Imagine that you are Indiana Jones. A series of ancient doors lie before you. Behind one – unimaginable success, profitability, and reward. Behind the others – defeat, loss and failure. You have but a single key and too many possible doors – which to choose? Does this sound like your organization? This is the constant dilemma facing those in portfolio management.
Pharma faces exploding R&D costs, falling productivity, high failure rates and persistent competition from generics. The need for effective portfolio management is a forgone conclusion. Every drug company utilizes some management process to ensure the success of their portfolio. But certain approaches can be substantially more effective than others.
The Nature of the Beast
Historically, organizations have prioritized and applied resources against the major (or most politically connected) projects in their portfolio. Sound familiar? Although this is the easiest and seemingly most obvious solution, it is not always the best or most efficient one. Projects evolve, expectations change, results and requirements conspire over time. These can derail the best laid initial plans and portfolios. By returning to the process that “got you there” and reapplying that “thinking,” you only create more issues and deeper frustrations. The cycle of performance despair.
Resource-directed portfolio management has enabled organizations to extract a competitive advantage from the application of valuable, unique and scarce resources. Traditionally, resources are any human assets, financial strengths, processes or knowledge brought to bear by your organization to fulfill its strategic initiatives. This definition illuminates an underlying problem faced by pharmaceutical companies. Various factors must intelligently be brought to bear in a complex and dynamic reality to produce a profitable outcome within an acceptable timeframe, under regulatory scrutiny. Unfortunately, all of this usually occurs in a vacuum of understanding around the organization’s resources potential, leading to poorly supported or weakly delivered project objectives. So, which approach(s) make the most sense and can consistently provide the highest ROI and prospects for success?
Obviously, your initial strategic and organizational assessments must be robust. Therapeutic areas, finances, markets, production and R&D capability and internal and external variables all must be understood, evaluated and tracked well before portfolio planning begins. Only then, can the heavy lifting of portfolio resource management begin.
1. A Solid Benchmarking Strategy – Hint: You Don’t Have to Only Look To Pharma
Your first step should be to create a benchmarking strategy to obtain insights into the best practices in portfolio resource management. By reviewing how those in other industries and companies operate, you can compress your learning curve, establish solid performance metrics and save valuable time. It’s best not to restrict yourself to the pharmaceutical industry for ideas. The transportation, manufacturing and software industries all can provide “ah-ha” moments and creative solutions to your planning problems.
The logistics maven, UPS, has mastered the art of redirecting resources, realigning support and quickly integrating all of its formidable resources to meet changing customer and seasonal demands. A resource management plan that is sensible for them in July is useless in the holiday rush of December. Their well-won success in global distribution is a direct consequence of their superb resource management capability. In addition to providing your portfolio teams with a solid lift-off, you can gain a deeper sense into how good portfolio planning should perform and execute.
2. Identify Your Resources
A good second step is to identify all of the available or potential resource options that you have which match your anticipated portfolio plan.
- Are there resources in other sites, countries or departments that could be applied in the portfolio?
- Should you hire-in, or train your people, develop in-house, or purchase new capabilities and technologies?
- Can existing resources, tools or processes in one area be repurposed to support another, new one?
- Do you need full resource support, or can people be shared, or rolled on/rolled off for peak demand periods?
Many organizations fail to adequately understand or gauge the full breadth and depth of their potential resources and thereby artificially limit what they could accomplish. When you begin with assumptions or suppositions, you have already significantly undermined the possible capability of your alternatives. Use a broad-based portfolio team from different sites, departments or countries. This ensures that all options have an equal probability for consideration.
3. What Goes Where, When?
The third step requires an evaluation of how those resource options can best be leveraged across the portfolio mix.
- Which resources and in what combinations, provide the greatest ROI with the lowest cost?
- Will they change over time?
- How can I measure effectiveness and impact?
This is where software and tools such as decision trees, greedy algorithms, resource matrices or scenario modelling may be particularly impactful. Singly, or together, these instruments will allow you to ask various “what-if” questions, without the burden of having to learn from failure. Because they execute brute-force quantitative analyses quite well, these approaches are seductive. But be careful to evaluate the outcomes against your internal experts for a reality and fitness check. Once you have created an optimal resource mix and launched, it is critical that you are able to measure the performance and outcomes of your portfolio.
4. Did We Make the Honor Roll?
An important ongoing responsibility is having the capability to carry out a real-time analysis of your portfolio performance. This provides an appropriate answer to the “How are we doing right now?” question. It enables quick responses to unexpected outcomes or evolving conditions and requirements that are inherent in any portfolio. In fact, it may be wise to develop short-term and long-term forecasts to optimize staffing over time as conditions and demands change. Additionally, this philosophy allows you to compare, balance and rebalance the portfolio resource demands against financial costs,
In fact, it may be wise to develop short-term and long-term forecasts to optimize staffing over time as conditions and demands change. Additionally, this philosophy allows you to compare, balance and rebalance the portfolio resource demands against financial costs, outcomes, and skills capability.
5. What Needs Adjusting?
Finally, any good portfolio resource management plan must have an internal stage-gate review process. This can be as simple as a quarterly meeting of the principals crafting a go/no go continuation decision based on the current performance metrics. Nothing is more financially draining or demotivating to an organization than an unbalanced, weak portfolio, or initiatives that hang around long past their “expired by” date. It drains and misapplies critical
Nothing is more financially draining or demotivating to an organization than an unbalanced, weak portfolio, or initiatives that hang around long past their “expired by” date. It drains and misapplies critical resources while wasting time and money that could be better applied elsewhere. Effective portfolio resource management is a dynamic beast. It requires insight, flexibility, and responsiveness to balance and extract the full value from your portfolio. Solid portfolio planning beforehand, minimizes failures and creates a culture of excellence that is both sustainable and highly profitable. What are your war stories?