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Increase Innovation ROI with Project Portfolio Management
In Jim Andrew's new book, Payback: Reaping the Rewards of Innovation, he describes the typical innovation project portfolio as being divided into three parts: One-third are proven winners. Another third are still in the beginning stages, and can't be fully evaluated. The final third haven't borne real fruit, but have been kept alive by true believers who refuse to see the writing on the wall. No wonder that 48 percent of senior finance executives surveyed by Andrew in 2006 are dissatisfied with their financial return on innovation spending.
For a company like GE, with more than 90 projects in its current innovation portfolio, knowing when to pull the plug on projects and when to greenlight others requires a disciplined approach to project management. Enter project portfolio management (PPM), a strategic approach to project management that helps companies achieve maximum project value through the continuous process of evaluating and managing projects against key performance metrics and strategic business objectives.
PPM was originally used by construction and engineering firms to monitor the progress of their infrastructure investments; now PPM has gone mainstream. It is being deployed by companies seeking to achieve excellence in people-process initiatives such as project and program management—two hallmarks of success in a global economy driven by cross-border collaboration and innovation. Although most companies use PPM to govern IT investments, analyst firms report that the solutions are catching fire in other key business processes that directly affect innovation success rates, including R&D, marketing, facilities management, M&A, asset and capital management, and product lifecycle management.
Given Andrew's findings that most companies don't rigorously track their innovation investments from start to finish, the potential for using PPM solutions such as Oracle Project Portfolio Analysis and PeopleSoft Project Portfolio Management to increase innovation ROI is substantial. Andrew's research points out that CFOs currently use only a handful of metrics to track the performance of their innovation projects, with 63 percent admitting to monitoring five metrics or fewer. PPM solutions enable CFOs to score and rank projects by multiple metrics, from standard financial criteria, such as net present value, payback period, internal rate of return, and ROI, to more-competitive metrics, such as time-to-market, customer satisfaction, new product sales, risk mitigation, and globalization. In addition to monitoring key performance indicators, PPM solutions also give CFOs the bigger picture about how best to allocate human, IT, and capital resources to fund the innovation projects with the greatest chance of success. And as Andrew points out in Payback , when innovation is successful, the impact on profit margins and stock prices can be substantial.
For more information about how Oracle Project Management solutions can help your organization improve its return on innovation, go to http://www.oracle.com/applications/project-management.html
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