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.

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.