeup.