Problem 2 (65 points) Read the case study, Danaka Corporation: Healthcare Solutions Portfolio Management, available through the HBR Course Pack. You will also use a spreadsheet called Danaka Spreadsheet that is in the Articles and Other Tools folder, within Modules on Canvas. This case study poses a typical issue where new projects are needed to deliver on revenue goals, but no additional funding is available. This means R&D funding needs to be freed up to invest in new projects. You can see how the concept of categorization is used in this case to analyze the portfolio and you will want to consider the categories as you work to free up project funding.

Specific questions for this case:

a) Create a simple weighted decision matrix for the current portfolio which uses 3 criteria and associated weighting: Project NPV (33%), Business Criteria Ranking (33%), and Predicted 2012 Revenue (34%). Rank order the results. What if the weights were changed to: Project NPV (30%), Business Criteria Ranking (25%), and Predicted 2012 Revenue (45%)? Comment on your results. (10 points)

b) Assuming you need to free up $300M in 2007 Project Funding, while delivering at least $5B in from existing projects in 2012 revenue, which projects would you elect not to fund? You will need to use the information on page 8 of the case. For example, a Share Growth project that is unfunded will still see revenue, though it will decline by 10% year over year You can do this manually or use Excel Solver to help identify the optimal portfolio. I used a combination of Excel Solver and some manual effort to identify a portfolio. For example, in my Excel Solver spreadsheet, I excluded any revenue for projects that werent funded. So, although I was able to save $300M in project funding I didnt quite make $5B in revenue. I went back and determined the loss in revenue for the projects not funded and added that revenue into my Solver results and was able to get close to the required revenue. (40 points)

c) Exhibit 7 in the case shows a graphical way of representing the project portfolio based on revenue growth. For projects in the portfolio, determine revenue growth from 2006 to 2012 (assuming all projects are funded). Create a visual like Exhibit 7 showing the projects in each category with their growth rates. Then, take your project portfolio from part b) and create another visual that shows the view after freeing up $300M. Remember, projects that arent funded still contribute revenue at a reduced rate per the information on page 8. (15 points)