Project selection

Selecting the right project for investment is critical to business success. There are a few common mistakes:

Having only one viable project and so going with it regardless of the business case
Having many great ideas, but not knowing how to choose the winners
Not having a visible, objective and repeatable way of evaluating a proposal
Not considering the impact of undertaking one project on the progress of other projects

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Evaluating individual project proposals
As a way of reducing the chances of investing in the wrong project, companies often adopt a formal approach to evaluating project proposals. These approaches address a range of issues, including the commercial viability of a proposal, the relative merit of a proposal (compared to other ideas), the risks and resources.

Equally important is to ensure an appropriate mix of project types and maintain the desired mix of products in the overall portfolio.

Ultimately, the purpose of a structured approach is to authorise investment for further work, based on high quality information. Companies typically use a combination of approaches to evaluating individual project proposals:

Checklists and scorecards
How well does a proposal satisfy a predetermined set of required criteria?
Financial analysis
How potentially profitably is a proposal and how sensitive is the payback to variations in time, investment and sales estimations?
Risk analysis
How risky is the project, compared to the potential rewards?
Aggregate project plan / Portfolio analysis
How does the proposed project fit with the current portfolio of projects?
Project mix management
Does the company have an appropriate mix of risky vs safe projects or radical vs incremental innovations?
Resource constraints
Are appropriate resources (time, people, money, materials, equipment) available to tackle the proposed project?

Further information

Baxter M, (1999), Product design: practical methods for the systematic development of new products, Stanley Thornes, UK
Cagan J, Vogel C M, (2002), Creating breakthrough products: innovation from product planning to product approval, Prentice Hall, USA
Cooper R G, (1993), Winning at new products: accelerating the process from idea to launch 2nd edition, Perseus Books Publishing, USA
Cooper, R.G., Edgett, S.J. and Kleinschmidt, E.J. (1998) Portfolio Management for New Products, Addison Wesley
Urban G L, Hauser J R, (1993), Design and marketing of new products 2nd edition, Prentice Hall, USA
Wheelwright S C, Clark K B, (1992), Revolutionising product development: quantum leaps in speed efficiency and quality, Free Press, New York

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