One ideal of product management is to manage a product or product line as an independent business, tracking expenses and revenue and deriving IRR or NPV. Product managers frequently struggle to achieve this ideal in complex, rapidly-changing corporate environments. However, for planning purposes, especially when considering multiple product investments, it is critical to understand the risk of potential investments in addition to their IRR or NPV. Furthermore, "real options" are frequently available to mitigate risk. These must be understood in the planning phase, and exercise of options must be tracked in order to ensure product success.

We present a methodology for planning and tracking a product development effort. The primary tool for the methodology is a simple, one-page spreadsheet capturing actual and predicted expenses and revenues, from which IRR or NPV can be derived. Furthermore, the spreadsheet models uncertainty of predictions. By constructing the spreadsheet for a product development effort, real options are exposed. By maintaining the spreadsheet on an ongoing basis, the exercise of real options is tracked and the likelihood of product success or failure is clarified.

The simplicity of the methodology ensures that
* a product manager can independently stay up to date on the progress of a product development effort
* anyone from line workers to corporate board members can easily understand the state of a product development effort
* multiple product development efforts in various stages can be compared or aggregated into a portfolio
* investment and divestment decisions can be made rationally and with complete information

To demonstrate this methodology, we will construct and modify a spreadsheet for a commonly-understood project: the purchase, improvement, and sale of a home.