Yet another company to be presented in our ongoing project portfolio management series is a satellite operator and producer that operates several dozen satellites providing communication services to businesses and government agencies, and broadcast TV and radio channels to audiences worldwide.
Despite an acceptable financial performance the executives of the company felt that there were several challenges awaiting the organization in the near future. One of the potential problems were saturated existing markets and stiff competition from other satellite operators. As a result the company could not assure the same growth rates as were achieved in the previous years.
The organization needed to move into the new emerging markets and develop new products and services for both developed and developing countries.
As a result of the analysis of the challenges facing the organization the executive management created the following strategic plan for the upcoming five years:
- Maintain market shares in developed countries
- Increase investments in the developing countries
- Improve innovation
- Improve vertical integration of the organization (develop end-to-end solutions)
The Scoring Model
The scoring model developed by the company management consisted of the following six variables (see also Table 1):
- Strategic Alignment
- Customer Need
- Synergies with the Existing Business
- Technical Feasibility
- Profitability (Payback)
- Commercial/Technical Risk
The first variable added to the model was the popular "strategic alignment" category. The points have been allocated in the following fashion:
- Fits 1 of the criteria - 1 point
- Fits 2-3 of the criteria - 5 points
- Fits 4 of the criteria - 10 points
The strategic fit variable has been deemed to be a "kill" category. If the project reflected none of the company strategies it would be automatically removed from the list, unless it was designated as "joker" or a regulatory project.
Customer need was the next category added to the scoring matrix. If there were few requests for the product from the sales department, the project would receive a score of one point, if there were several requests - five points and finally the products that were requested by many customers would receive full ten points.
The third variable included was the " Synergies with the Existing Business" in order to align the future product with the existing company offerings. The points have been distributed in the following fashion:
- Difficult to cross-sell the new product with the existing product lines - 1 point
- Fairly easy to cross-sell the new product with the existing product lines - 5 points
- Very easy to cross-sell the new product with the existing product lines - 10 points
Technical feasibility was the next variable added to the model in order to steer the company away from larger, very complicated projects. The points in this category were awarded as follows:
- Complex project involving a lot of external expertise - 1 point
- Somewhat complex project with certain degree of outsourcing involved - 5 points
- Relatively simple project, no or little outsourcing is required - 10 points
The projects that were deemed to be very complicated with a lot of outsourcing involved would be removed from further consideration, again, unless designated as "joker" or regulatory endeavors.
Finally, in order to promote financially attractive ventures the executives included the payback variable to the model with the points being distributed in the following manner:
- T > 5 years - 1 point
- 1 < T < 5 years - 5 points
- T < 1 year - 10 points
The projects with the payback of more than ten years would be automatically killed and removed from further consideration unless they were "joker" or regulatory endeavors.
The executive team decided to monitor the portfolio performance using the risk versus reward diagram (see Figure 1):
The management team decreed to proceed with the popular top-down, bottom-up model with the following designated resource buckets:
- Mandatory and maintenance projects - 20%
- Product improvements projects - 40%
- New product lines projects - 40%
About the Author
Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East. Read Jamal’s Blog @ www.thinktankconsulting.ca
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Jamal is an author of two very popular books: Delivering Exceptional Project Results: A Practical Guide to Project Selection, Scoping, Estimation and Management and Project Scope Management: A Practical Guide to Requirements for Engineering, Product, Construction, IT and Enterprise Projects.