In past ValuePoint articles, Don Creswell has discussed the “R&D Grid” which was introduced in detail in “The Smart Organization” book by David and Jim Matheson. The grid has been renamed the “innovation screen” in Portfolio Navigator® but the function remains the same: displaying projects within a portfolio based on risk vs. reward.
Take the Innovation display, which divides New Product Development/R&D projects into four types: Bread and Butter, Oysters, Pearls, and White Elephants. Management accountability differs dramatically among these segments.
- Bread and Butter: These are projects which have a high probability of succeeding, but a relatively low value if successful – often product improvement or cost reduction type of applications. Essential to the near-term well-being of the company. Accountability for management of these projects can usually follow a common pattern: does the project come in on time, within budget, and meet its stated goals?
- Oysters: These are hard projects with a low probability of succeeding, but a high value if successful – often products or processes that will create new offerings to the company or revolutionize existing offerings. Essential to the long-term well-being of the company. Traditional accountability for the management of these projects would lead to a reduction in scope (value) of the project which would increase the probability that the project will come in on time, within budget, and meet its stated (reduced) goals, effectively becoming a Bread and Butter project. If this is not possible, managers will flee from this type of project. A more effective type of accountability would encourage the manager to:
- Find out as early and inexpensively as possible if the project is going to fail (“fail early if you are going to fail”).
- Choose among alternatives that increase/decrease the scope/value of the project and its probability of success.
- Steer the project to meet (or enhance) the long-term strategic goals of the company.
- Pearls: These are easy projects with large value – often Oysters that have come close to succeeding and may provide long-term benefits for the company. Bread and Butter type accountability works here, but care must be taken not to burden the project with unreasonable demands or expectations.
- White Elephants: These are projects that are unlikely to succeed, and would not be worth much if they do succeed; low-value expenditure of valuable resources, though sometimes mandated. Much like Oysters, accountability should emphasize “fail early if you are going to fail” and/or “try to improve the scope/value of the project”.