Project Prioritization: Quantifying the Cost of Strategy

Dr. Richard Bayney is president and founder of Project & Portfolio Value Creation (PPVC), a consulting boutique providing training and education in project, program, portfolio, resource and risk management as well as business, strategic, portfolio and scenario planning services. He is an adjunct faculty member at the University of Pennsylvania, and delivers certification master classes in the U.S., EU and Asia.

As companies prepare to prioritize the assets (projects, programs) in their portfolios, two questions generally emerge:

  1. To what extent are our assets aligned with corporate strategy?
  2. Given our resource constraints, which assets will best enable us to meet our financial targets?

In the world of portfolio selection, the old adage “you can’t have your cake and eat it too” holds true. Stated otherwise, you cannot enjoy the best of multiple desirable but mutually exclusive alternatives. While a portfolio selected on the basis of maximizing strategic intent will yield some financial value without necessarily maximizing financial value, the converse is quite true (i.e., a portfolio selected on the basis of maximizing financial value will yield some strategic intent without necessarily maximizing strategic intent). Why is this so?

In reality, if portfolio selection is conducted on the basis of strategic considerations alone, these considerations are weighted at 100%. The converse is true for a portfolio selected on the basis of financial considerations alone. However, when both strategic and economic considerations are utilized for portfolio selection, neither set of considerations can be weighted at 100%. Consequently, the more importance (or weight) that is given to strategy, the less importance can be given to economics. And whether or …

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