Link Strategy to P3: Pipeline, Process, Portfolio
We have encountered companies struggling with the implementation of their strategies because there is no clear linkage between strategy and execution. The approach we have seen work best includes linkages between strategies and the design and implementation of the P3 (pipeline, product development process, and portfolio management system).
PIPELINE
New-product ideas are identified and vetted during the strategic-planning process (for example, discussion of new categories, new markets, and platform generations) and communicated most visibly in the road maps. Though the ideas on the product road maps should proceed through the product development process with few obstacles, serendipitous ideas require careful evaluation based on several dimensions, including strategic fit.
Case Study
Strategy also provides guidance and boundaries for project team members, starting with ideation. The following example provides a great illustration (it may be dated, but it really drives the point home):
Whirlpool was very brave in openly discussing its lack of strategic boundaries in the May 8, 2006, issue of Business Week. The article revealed that management had learned the hard way by sending a team off to generate new-product ideas without the guidance of a product strategy, resulting in wasted time and effort.
The company selected a 25-person team from its European staff and asked the team to develop out-of-the-box ideas that would differentiate Whirlpool in the future. Team members were freed from their regular jobs and spent a year together, brainstorming ideas in the Italian Alps.
A year later, the team presented its best idea to Whirlpool executives. It was an idea for racing stationary bicycles over the Internet. It is quite evident that this idea didn’t build on Whirlpool’s strengths and business strategy.
We can all learn from this story. A good strategic framework can save us from a path of folly and direct us to a path of relevant product ideas. This may sound overly rigid to some, but creativity and breakthrough ideas are possible with a focused approach.
PRODUCT DEVELOPMENT PROCESS
Once the idea enters the product development process, the product concept adapts to changes in customer needs, technologies, and competitor actions. It is important that the product concept remain true to the strategic objectives, and this can be achieved at the executive and team level. The executive team is responsible for evaluating projects based on strategic fit and other criteria.
At the team level, a high-level overview of the strategy is very helpful for the team to revisit throughout the process to ensure that the project is meeting its strategic objectives.
PORTFOLIO
The executive team evaluates the portfolio of product development projects just as an investor evaluates an investment portfolio. The executive team reviews the totality of the portfolio and adjusts it as necessary to maximize return on investment. This includes managing the level of risk and diversification, and staying true to the objectives of the portfolio, in order to achieve the company’s strategic initiatives.
The strategic initiatives are translated into project priorities. The portfolio management system monitors the portfolio and manages the assignment of resources to projects. Clear priorities from the strategy ensure that the organization executes the projects that will deliver the most value.
