The evolution of project portfolio selection methods: from incremental to radical innovation.
| Autor | Chaparro, Ximena Alejandra Flechas |
-
Introduction
There are two ways for a business to succeed at new products: doing projects right, and doing the right projects. (Cooper, Edgett, & Kleinschmidt 2002) Project portfolio selection (PPS) is an iterative process whereby managers select projects from available proposals and current projects, in order to meet organizational objectives (Archer & Ghasemzadeh, 1999). This process is crucial to maintain the competitive advantage, enabling the company to focus on the most relevant and strategic projects. However, firms struggle in managing this process. PPS' complexity relies on two main facts. First, the information required to determine whether a project could be successful or not is extremely difficult--if not impossible--to know (Baker, 1974). And second, because the project and environment conditions are too volatile, strategic goals might change, promoting high levels of uncertainty (Rice, O'Connor, & Pierantozzi, 2008).
Different methods and approaches have been proposed to address the PPS (Bard, Balachandra, & Kaufmann, 1988; Cooper, 1993; Regan, Ben-Haim, Wilson, Lundberg, Andelman, & Burgman, 2005). Current literature offers a number of increasingly sophisticated project selection approaches, including multi-criteria decision methods, scoring-based and simulation techniques, among others (Zhang, Yang, Dou, & Jiang, 2016). However, the current literature presents an "interesting dichotomy": although there are an increasing number of frameworks supporting PPS, the adoption by firms and its impact remains limited. In addition, there is a lack of theoretical foundations for these frameworks (Kavadias & Chao, 2008).
Other scholars have also identified similar problems in PPS literature (Beaujon, Marin, & McDonald, 2001; Cooper, Edgett, & Kleinschmidt, 1999; Kavadias & Chao, 2008). Indeed, years of research provided a fragmented and disperse knowledge on PPS, increasing the difficulty of convergence and accumulation of knowledge. To some extent, the existence of this fragmentation might also impact the adoption by firms. The development and adoption of PPS are more difficult for radical innovation, in which managers face high uncertainties in structuring and selecting projects. According to Brasil, Salerno and Gomes (2018), inappropriate selection methods might restrain radical innovation proposals, since, typically, the PPS process has been centered on the assessment of ex ante information, such as estimated costs, profits or market share, that only can be confirmed after launching the project (Zhang et al., 2016). In sum, there are two major concerns in PPS literature, which can render the consolidation of the field more difficult. First, there is a lack of a comprehensive framework regarding how the PPS approaches evolved. And second, there is a lack of understanding of how these different approaches might be associated with different degrees of innovation.
To reduce these two major gaps, the following research question drives our research: RQ1. How have the PPS approaches evolved to better fit within radical innovation? Employing a systematic literature review, we aim to identify which approaches are more suitable for radical innovation projects and what aspects are crucial to manage radical innovation portfolios. Our goal is to go beyond the last review on PPS methods, dated from more than 10 years ago (Cooper et al., 1999), capitalizing on more recent works. Addressing this research question is fundamental to theory and practice. First, there is a lack of understanding regarding when and how to use these approaches to select the specific level (degree) of the innovation project (from incremental to more radical ones). Likewise, without a proper method, firms might not be able to select the opportunities related to radical innovations (Brasil, Salerno, & Gomes, 2018). Using a kind of method that fits all approaches, firms might fail in differentiating the valuation and selection of incremental and radical innovation. Finally, it is also important to determine whether newer PPS methods meet the particular features of radical innovation projects in order to provide a guide for future research.
This paper provides important insights that advance the knowledge on PPS literature. First, we show how PPS evolved. This is especially important to new scholars in the field, who might face difficulties in building a big picture of how this field is structured. Second, we identified the main characteristics of different PPS approaches. This finding provides a rich portrait regarding the approaches, helping scholars and practitioners to identify when and how to use these approaches according to the innovation level. Finally, we provide a theoretical framework in which we associate these approaches according to the innovation level.
This study is structured in five sections as follows. Section 2 presents the methodological procedures including the documents sample selection and the analysis of the methods. Section 3 discusses the PPS approaches, describing each of the 12 taxonomies identified. In Section 4, we discuss the key issues for radical innovation portfolio management and which approaches are more suitable to this end. In addition, we elaborated an integrated portfolio selection method for radical innovation framework, based on the main characteristics and advantages of the approaches. Finally, Section 5 is concluded with the final considerations and future research directions.
-
Methodology
To obtain an overview of the evolution of PPS, a systematic literature review was performed. This methodology enforces explicit methods to perform a thorough research and analysis, underlining how a determined field has evolved, and enabling the identification of consensus or divergence among studies and theories (Briner & Denyer, 2010).
2.1 Sample selection procedure
The collecting methods' process started through the search on the Web of Science database, which provides different searching and browsing options to obtain higher accuracy during the research. We applied the keywords: "Project Portfolio Selection," in order to gather the broadest number of related works. The search returned 175 documents; this sample was refined selecting only the pertinent predefined categories as follows: "management," "operations research management,""engineering industrial" and "business." Additionally, we focused our research only on "article," because this type of documents is peer-reviewed--an important indicator of quality. We then reached out 75 documents.
Another selecting parameter was the inclusion of articles whose purpose was the proposition or improvement of method or approach for PPS. We read again the titles, abstracts and keywords. Based on this process, 35 articles related to "Project Portfolio Selection" were obtained. Notwithstanding, four documents referenced by Cooper, Edgett, and Kleinschmidt (1999) were added and other works were included too because they are recurrently cited by the studies in our sample. In total, 48 articles were selected.
2.2 Methods analysis procedure
Once the sample of articles was established, the first stage was to read them identifying the relevant points and the main contributions including proposed frameworks, techniques, tools, examples of application and required data. Based on Cooper et al.'s (1999) portfolio selection methods classification, we defined 12 taxonomy categories to classify the PPS approaches. The categories are: financial, probabilistic, options pricing, strategic, scoring, combinatorial optimization, behavioral, mapping approaches, real options, integrated methods, information gap theory and scenario-based approach. Table I shows the number of documents per year and methods categories. Combinatorial optimization (15) and integrated methods (13) have the greatest number of approaches and also represent the categories more explored in the last 10 years (ten and five documents, respectively).
Afterward, we carefully examined each PPS approach. We then identified four key requirements that PPS methods must meet in order to address radical innovation projects: dynamism, interdependencies, uncertainties and required input data. Based on these analyses, we proposed an integrated portfolio selection method for radical innovation (Section 5).
-
Project portfolio selection methods
According to Cooper et al. (1999), portfolio selection methods have progressively changed since the first methods emerged in 1960. At that time, methods were strongly focused on mathematical techniques. Over time, because the business and technology environment became more complex, more sophisticated methods emerged. Scholars identified that some of these approaches consist of prescribed solutions (one fits all), which might not fit with the vast variety of project and firms' conditions (Chien, 2002; Baker, 1974). Furthermore, these prescribed aggregate methods raise a paradigm wherein a given set of projects (usually competing for limited resources) must be appraised in order to choose the ones which will maximize profits. Although these methods might be useful for more incremental innovation, an increasing research stream suggested that prescribed methods are not sufficient to analyze radical innovation projects due to the large numbers of unpredictable variables and knowledge gaps (e.g. Baker, 1974; Archer & Ghasemzadeh, 1999; Ghapanchi, Tavana, Khakbaz, & Low, 2012). In the following sections, we present 12 methods for PPS.
3.1 Financial methods
In these methods, the most important selection criterion is profitability and the objective is to establish a portfolio that maximizes expected returns (Bard et al., 1988). This is one ofthe most widely adopted methods by managers for screening projects (Chien, 2002; Dutra, Ribeiro, & Carvalho, 2014), and basically, are utilized to assess projects individually. Two documents were identified within this category (Table II).
3.2...
Para continuar a ler
PEÇA SUA AVALIAÇÃOCOPYRIGHT GALE, Cengage Learning. All rights reserved.
