Managing portfolio uncertainties at Company B

Both innovation project portfolios described previously are influenced by multiple portfo-lio uncertainties. In order to develop adequate uncertainty responses, a clear view on the common uncertainties, roles and responsibilities is needed. These themes are pre-sented in further detail in this chapter.

Portfolio uncertainties

Multiple different portfolio uncertainties arise from the interview data at Company B. Es-pecially the projects under the research and technology sector are seen to be character-ized with high levels of uncertainty. Different portfolio uncertainties are compiled into figure 9 below, again classified based on the uncertainty categories presented in chapter 2.2.2. One additional category was also added based on the interview data, as collabo-ration with third parties was seen as significant source of opportunity related to research and development activities at Company B. Again, the uncertainties have also been color coded based on the uncertainty classification: external environment, organizational com-plexity or single projects.

Portfolio uncertainties at Company B

Altogether five uncertainties related to the innovation project portfolio were mentioned in all three interviews: changing customer needs, collaboration with third parties, competi-tive conditions, technological opportunities and threats, and variability associated with project parameters. Customers and third parties were seen particularly important as sources of opportunities for further product development. For example, one of the inter-viewees explains the role of the customers follows:

“Indeed, we need to collaborate closely with customers and listen to the cus-tomer’s needs, since not all wisdom lays here at our facilities. That has been noted multiple times. That is why we need to keep an open mind while listening to the needs of the customer.” – I6

New projects arise to the innovation project portfolios also from collaborations with third parties. Company B has established close relations with different research institutes and universities and organizes innovation events for other companies in order to develop new solutions and create new partnerships. In addition, component suppliers are seen as a valuable source of input in terms of new product development.

Competitive conditions is also significant uncertainty influencing the innovation project portfolios, as it was mentioned in all interviews. This uncertainty is seen to be closely linked to the changing customer needs, as one of the interviewees explains:

“– – and then there is of course competitors, what the competitors are doing. If they launch something pivotal to the market, then we often get feedback from the customers saying that hey, we would need that as well. And that is always a situ-ation where we would not want to end up in. We would want to be the one in our field to launch a new thing and set the standard, so that the competitors have to run after us.” – I8

One of the greatest sources of uncertainty was seen to be related to continuously devel-oping technologies. This uncertainty is described by one of the interviewees as follows:

“But maybe one could say here that the technology is transforming this world more than ever before. So, the pace is accelerating and it is going to be important that how well we are able to increase our competitive advantage through technology.

That is perhaps one of the megatrends that indeed influences this business strongly.” – I8

Hence, the company aims to constantly follow the patenting database to keep track on especially what their competitors are currently developing. Company B also benchmarks

other companies outside the scope of their direct market, that are facing similar chal-lenges and technology trends related to the development of heavy machinery. As one of the interviewees explains:

“We follow technology trends really closely, so what is generally happening for example in the development of the automotive industry or moving machinery. In Finland we do have these moving machinery manufacturing clusters – –, so we share some ideas with them and benchmark each other.” – I6

In addition, variability associated with estimated project parameters is deemed as a port-folio uncertainty by all interviewees. The changing resource situations and the basis of the estimates mentioned both mentioned once can be seen as closely related to this variability. This linkage is explained by one of the interviewees as follows:

“Well perhaps uncertainties would be that if we estimate the workload incorrectly or the resourcing, so that we end up having some key people in too many projects at the same time and the schedules start to fall apart.” – I8

Legal factors were mentioned in one of the interviews as portfolio uncertainties. Espe-cially the lack of clear regulation influences the product development, as no clear stand-ardization exists yet for example for autonomically operating machines. Lastly, potential interdependencies between portfolio components was briefly mentioned by a single par-ticipant. This uncertainty arises from the high number of on-going projects, where possi-ble delays and difficulties to find the relative priority between them might cause some uncertainties impacting the whole portfolio.

Most portfolio uncertainties in Company B are related to the external environment:

changing customer needs, technological opportunities and threats and competitive con-ditions. Collaboration with third parties and legal factors are also seen to fall under this category. When the count of interviews where the uncertainty was mentioned in is taken into account, uncertainties related to the external environment cover 68% of identified portfolio uncertainties. Uncertainties related to single projects, namely the variability as-sociated with the estimated project parameters and the basis of estimates cover 21%.

Organizational uncertainties on the other represent only 11% of these uncertainties, in-cluding changing resource situations and potential interdependencies between portfolio components.

Roles and responsibilities

At Company B, the roles and responsibilities related to innovation project portfolio man-agement are deemed quite clear by the interviewees. These roles and responsibilities are collected into table 15 below. Especially project managers play a significant role in

tackling uncertainties arising from the single projects, although some changes are being made to the current processes. When asked about this clarity of roles and responsibili-ties, one of the interviewees explains:

“Yes, I would say that those are [clear]. The project manager is always responsible for their own project and that is in fact where the development is happening in our case. – – so basically, those things that have to happen in every project are taken into account in this set of questions, where we evaluate if the project needs sep-arate risk assessment or if it can follow this sort of, lighter [process]. But it is con-sidered in every project at some level” – I8

Project managers therefore bear the primary responsibility for risk analysis on a single project level. At Company B, the project manager fills a certain risk management matrix when the project is small, whereas a risk management software is utilized in larger pro-jects. Both the matrix and the software are intended for compiling all potential risks into one place, therefore aiming to support uncertainty management on project level. Accord-ing to one of the interviewees, the sAccord-ingle project risks compiled within the software are also viewed on an aggregated level. Hence, the software also enables identification of potential risk trends impacting the whole portfolio.

Although the project manager is responsible for maintaining the matrix or the software, multiple other stakeholders participate in project risk identification. As one of the inter-viewees explains:

“In my point of view, the risk analysis has probably been at the project manage-ment responsibility area, at least in long-term. But in terms of risk identification, well we recently did a study on this, it involves the project steering group members and project team members and also people from many other functions. It slightly varies based on project, but it goes something like this.” – I7

Another interviewee also highlights the role of R&D managers, product managers and specialists in project risk assessment:

“– – the project manager is probably the one facilitating and leading it [risk man-agement], but others are also involved. – – probably specialists need to be in-volved in the risk assessment, but also R&D managers as well as product man-agers. Those are the ones involved in it.” – I8

Table 15. Key actors, roles and responsibilities related to portfolio uncertainty man-agement at Company B

Project steering groups are also essential actors in uncertainty management. These groups can make decisions related to resource allocation and put projects on hold when necessary, therefore potentially impacting the whole portfolio. The role of project steering groups is described by one of the interviewees as follows:

“Usually, – – the steering group makes decisions related to allocation of resources to the project – –. And then it might decide that we need to freeze this project and reallocate the resources somewhere else.” – I8

However, the technology board is also involved in significant decisions. One of the inter-viewees explains the decision-making hierarchy related to project freezing and termina-tion:

“Surely that will be informed to the technology board if it is a productization project.

Yes, of course it is informed, it might be that some of those have to be decided upon in there, but usually project steering groups are quite powerful, so they can make the decisions.” – I8

The technology board is also involved in evaluating, approving and budgeting potential new innovation projects. In addition, it acts as the decision-maker for proposing the pro-ject to be commercialized after successful implementation.

Manager of technology has a key role in portfolio uncertainty management and partici-pates in the annual roadmap steering groups where the strategic direction of the tech-nology roadmap is defined. The manager also participates in various other steering boards on different levels and follows the progress of the innovation projects closely through gate-meetings. As the manager also holds the main responsibility related to product patenting at Company B, this role is visible in the steering meetings. As the manager explains:

“– – I always try, when I am participating in the steering meetings and others where projects are kick-started, decided upon or evaluated, to bring up whether we have been able to identify all relevant inventions and innovations related to this project, and have we taken their protection into account.” – Manager, technol-ogy

The R&D manager responsible for software research and development has a similar role as the manager of technology. The manager also participates actively in various steering boards and is included in strategic planning of the innovation project portfolio. As de-scribed in the previous chapter, the R&D manager also acts as a project manager in some large innovation projects, and therefore practices uncertainty management on both project and portfolio level.

The director of R&D is ultimately responsible for all three sectors of the innovation project portfolio 1. As the director is also part of the top management, he also has the main responsibility for budgeting and strategic planning of the portfolio. In addition, the director is an active participant on various steering boards and acts as the chairman of the prod-uct council.

According to one of the interviewees, the role of the sales team is quite significant in the steering meetings. Due to their high level of knowledge related to customer needs, their opinion is also highly valued in decision-making. Such external portfolio uncertainties can be identified by multiple other actors at Company B, but the product management seems to be the one with the main responsibility for competitor and customer mapping.

However, such risk identification may also be done by a separate, temporary research group when required. As one of the interviewees explains:

“Of course, maybe everyone on their behalf does that, but in way it does fall under product management. But for example, in the strategy development we typically choose a smaller group, that might involve product development representatives, and conduct a bit more focused and deeper research of such. But from the organ-izational point of view, it does fall under product management.” – I7

Top management on the other hand influences the innovation project portfolio by ulti-mately setting the target schedule for large projects. In addition, the top management collaborates closely with the customers, and therefore aims to identify potential opportu-nities and new innovation projects. One of the interviewees explains the role of top man-agement as follows:

“But from the top management, that is clearly where the target schedules are coming from for the most significant projects. – – the top management is also of course really close to the customer as well and organizes these yearly meetings with our most important customers. That is where new projects might arise rather quickly. Then those can be brought to the research and development table dictat-ing that this sort of a project is kick-startdictat-ing next.” – I8

As mentioned previously, the product council typically holds the highest decision-making power related to new product development at Company B. Within those meetings, the product council decides upon which projects will be included to the portfolio based on business case presentations held by product managers. The typical meeting agenda at the product council is described by one of the interviewees as follows:

“At first, we went through all projects that were on-going at the moment, their sta-tus and also new proposals. But now we have cut it down to only topics requiring

a decision. The council does not go through anymore those projects that are pro-ceeding without any problems, within the planned schedule and so on. Those things are not even brought up, but from time to time the project manager does inform the council members [about the status] and sends a message on how it is proceeding – –. New projects launches are gone through there, or if some bigger challenges are faced, those are also considered. So, matters requiring decisions.”

– I6

Although the product council has the highest decision-making power related to the prod-uct offering, the board of directors also reviews the most significant decisions. These include decisions related to the strategic direction of the company, and ultimately reject-ing or approvreject-ing the budget for significant innovation projects.

In conclusion, multiple actors are involved in innovation project portfolio uncertainty man-agement at Company B. In this case, the role of four actors is highlighted in terms of portfolio reconfiguration: project steering meetings, annual roadmap steering meetings, technology board and the product council. The portfolio reconfiguration practices of these actors are described in further detail in the following chapter.