R&D Portfolio Management: a guide to optimize your projects

Author: Sofyân Bicep, expert consultant in project portfolio management (PPM)
Projets R&D : le guide pour optimiser votre portefeuille

In the complex world of Research and Development (R&D), project managers and project management offices face a maze of uncertainties: projects that can take years or even decades to complete, tight budgets and sometimes huge costs for questionable benefits, or complex management of resources over the long term.

And the question that torments 70% is: “How to choose good projects to obtain the desired outcomes?”.

Do you think that R&D portfolio management is an impossible task? Not at all! Here we will examine the founding principles of a methodology designed to provide you with the keys to better prioritize, manage and monitor your R&D project portfolio.

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Customized financial reporting: the starting point for profitability

Money is the most pressing issue, so don’t forget to prepare a customized financial report as a matter of priority. This will give you an overview of the financial health of your projects at all times.

It is essential to use the same financial indicators for each of the projects in order to be able to compare them objectively and make the right decisions.

You should ask yourself which financial indicators, standard or specific, are the most relevant:

  • Net Present Value?
  • Internal Rate of Return?
  • Return on Investment (ROI)?
  • Payback ?
  • Other indicators specific to your organization? Which ones?

After this analysis and a consensus on the KPIs to be followed, it is essential that you can, in each of your projects:

  • Enter in a simple way in a centralized register the financial data that will allow you to calculate these indicators.
  • Generate a customized report for each project or for the portfolio as a whole.

This will give you the visibility you need to benchmark your projects against these indicators and make decisions based on reliable data.

Data entry for calculating financial indicators
Génération de rapports personnalisés
Generation of customized Excel reports with the values of the financial indicators

Evaluate your R&D Portfolio Management from all angles with the scoring method

Financial KPIs are essential, but not sufficient. It is recommended that you provide your project managers with a set of criteria, some of them specific to your core business, so that they can evaluate your projects as comprehensively as possible.

At Triskell, we recommend the scoring method to evaluate your projects in-depth. It brings new elements of comparison between your projects and enhances your work.

To this end, the evaluation criteria for each project must be documented according to different topics:

  • Profitability criteria.
  • Risk criteria.
  • Strategic impact criteria.

The table below is illustrative and is based on a portfolio of industrial projects.

Profitability criteria
Development costs, average annual volume (in tons), amount of investment, ETPs required.
Risk criteria
Market volatility, competitive activity, regulation, technical or technological complexity.
Strategic impact criteria
Competitive advantages, alignment with strategic vision, impact on current activities, value for the customer.

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To avoid bias, neither the weighting nor the scoring of each criterion should be disclosed to project managers.

That’s it! The result is a side-by-side comparison of the projects with their different scores.

It is recommended that this information be presented in a customized report, such as a bubble chart, so that it is graphically and immediately legible.

Saisie des critères d’évaluation selon les axes Gains & Risques
Introduction of evaluation criteria according to the Benefit and Risk axes

Below is an excerpt from an industrial client’s project portfolio. The projects that stand out are Initiative SolarSync and Opération Future Tech Solutions, with a higher win score.

Example of Scoring Comparison Chart
Example of a comparison chart

With the help of this chart, you can quickly identify the projects to be removed, located in the red box, as well as those that meet the requirements, located in the green box. Core projects should be promoted to achieve the green box by giving them the necessary means (team building, hiring experts, optimizing the supply chain, optimizing production processes, allocating budgets, etc.).

Exemple de bubble chart
Example of a bubble chart

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Monitor the progress of your R&D projects with dashboards

This is even more important for R&D projects, which tend to have longer time frames than any other type of project. It is essential to regularly monitor these projects and ensure their relevance or feasibility against critical objectives.

Phase-Gate methodology for tracking progress

Most of these projects adopt a Phase-Gate approach. This is the methodology we recommend at Triskell for R&D projects.

Each project is divided into phases: e.g. idea, feasibility, conception, industrialization and commercialization. Each phase is marked by a milestone or Gate at which the project is re-evaluated.

This reassessment makes it possible to verify that the project is consistent with the company’s strategy, remains technically or technologically appropriate, continues to be profitable, etc.

This article details the strengths of the Phase-Gate methodology:

Dashboards, an essential management tool

Adopting this approach is important, but the right tools must be in place to monitor and measure this progress. A customized dashboard containing, for example, a chronological chart with all the phases and milestones of the project is a great advantage for monitoring.

En vert plein les phases et gates franchis, en blanc et vert la phase en cours, en rouge ceux en retard et en gris ceux à venir
Green for phases and milestones reached, white and green for phases in progress, red for phases behind schedule and gray for upcoming phases.

The dashboards should be complemented with other monitoring indicators depending on your needs, such as the SPI (Schedule Performance Index), which measures project efficiency in relation to the planned schedule, or the CPI (Cost Performance Index), which measures project efficiency in relation to the budget. Everything can be exported to Powerpoint or PDF to share with your collaborators.

Interest in milestone checkpoints culminates in the use of a checklist to verify that the expected results at the milestone have been validated and are available.

The execution of a workflow allows to ratify the decision taken by the committee, i.e. whether the project should:

  • Proceed to the next phase (go)
  • Abandon (kill)
  • Temporarily suspend (hold), etc.

Milestone checkpoints, with a checklist and workflow, ensure that only projects consistent with the company’s strategic requirements progress. Projects that are not consistent will be disqualified and stopped in time.

Example of a project board
Kanban board du portefeuille avec les projets regroupés par phase en cours et affichant des indicateurs
Kanban portfolio dashboard with projects regrouped by phase in progress and display of indicators
Exemple de checklist au moment du passage de gate
Example of checklist at milestone crossing point
Exemple de workflow d’un gate
Example of a milestone workflow

Ensure the financing of your innovation projects

 The financing of your R&D projects can be optimized through schemes such as the Innovate UK Smart Grants, with which UK registered organizations can apply for up to £25 million for R&D innovations that are transformative and commercially viable.

However, this plan is subject to strict auditing, so you will have to identify the activities eligible for CIR and establish a record of the time spent by your employees, in order to prepare specific reports to justify the credit claim.

We recommend establishing a tool for tracking and recording data, so that it can be easily audited.

Leverage a PPM tool dedicated to R&D Portfolio Management

That’s it as far as the process is concerned. That said, this approach is useless if it is not well put together. Centralized, uniform, reliable and tangible information must be available to make good decisions quickly.

Forget about Excel files, as they are never up to date and impossible to integrate, you need dynamic dashboards, updated in real time and available in a single click!

On the other hand, a good project portfolio management tool will become your best ally.

At Triskell Software, we have extensive experience working with R&D managers and project management offices in many SMEs and large companies around the world. Our NPD Ready solution (NPD for New Product Development) will allow you to overcome this phase with ease, putting at your disposal:

  • A predefined data model compatible with Phase-Gate and other approaches.
  • A collection of relevant metrics and KPIs at your disposal.
  • Specific functionalities such as resource management and capacity planning, time recording, risk analysis and master planning at all levels and for all stakeholders, from R&D managers to sponsors, project management offices and project managers.

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Conclusion

In summary, this methodology is not only a solution, but also a transformation. This approach equates to a clear vision amidst the turmoil of innovation, to decisions based on predicted data rather than guesswork.

Now you know the recipe for building an optimal portfolio of R&D projects: you must choose and measure the right indicators, evaluate them using scoring tools, meticulously and regularly monitor the progress of the projects using the phase-gate methodology, and encourage the funding of these projects.

Don’t let your portfolio of R&D projects remain in no man’s land. Let’s get to work!

Sofyân BICEP

Sofyân is a senior consultant at Triskell Software, specialized in project portfolio management in the industrial sector.

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