6Portfolios

This chapter contains the following:

Portfolio Management

Create and develop your product portfolio to execute product strategy. You can analyze resource constraints to understand whether you can achieve intended revenue and other goals. Here's what you can do:

Task Details

Create Product Portfolio

  • Create a new portfolio, create a portfolio from a template or from an existing portfolio and retain most of the information of the existing portfolio along with predefined standard metrics, targets and analyses.

  • Edit portfolio attributes and delete unfeasible portfolio or that which contains incorrect data.

Define Product Portfolio Metrics

  • Add product and portfolio metrics for evaluation.

  • Provide resource capacity information.

Define Product Portfolio Goals

  • Set product portfolio goals by assigning target value ranges for product and portfolio metrics.

  • Evaluate product metrics for each product, and portfolio metrics for each What-if scenario of the portfolio.

Develop Product Portfolio Structure

  • Add products and product proposals to a portfolio.

  • Update financial information for product and product proposals.

    Note: When a product proposal is added to a portfolio the product proposal currency adjusts to the portfolio currency. The conversion happens automatically.
  • Define resource capacity for a portfolio.

Analyze Product Portfolio

  • Edit a scenario based on the analyses displayed in terms of value, balance, strategy analysis, resource consumption, product maturity, and product road map.

  • Compare different scenarios in terms of portfolio metrics.

  • Generate What-if scenarios to adjust each product portfolio scenario using various types of analyses.

Use the Portfolio Management work area to:

  • Identify the optimal product mix

  • Evaluate portfolio performance

  • Perform What-If analysis

  • Optimize resources across the portfolio

  • Create a road map in parallel with the portfolio

A product portfolio is managed through the Edit Portfolio area, whereas, product proposals are created and managed in the Concept Design work area.

Use the Edit Portfolio page to do the following:

  • Modify portfolio details

  • Define portfolio metrics

  • Modify resources

  • Compare scenarios

  • Submit scenarios for approval

The Edit Portfolio page is separated into two sections of Scenario Elements and Analytics.

Use the Scenario Elements section to add product proposals, edit product proposals in a spreadsheet, include product proposals on a scenario, and publish products or elements back to the product proposal.

Note: The portfolio scenario must be approved before you can publish changes back to the proposal.

In the Analytics section, view charts to analyze and determine product profitability in terms of the final portfolio mix.

Create a Portfolio

You can create a portfolio from the Portfolio Management work area.

  1. Navigate to the Portfolio Management work area.

  2. In the Overview tab, click the Add icon.

  3. In the Create Portfolio dialog:

    • Select New - to create a portfolio from scratch.

    • From Template - to create a portfolio from an existing template.

    • From Portfolio - to create from an existing portfolio.

    • The planning period and currency values are defined by the administrator.

    • To save this portfolio as a template, select Save As Template.

    • Click Save and Close.

      The Edit Portfolio page of the new portfolio appears.

  4. Rename the default scenario:

    • On the Analysis tab, click the Edit icon.

    • In the Edit Scenario dialog, enter a new name for the default scenario.

    • Select a baseline date to keep track of when you created the scenario.

    • Click OK.

      The Edit Portfolio page of the new portfolio appears.

  5. Add proposals as scenario elements:

    • In the Elements section, click Select and Add.

    • In the dialog, enter the search criteria to search for a proposal and click Search.

    • Select a proposal and click OK.

  6. To update the analysis charts, click Refresh Analysis.

    The analysis charts appear on the tabs based on the data in the proposals assigned as elements.

Modify a Portfolio

You can modify the proposal data in a portfolio.

  1. Navigate to the Portfolio Management work area.

  2. On the Overview tab, perform a keyword search for the portfolio you want to modify.

  3. In the search results, click the portfolio you want to modify.

  4. In the Edit Portfolio page, click the Analysis tab and click the element you want to modify.

    The Edit Element page appears.

    Although the data on this page originated from the proposal that was assigned as an element, the data isn't linked with the proposal. Hence modifying this data doesn't affect the proposal.

  5. Click any of the tabs in the Edit Element page to modify the data, and then click OK.

  6. On the Edit Portfolio page, click Refresh to view changes in the analysis charts.

Define Portfolio Metrics and Resource Capacity

Select the metrics you want to display in your portfolio for analysis and adjust resource capacity directly from the portfolio.

  1. Navigate to open the Portfolio Management work area.

  2. On the Overview tab, search for a portfolio. Click the portfolio name to open the page.

  3. In the Actions list, select Define Metrics. The Define Metrics dialog opens, with tabs for Portfolio or Product.

  4. Predefined metrics are displayed. Select any metric for your analysis, and click OK, then Save and Close.

    You can see the metric now heads its own column in the portfolio or product that you chose.

  5. Adjust the resource capacity by selecting Actions > Define Resource Capacity.

  6. In the Define Resource Capacity dialog, you see the capacity of each Resource Pool assigned to each Planning Period Unit. Edit these values as appropriate.

  7. Click Save and Close. Click Refresh Resource to see the updated changes in the analysis charts.

    For instance, if you raised the resource capacity values, you can see the Capacity line is now raised.

Modify records in the Elements table using the Oracle ADF Desktop Integration spreadsheet. The metrics that are editable in the application user interface can all be updated in the spreadsheet as well, except for the Score metric. You can insert, delete and update cost, revenue and resource information.

Using the Oracle ADF Desktop Integration tool update the metrics data of a product proposal or product portfolio. Make your changes in the spreadsheet and then import those changes to the data back into the application. The following is an example of this process started from the Edit in Spreadsheet option of the Actions menu on the Resources tab of a product proposal object.

Export and Import Data Using the Oracle ADF Desktop Integration Tool

  1. Click Edit in Spreadsheet from the Actions menu.

  2. Enter your login credentials information.

    If you already provided your login credentials to use the Oracle ADF Desktop Integration tool for another open Excel spreadsheet, then you don't have to provide them again.

  3. In the open Excel file, you can update data.

    Ensure that there are no empty rows in between, otherwise the data doesn't import back into the application.

  4. From the tab where the exported data is displayed in the Excel spreadsheet, click the Upload option.

  5. When the upload finishes importing the data back into the application successfully then the modified data displays its updated status in the Status column.

    After uploading changes from the Excel spreadsheet, open the object once again. Changes don't display even if the object is saved.

    If you perform this export and import from the Elements table, you must save the portfolio in the application before changed data is accurately displayed in the locally viewed Excel spreadsheet.

Scenarios

Portfolio metrics, product metrics and charts are used for comparison of scenarios. You can select the best scenario and send it for approval. Once approved, a new Revision is created and the approved scenario is moved to the new Revision. The status of the scenario is changed to Current.

Note: Portfolios aren't submitted for approval, only the scenarios.

You can also view the deviations in product costs, revenues and resources in the Overview section after you save the portfolio.

The criteria that determine the best scenario are:

  • Value

  • Balance

  • Strategy

  • Resources

  • Product Mix

Value

You can determine the value or commercial worth of each scenario with the help of visual representations displayed in terms of Cost vs. Revenue vs. Resource Headcount, Product Maturity, and Revenue, Cost and Margin.

Balance

To check the balance of each scenario, you can view charts that are displayed in terms of Technical Risk vs. Reward vs. Resources, and Market Risk vs. Reward vs. Cost.

Strategy

For business strategy analysis, you can view charts that are displayed in terms of Strategic Fit, and Market vs. Strategic Fit. You can determine the scenario that aligns with the product innovation strategy.

Resources

You can identify the shortage of resources allocated to projects during each quarter with the help of charts that are displayed in terms of Resource Allocation Consumption.

Product Mix

For the global product mix across the planning period, you can view details such as the schedule, cash flow, resources, and the products included in each scenario.

When you create a new portfolio, a default scenario with a default Revision is created. You can add product proposals to the default scenario and edit the details.

Note: While adding scenarios to a portfolio, remember that the 'Submit for Approval' option is enabled only for the last created scenario.
Note: The product proposals that you add to the Elements table and which get copied to scenario are referred as Elements. As you progress by creating different scenarios and adding product proposals to the scenarios, you can't delete the elements from the portfolio unless you remove the association of the elements with the scenarios or delete the scenario that contains the elements you want to delete.

A scenario workflow consists of the following statuses:

  • Draft

  • Submitted

  • Approved

  • Current

Status Implication

Draft

Initial default status when you create a scenario.

Submitted

The Product Portfolio Manager submits a scenario. The submitted scenario is read only, but the other scenarios in the same revision are editable.

Approved

Scenario is reviewed and approved. All approvers must approve the scenario for the status to change to Approved. If the scenario is rejected even by a single approver, the status changes to Draft.

Current

The approved scenario moves to a new Revision and the status changes to Current. The scenario in current status isn't editable. When the scenario status changes to Current, the portfolio status changes to Released.

Approve Scenarios

You can submit a scenario for approval from the Analysis tab of a portfolio.

Note: Avoid self-approving any Innovation Management object as this can result in stuck workflows. Remember that the workflow only gets stuck if self-approval isn't allowed, which can be changed in the BPM taskflow setup.
  1. Navigate to the Product Management work area. From the list of offerings, click Portfolio Management.

  2. Enter the search criteria to search for a portfolio in which you want to approve a scenario and click Search.

  3. Click the portfolio in which you want to approve a scenario.

    The page appears.

  4. In the Edit Portfolio, click the Analysis tab, and expand the Scenarios menu.

  5. From the Actions menu, select Submit for Approval.

  6. In the Submit for Approval dialog, click Select and Add.

  7. In the Select and Add dialog:

    • Enter the criteria to search for users or user groups and add them as approvers. Click Search.

    • Select an approver and click OK.

  8. In the Submit for Approval dialog, click Submit.

    A notification is sent to the reviewer.

  9. Click Save and Close.

    The reviewer can approve or reject the scenario directly from the notification. After approval, the status of the portfolio changes to Released.

Compare Scenarios

The following procedure shows how to use the compare scenario capability.

Compare a Scenario

Here are the steps to compare a scenario.

  1. Navigate to the Portfolio Management work area.

  2. Enter the search criteria to search for a portfolio and click Search.

  3. Click the portfolio in which you want to compare scenarios.

    The Edit Portfolio page appears.

  4. On the Analysis tab click Scenarios and then click Navigate to Compare Scenarios.

  5. Select the scenarios that you want to compare and click Refresh Analysis.

    The application displays a comparative analysis of the selected scenarios in charts.

    Click Refresh Analysis to view the changes in the charts. The Value, Balance, Strategy, Resources, and Product Mix refreshes with the comparative data displayed in graphs and tables.

  6. To export the comparison charts, click Export to Excel. You can then open or save the file.

This topic explains the values that are copied when you perform a Save As operation on a product portfolio.

Portfolio Types

You can save an existing product portfolio as a template and reuse it to create similar portfolios.

The latest scenario is copied over with the Save As operation. You can select any or all the available scenarios instead of accepting the latest scenario.

Which Values Are Copied

Depending on the type of source and target portfolio, the values, listed in the following table, are copied:

Source portfolio type Target portfolio type Which are copied

Regular

Regular

  • General information

  • Metrics

  • Attachments

  • Resource Capacity

  • Scenarios (from the default latest version or the selected versions)

  • Products

Regular

Template

  • General information

  • Metrics

  • Attachments

Template

Template

  • General information

  • Metrics

  • Attachments

Template

Regular

  • General information

  • Metrics

  • Attachments

Note: When you perform a Save As operation, irrespective of the type of portfolio, the planning period isn't copied.

Value Calculation

Net Present Value

The Net Present Value is calculated as the difference between present value of cash inflows and the present value of cash outflows.

Settings That Affect Net Present Value

Three factors affect the net present value:

  • Cash flow

  • Discount factor

  • Number of years

  • Baseline date

How Net Present Value Is Calculated

In the application, NPV is calculated using the Newton-Rhapson algorithm. The net present value is derived from the equation:

NPV = C(0) + C(1)/(1+d) + C(2)/(1+d)2 + and so forth + C(n)/(1+d)n

The variables in the equation are described as:

  • c - cash flows for the product wherein Revenue is considered positive and Cost is considered negative

  • d - discount factor

  • n - number of years in future

The value n is calculated based on the trend defined for it. Since we are considering the trend to be Point trend, the trend date is the same as start date. The following explanation is how to calculate the value of n.

n = (Start Date - Baseline Date)/365

Note: The Baseline Date value defaults to the same date as the creation of the proposal.

If the Start Date of the Cost or Revenue is less than the Baseline Date, the rows are ignored so that any cash flow that occurred before the established baseline date isn't included. If the Start Date of the Cost or Revenue is less than or equal to one year after the Baseline Date, then the value of n is equal to 0 (it's the first year). One day beyond the first year increments n to 1. If the Start Date of Cost or Revenue is less than or equal to two years after the Baseline Date, then the value of n increments to 2 and so on and so forth. One day beyond the second year increments n to 2 and so on and so forth. Total the rows that have the same n value and apply the formula.

Example

  1. Calculating number of years

    Consider the scenario described in the following tables with a fixed baseline date as January 01, 2012. For varying start dates, the value of n is determined as:

    Start Date Cost Number of Years

    May 01, 2012

    140

    0

    April 03, 2010

    300

    -2

    Start Date Revenue Number of Years

    January 01, 2015

    200

    3

    April 03, 2010

    300

    -2

    Note: If the number of years is negative, the corresponding values of cost and revenue aren't considered for NPV calculation.
  2. Calculating cash flow

    All the costs and revenue for the same number of years is grouped to determine the cash flow. Using the value n obtained in the previous step, the cash flow is calculated as described in the following table:

    Number of Years Cash Flow (Revenue - Cost)

    0

    -140

    3

    200

  3. Calculating NPV

After you determine the values for cash flow, and assuming the discount rate to be 0.1, calculate NPV using the given equation and arrive at a value of 10.26.

Internal Rate of Return

The Internal Rate of Return is the rate at which the Net Present Value is equal to zero. The IRR is also defined as the discount rate at which present value of all future cash flow is equal to the initial investment.

Settings That Affect Internal Rate of Return

Three input variables affect the internal rate of return:

  • Cash flow

  • Number of years

  • Net Present Value

How Internal Rate of Return Is Calculated

The internal rate of return is derived with the same equation that's used to calculate the net present value. The NPV is derived from the equation:

NPV = C(0) + C(1)/(1+r) + C(2)/(1+r)2 + and so forth + C(n)/(1+r)n

The variables in the equation are described as:

  • c - cash flows for the product wherein Revenue is considered positive and cost is considered negative

  • r - internal rate of return

  • n - number of years in future

You can determine the internal rate of return by setting NPV to 0. The application uses the Divide-and-Conquer guess method where an assumption is made on the discount rate to arrive at zero net present value. The adjustment factor, or the guess factor, that results in zero NPV is considered to be the internal rate of return.

Example

Consider a scenario where the guess factor or the discount rate is 0. By setting this, if the resulting NPV is negative, the discount rate is increased to 10 and the NPV is recalculated. With the discount rate as 10, if the NPV turns out to be positive, you can determine that the range where NPV tends to 0 is between 0 and 10.

Now that you have determined the probable range, the discount rate is further adjusted to determine a closer range where NPV tends to 0. Consider the discount rate to be 1. With this value replaced as the discount rate, consider that the resulting NPV is negative. It implies that the discount rate can be further increased to 2 to obtain a positive NPV. If the resulting NPV is 0, the discount rate is considered to be 2.

Consider another scenario where NPV is negative when you give incremental discount rates as 0, 10, and 20. With the discount rate as 30, if the NPV results in a positive value, you can determine the range of the discount rate to be between 20 and 30. Let us consider the discount rate to be 21 for which the NPV turns out positive. The possibility of finding the value of the discount rate resulting in NPV to be 0 is now between 20 and 21. Incremental values of 20.1, 20.2 and 20.3 are now given as the discount rate and NPV is recalculated. If the NPV is 0 with discount rate 20.3, the value of IRR is considered to be 20.3.

Break Even Time

Break even time is the period when the running addition of calculated value of revenues becomes equal to the total development projected costs.

Settings That Affect Break Even Time

Consider four factors while calculating the break even time:

  • Development Projected Costs for product

  • Revenue

  • Discount rate

  • Baseline date

How Break Even Time Is Calculated

The break even time is calculated by adding the calculated values of all revenues over time using discount rate and the number of years to the total development projected costs provided for the product.

Example

Consider a scenario with discount rate as 0.1. To determine the Break Even Time, calculate the number of years as shown in the previous scenario. After determining the value of n, use the following steps :

  1. Using the following table, determine the calculated revenue using the equation:

    Calculated Revenue = 1 / (1 + d) ^ n

    With the discount rate as 0.1, determine the calculated revenue and the running revenue.

    Number of Years Calculated Revenue Running Revenue

    0

    200

    200

    1

    272.73

    472.73

    2

    330.58

    803.31

  2. Calculate the linear factor

    The values that are closer to the development projected cost are 472.73 and 803.31. Consider these values as the lower value and the higher value respectively and determine the linear factor using the equation:

    Linear Factor = {(Development Projected Cost - Lower Value) / (Higher Value - Lower Value)} * 365

    In this example, the resulting linear factor is 30.10.

  3. Calculate linear date

    The linear date is calculated using the equation:

    Linear Date = Y + Linear Factor

    Here Y is the start date of the lower value.

    In this example, the linear date is January 31, 2013.

  4. Calculate the Break Even Time using the equation:

    Break Even Time = (Linear Date - Baseline Date) / 365

    In this example the Break Even Time is determined as 1.09 years.

Payback Period

Payback period is the period when the running addition of revenues becomes equal to the total development projected costs.

Settings That Affect Payback Period

Two factors that affect the payback period:

  • Development projected costs

  • Revenues

How Payback Period Is Calculated

Payback period is calculated by adding the revenues in time to the total development projected costs for product or portfolio.

Example

Consider the following scenario where January 01, 2012 is the fixed baseline date. If the projected development cost is 500, the running revenue is calculated in the following table:

Start Date Revenue Running Revenue

January 01, 2012

200

200

January 01, 2013

300

500

January 01, 2014

400

900

The period during which the running revenue is equal to the projected development cost is January 01, 2013. Considering this date and the baseline date, the payback period is calculated as:

Payback Period = X - Baseline Date

Where X is the period where the running revenue is equal to projected development cost

With X as January 01, 2013 and baseline date as January 01, 2012, the payback period is calculated to be 1 year.

How Scenario Baseline Date Determines Metric Values

The baseline date that you select while editing a scenario is used in scenario analysis to calculate product and portfolio metrics such as Net Present Value.

Settings That Affect Baseline Date

The creation date of a product proposal is considered as baseline date for the product proposal. When you add a product proposal to a scenario, the product proposal baseline date is overwritten with the baseline date that you provided for the scenario. This initiates the product proposal metrics in the Elements table to be recalculated. Changing the scenario's baseline date updates the baseline date for all of its elements. The scenario metrics also update accordingly.

Note: Changing the product baseline date recalculates the metrics associated with that product once you save the product portfolio.

How the Baseline Date Determines Metric Values

Baseline date is an important factor to calculate various portfolio and product metrics. The baseline date is used to calculate Net Present Value, Internal Rate of Return, and Break Even Time for product proposals and products in the Elements table.

Product Road Map

In the Define Product Road Map activity, the portfolio manager can generate road maps for each local product portfolio when the corporate product portfolio is approved and published. Defining a product portfolio road map involves the tasks described in the following table:

Task What you can do

Submit Product Portfolio Elements

  • Identify the specific product portfolio version.

  • Submit the product portfolio scenarios for approval.

Approve Product Portfolio Elements

  • Review product portfolio scenarios sent for approval.

  • Approve or reject product portfolio scenarios. You can comment on reasons for approval or rejection.

Generate Road Map

  • View road map generated according to the product mix for the selected scenario.

Road Map Tab Details

The Road Map tab helps you to visualize the Schedule, and Resources and the possible impact to the Requirements Specification. Road maps are generated after selecting approved scenarios for a chosen product portfolio.

Road Map

The Analysis side tab of a portfolio displays several vertical tabs. The Road Map tab or the View Schedule Versus Resource tab displays the Gantt chart by default. The Resource Utilization tab displays the Resource Pool list. By switching resources from the list, you can see charts of different updated tables and move schedules back and forth. The Requirements Specification tab displays a table of specifications of elements you have selected from the Product Development Schedule tab. Update Launch and Update Resource available for Road map and Resource tabs.

FAQs on Portfolios

What's an Annual Discount Rate?

Annual discount rate is the discount rate given to future cash flows to convert them to present cash flows.

Can I create ad-hoc reports for business objects?

Yes. You can create ad-hoc reports to obtain the counts, cycle times, and aging of concepts, proposals, and portfolios.

How can I add an attachment to a portfolio?

From the Actions menu of the portfolio select Edit Portfolio Details and click the Manage Attachments button.

No. For a portfolio you can provide business-related information, select the time period, include target revenues, and target costs. For a product proposal you can include projected and actual costs, resources, and revenues.

How do I access the Oracle ADF Desktop Integration tool to edit an object?

An Actions menu option of Edit in Spreadsheet available from a product proposal's Cash Flow tab, Cost table, or Revenue table and the Resources tab. And also available from a portfolio's Elements table. In the open Excel file, you then can add, remove, or update data, depending on the source of the Edit in Spreadsheet action. If you started from the Cash Flow or Resources tab, then you can add, remove, or update content in the Excel spreadsheet. If you started from the Elements table, then you can only update content for the metrics that are already editable in the user interface of the application.

How can I compare planned resources pool data to actual resources pool data?

Using the Refresh button brings actual resource pool utilization from the associated project to the Proposal tab. A time stamp is included capturing the last refresh. This enables a comparison of the planned resource pool use in the proposal to the actual resource pool use in the project.

How do I share my opinion with development teams on terminating a product?

If the Edit Portfolio page has a Social link, you can invite others to a conversation to discuss the ideas.

For example, as a portfolio manager, you carefully weigh the market share research, revenue, and future portfolio plans, and want to add an additional feature to one of the products in your portfolio. You want to make sure you have agreement from the people closest to the product, the product development manager, and the product manager.

From the Edit Portfolio page:

  1. Click the Social link to open Oracle Social Network (OSN).

  2. Click New Conversation.

  3. Invite your product manager and product development manager to the conversation.

The details of your conversation and key aspects of the portfolio are visible on the portfolio wall in OSN for everyone to view.

After a joint online discussion about the pros and cons of terminating the product, questions are asked and answered, and supporting documents are uploaded and reviewed. When you click the Social link from a business object, all the social networking features provided by OSN are instantly available. This makes it easy to bring in the people you require to make an informed decision.

Depending on your job role and permissions, you can use social networking features for the following Oracle Innovation Management business objects:

  • Ideas

  • Requirements Specifications

  • Concepts

  • Proposals

  • Portfolios