Risk/Reward Bubble Charts - More than just a Pretty Output

Risk/Reward Bubble Chart in DPMX

When it comes to project and portfolio management analytic outputs, bubble charts are by far the most charming. Colorful and playful, they are reminiscent of a jar of gumballs. But they're really more than just an pretty chart to throw in your PowerPoint or dashboard for a splash of color. When it's critical to find the mix of projects that will add the most value to your R&D portfolio its imperative you have a strong grasp on the risk/reward balance -- which is just what this chart type can provide.

DPMX: Answering the Where, How Much, and How To of Resource Allocation

"…the problem with resource allocation isn’t ignorance of its importance—83 percent of executives we polled named it as the most critical management lever for spurring growth." - McKinsey (Where, how much, and how: Answering the hardest questions of resource allocation)

And yet, McKinsey and Company go on to point out that a third of organizations included in a survey reallocate just 1% of capital from year to year. Whether you're talking about money, talent, or time these precious, finite resources tend to be handled by management teams with far too much safeguarding and rigidity -- leaving them in the dust of those who pursue a more deliberately dynamic resource allocation strategy.

The #2 Reason Why Project Values Get Revised Down

In an earlier post I argued that the #1 cause of downward project revisions in portfolio analysis is a phenomenon called "winner's curse", whereby the error in estimating project values, together with screening criteria, results in more negative surprises than positive ones. In this post, I'll talk about the #2 reason (which might be the #1 reason in some portfolios).

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The #1 Reason Why Project Values Get Revised Down

A topic of considerable lament in portfolio management circles is the frequent downward revision of project valuations. Anecdotally, it just seems like news tends to bring the project value down more often than it pushes it up. Senior management often views this as something sinister, a sign of deception or flawed execution: "Last year you bozos told me this was a blockbuster!".

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