Optimal portfolio for R&D and NPD projects

Abstract

Summary form only given. For continued success in the market place firms should introduce new successful products into the market, and gradually retire older mature products. The introduction of new products should be timed properly; it should also produce an appropriate product mix so that the strategy of the firm is continued and strengthened. The portfolio of R&D and new product development (NPD) projects should be structured such that the goals of the firm are met. There has been considerable interest in this field. Firms want to optimize the use of their resources invested in R&D and new product development projects. The R&D and NPD portfolio should fit the strategic vision of the firm in terms of-technology, growth and areas of business. Once the projects in the portfolio are plotted in the contextual model it is relatively easy to see where the holes in the portfolio are, and where the over representation of projects is. With such an understanding one can develop an optimum portfolio of NPD projects consistent with the strategy of the firm, and determine the appropriate number and type of projects one should have in each of the cells of the contextual cube. The type of mix of projects in the portfolio for a specific strategy has to be determined based on the strengths and weaknesses of the firm, as well as the managerial style of the organization. A very general set of guidelines is proposed in the paper. These guidelines take into account the nature of the projects, the type of effort involved and the strategic fit of the projects with the firm's strategy.