An Example of Portfolio Management
Consider the example of the large pharmaceutical firm, Pfizer. Pfizer and all its competitors routinely manage large families of projects in an integrated manner. The overall integration of their project management efforts are done to address and compensate for the realities of the pharmaceutical industry, one fraught with extremely high development costs and long lead times for product introduction. For example, at any particular point in time Pfizer will have numerous projects under research and development, some smaller number entering various stages of clinical trials, and finally, a small set that are commercially introduced. Each step of this development cycle is fraught with risks and uncertainties. Will the drug work effectively in clinical trials? Will it have minimal negative side effects? Can it be produced in a cost-effective manner? Is the drug’s release time sensitive in that there is a limited market opportunity for it to address? The answers to these and numerous other questions serve to rapidly trim down Pfizer’s on-going portfolio of development projects. In fact, as Figure 1.4 shows, the lead-time necessary to bring a new drug to the marketplace can easily stretch out over 15 years and the success rate of drugs actually being commercially developed is estimated to be less than 0.002%.
Source: Lehtonen, (2001), in Artto, et. Al (Eds.): p. 41