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Black Belt Brief


Portfolio Valuation Template

 
 

Portfolio Valuation

Project portfolio prioritization is the process by which stakeholders weigh the relative value contributions of all projects and hierarchically sequence their total value to the enterprise.

Ostensibly prioritization is a quantitative matter, but in the real world, the assessment of aggregate relative value may vary between individuals. This variation is often due to disconnects in strategic context. The modeling tool described below not only provides valuable decision support data but also exposes context disconnects between corporate planners.

Marketing is responsible for achieving convergence. When reconciliation of the different perspectives fails to converge, marketing has failed in its unifying mission and the organization may be hamstrung.

The portfolio valuation template is a tool designed to drive consistent project weighting, scoring and convergence. Its captures the rigor of the decision process and forces a quantification of a project’s value across multiple value domains.  

Value Domains

This chart below highlights some categories and domains of project value. There are many others.

Typical Project Value Domains

Internal financial factors

External financial factors

Strategic considerations

Customer perceived quality

Cost reduction

Revenue

Market share

Performance

Yields

Margin

Congruence

Scaleability

Testability

Time to break even

Risk

Reliability

Serviceability

Profitability

Market attractiveness

Maintainability

Variation reduction

 

Shareholder value

Life cycle costs

 

 

Customer retention

Usability

 

 

Partnership enhancement

 

Measured by ROI

Regulatory compliance

 

NPV

Time

 

IRR

Intellectual property

 

Time

Platform for growth

 

$$$s

New venture

 

Sometimes the domain’s characterization is quantitative (e.g. Profit Margin) while for others, it is subjective (e.g. Congruence). Selecting the appropriate domains and quantifications per domain, and fairly assessing the project’s delivered value is a prerequisite to achieve portfolio prioritization convergence.

Profit Margin between

and

Score

 

> $5,000,000

5

$2,500,000

$5,000,000

4

$1,000,000

$2,500,000

3

$500,000

$1,000,000

2

Not meaningful

NA

1


 

Congruence

Score

Critically needed congruent venture

5

High congruence venture

4

Some congruence value

3

Incidental congruence

2

Not relevant

1

Keeping Score

Once the foundation work is completed, each project is scored.  The sum of the domain values yields the project’s basic value score.

V1 + V2 + V3 + V4 + V5 +V6 +V7 +V8   …. = Basic Project Value.

So far, pure Marketing 101. The next step is more interesting. 

The calculation can be further refined if, under certain tactical considerations, some domains have greater significance than others. A way to account for this is to include weighting coefficients Cn to the calculation.

C1V1 + C2V2 + C3V3 + C4V4 + C5V5 + C6V6 + C7V7 +C8V8 …   = Weighted Project Value
          
The task then is to define tactical scenarios that place varying coefficients (Cn weights) on each value domains’ basic score Vn. The scenario / weighting diligence is captured in another table.  

Table of Cn Coefficients per Value Domain (Vn) per Tactical Emphasis Scenario

Tactical emphasis / scenarios

V1

V2

V3

V4

V5

V..n

(example) Bias towards short term revenue

1

1.1

.7

.7

1

Etc.

(example) Bias toward stakeholder value

.8

.7

1.1

.7

1.2

Etc.

(example) Bias towards partnerships

.9

.8

.9

1.2

1

Etc.

Etc.

 

 

 

 

 

 

Etc.

 

 

 

 

 

 

 

 

 

 

 

 

 


 
Interactive analysis

The template’s immediate utility is that consistent project value domain scores and weightings can be compared, sorted, graphed and tested against alternative projects and tactical scenarios.

A radar chart is especially useful when comparing multiple weighted domain values across multiple projects. A dynamic radar chart can vary emphasis scenarios, products, and domains in real time. The basic visualizations can support decisions by demonstrating complex dynamics to stakeholders. 

Building a spreadsheet that executes this entire model is simple. Creating the macros and dynamic graphs that make it truly interactive and operationally convenient is well within the abilities of most Excel programmers.

Contact On-Fire’s if you would like to receive the Excel spreadsheet we use to implement this methodology.

 
 
   
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