1. Confidential Strategic Innovation Planning for Tomorrow's Products Steve Rogers Senior Consultant Research and Application Development Sopheon July 2008

2. Confidential Food/Bev Chemicals Consumer Goods A&D, Auto High Tech, Services Customer Examples Sopheon – Who We Serve Fortune 50 Bank

3. Confidential MAKING PROCESS “OBVIOUS-TO-USE” “One of the key strengths of the Accolade product is its simplicity. Our users have picked up the technology easily and so are able to concentrate on the benefits it brings—principally, our ability to share the content of our innovation pipeline." Chief Information Officer Cadbury Schweppes plc. Track record BUILT-IN DOMAIN EXPERTISE “We benefited from Sopheon’s domain expertise in product- development best practices and the fact that they have installed and supported similar, successful systems for a substantial number of CPG companies. Their industry-specific know-how gave us an important leg up in developing a process in which we can have confidence.” Vice President of R&D Land O’Lakes “The most meaningful outcome has been the access and visibility into the entire portfolio of new products and product change projects for all of our associates, including key resources in marketing, research and development, quality assurance and operations.” Senior Portfolio / Process Manager

4. Confidential Agenda How Product Portfolio Management makes Business Strategy work How the "Decision Exchange" funnels strategy into operational decisions Using a Product Innovation Masterfile to underpin corporate compliance How to develop a company wide knowledge base How to: Product Portfolio Analysis in practice

5. Confidential Industry Challenges 68% Loss in Share Value in Past 12 Months Manufacturer of chemicals for construction materials did not anticipate dramatic decline in housing market Instead of creating organic growth, GGC financed $1.5B to acquire a housing materials producer before market sank – now they are at threat of defaulting on loans Chemical Industry 75% Loss in Share Value in 12 Months 13 consecutive quarters of losses Over-expanded in midst of market shift to “low-carb” and low-trans-fat foods As Krispy Kremes became easy to find, novelty wore off & consumer interest declined Unable to compete with increasingly broader breakfast offerings of Dunkin’ Donuts Food Industry Sold out to Whirlpool; Iowa- based HQ, R&D Center, and manufacturing plants shut Not prepared for market that shifted from local appliance dealerships to discount “big box” distributors High-end product focus meant business model not able to respond to inroads from new low-cost Asian competitors Consumer Goods Industry

6. Confidential Industry Challenges Sales Manufacturing Marketing Finance R&D/Engineering Senior Executives Market Roadmapping Product Roadmapping Technology Roadmapping Resource Planning Portfolio Management Product Strategy Technology Development Idea Generation Product Retirement Stage-Gate® Process Competitive Threats Economic Turbulence Customer Trends Regulatory Changes Supply Chain Evolution Disruptive Technology New Market Pressures Geo-Political Shifts Changing Demographics

7. Confidential The World Market How Competent is your Innovation to deliver to the World Market? The Enterprise

8. Confidential Resource and cost savings Best-Practice Companies Quickly Eliminate Losing Projects Source: PDMA, PDI, Cap Gemini Best-Practice Companies % of ideas that make it to feasibility % of Ideas that make it to development 2.5% Ideas In Typical Companies Ideas In 12% 5% 23% 46%20% Overall % of resources spent on project failures 25%49% % of revenue from products introduced in the past 5 years Does your company have a Stage-Gate ® system or a “Flood- Gate” system”?

9. Confidential Portfolio Management: what’s it for? Strategic intent Blueprints Development 1. Portfolio Management links Strategy with Operation

10. Confidential Objectives of Portfolio Management? eliminate errors minimize delays maximize use of assets promote understanding ease of use customer friendliness adaptable to customer needs provide competitive advantage reduce excess head count H James Harrington, Business Process Improvement (1991) Criteria for a good business process

11. Confidential Agenda How Product Portfolio Management makes Business Strategy work How the “Decision Exchange" funnels strategy into operational decisions Using a Product Innovation Masterfile to underpin corporate compliance How to develop a company wide knowledge base How to: Product Portfolio Analysis in practice

12. Confidential Finance & Business Planning Q&A Process Sales Manufacturing / Production The Portfolio Management ‘Decision Exchange’ Portfolio Management Business Strategy New Product Development

13. Confidential Schematic: Strategic Business Planning, Portfolio Planning and Product Planning timeline NOW Strategic horizon Financial year Stage-Gate NPD Strategic Business Planning Product Planning and roadmapping Portfolio Rebalancing and Planning plan the future portfolio and rebalance the current portfolio

14. Confidential Dynamic decision process Cooper, Edgett and Kleinschmidt Portfolio Management for New Products (1998) –“dynamic decision process”, –whereby a business list of product investments is continuously updated, revised, rebalanced and reprioritized This is not the process of NPD or Gate-Keeping 2. Portfolio Management is a process in its own right

15. Confidential The portfolio management process Planning – short term horizon: How to deliver the strategic intent based on today’s reality. What Innovation and Development needs to be commissioned? What needs to be measured and what are the targets? Rebalancing – put the plan into action. Monitor the real state of affairs. Adjust the portfolio to meet strategic targets. Implement the decisions within Innovation and Development Assessment and Improvement – did we do what we agreed to do? What changed and why? Were we responsive? Was our information correct? How could we improve our decisions? Methodology is not the key to success Because all methodologies can fail..  if your information lets you down your decisions will let you down  un-implemented decisions are worthless

16. Confidential Agenda How Product Portfolio Management makes Business Strategy work How the “Decision Exchange" funnels strategy into operational decisions Using a Product Innovation Masterfile to underpin corporate compliance How to develop a company wide knowledge base How to: Product Portfolio Analysis in practice

17. Confidential Financial data PDM ERP SCM Product Innovation Product Innovation Gap IP management and knowledge-based information flows demand software support The Product Innovation Masterfile defines the information which needs to be right, i.e. –Accurate –Real-time –Trustworthy 3. Information for Portfolio Management is a by-product of NPD

18. Confidential Information Architecture - Internal Finance & Business Planning Q&A Process Sales Manufacturing / Production New Product Development Business Strategy Portfolio Management Organizational information Research information Decision information Planning information Management information Decision implementation information

19. Confidential Information Architecture Finance & Business Planning Q&A Process Sales Manufacturing / Production Portfolio Management Organizational information Research information Decision information Planning information Management information Decision implementation information New Product Development Business Strategy FTE requirements ROI forecasts Revenue targets Budgets Schedules Risks Status Estimated value Dependencies Market opportunities Business Strategy Product Strategy Decisions Supply Chain

20. Confidential Strategic planning Project financials Risk Management Dependency Management What-if decision support Status Scorecards

21. Confidential Resource Capacity Resource demand What-if decision support Resource pools Risk/Reward Scorecards

22. Confidential Agenda How Product Portfolio Management makes Business Strategy work How the “Decision Exchange" funnels strategy into operational decisions Using a Product Innovation Masterfile to underpin corporate compliance How to develop a company wide knowledge base How to: Product Portfolio Analysis in practice

23. Confidential Information Architecture: Enterprise Knowledge Base Finance & Business Planning Q&A Process Sales Manufacturing / Production Portfolio Management Organizational information Research information Decision information Planning information Management information Decision implementation information New Product Development Business Strategy 4. Grass-roots adoption is the foundation for success

24. Confidential Agenda How Product Portfolio Management makes Business Strategy work How the “Decision Exchange" funnels strategy into operational decisions Using a Product Innovation Masterfile to underpin corporate compliance How to develop a company wide knowledge base How to: Product Portfolio Analysis in practice

25. Confidential How-to’s? How to achieve dynamic portfolio decision making How to run a lean Portfolio Management process? How to support the interaction with other business processes? How to tighten the interaction with the down- stream Development process? How to achieve organizational adoption?

26. Confidential How to achieve dynamic portfolio decision making? Generate real time management information –See the gaps between targets and today’s development investments –Report in real time. The situation can change daily. Highlight trends –Evaluate capacity, capability and the closure of gaps over time –Monitor the success of development Smart tools for scenario evaluation –prioritization, rebalancing, scheduling and dependency analysis –Roll up management data from the actual development status –Insight to prepare decisions ‘Democratic’ or bottom-up support for decision making –Scorecards for reviewer-expert contribution –Feasibility, revenue potential, risks and liabilities

27. Confidential How to run a Lean Portfolio Management Process? Minimise data and time. Identify the essential ‘masterfile’ data for Innovation and avoid double data entry. Best practice reuses knowledge, focusing on distinctive added value. Pre-structured management information on demand, in real time. Don’t lose time collecting information. Reduce the number of atomic systems: Remove isolated departmental applications – connect to central data repository. Deconstruct ‘Monuments’ and Silos. Rationalize process, tasks and ownership logically, not historically Make decision-making transparent and traceable: avoid expensive communication and meetings to keep the organization on track. Responsibilities are clear, everybody knows the focus and understands why. Provide rich process management tools for continuous business process improvement, measuring process effectiveness. Mature the process over time.

28. Confidential How to support the interaction with other business processes? Embed the collection of knowledge from the current toolset on people’s desks Build information flows into the business process, from other systems via that toolset and on into the innovation repository. Make it part of the day job. Cross-system reporting views enabling real time report generation across applications. APIs formalise integration to collect and to feed other systems’ content

29. Confidential How to tighten the interaction with the down-stream Development process? Run Portfolio Management and Development processes in parallel in one database. Ensure transparency and guarantee data quality Integrate information views from both processes for Portfolio Management decision making. Rebalance targets with actual data, considering dates, finances, resources and dependencies. Manage the decision implementation activities. Decisions are actioned at a human level; changes to development projects are immediately visible. New portfolio decisions may be based on a partially implemented scenario

30. Confidential How to achieve organizational adoption? Look for a natural fit between processes, applications, behaviour and expectations. Support a growth path when rationalizing the Portfolio Management process: start simply, concentrate on key deliverables and metrics, slowly move to more advanced and smart functions Software configuration capabilities must be very flexible to be configured and re-configured by the organization itself Give users confidence to work with sensitive information in the system by applying security rules and access management Build on tools the users are familiar with – minimise training re-investment and dovetail with current good practices

31. Confidential Summary The purpose of Portfolio Management is to link Strategy with OperationThe purpose of Portfolio Management is to link Strategy with Operation Portfolio Management is a process separate from Innovation and Development processesPortfolio Management is a process separate from Innovation and Development processes Information for Portfolio Management is a by- product of NPDInformation for Portfolio Management is a by- product of NPD Grass-roots adoption is the foundation of successGrass-roots adoption is the foundation of success

32. Confidential Case Study – Rich Products Global Food Manufacturer Before Accolade Accolade is now being leveraged within its North American and International Business Groups to manage all projects related to NPD and product changes Rich has better access to info through a shared system to all NPD and product change projects Are better able to manage resource requirements more effectively across projects Have enhanced portfolio visibility and analysis through enhanced reporting capabilities Results “The most meaningful outcome has been the access and visibility into the entire portfolio of new products and product change projects for all of our associates, including key resources in marketing, research and development, quality assurance and operations.” Trish Hudson, Senior Portfolio / Process Mgr. “The most meaningful outcome has been the access and visibility into the entire portfolio of new products and product change projects for all of our associates, including key resources in marketing, research and development, quality assurance and operations.” Trish Hudson, Senior Portfolio / Process Mgr. Developed Stage-Gate process in-house in 2002 to better execute manage NPD projects and manage resources Expanded processes and effectiveness with external consultants - Improved time-to-market by 66% Over next 18 months as business continued to grow: Project owners spending 50% of time communicating status Projects arriving late to market Resources constrained on projects