Most often, Project Managers do the project we’re given. But it pays to start to hone your strategic thinking skills. And a question you may be asked is how to select a project, from a number of competing options. So, which portfolio prioritization method will you choose?
In this article, I will describe some of my favorite approaches to prioritizing projects to form a portfolio. These move from the simpler, qualitative approaches through to the more complicated, quantitative methods.
Here are the methods we’ll look at:
Mostly Qualitative Portfolio Prioritization Methods
- MOSCOW and KYIV
- Balloon Game
- Prune the Tree
- Opportunity Scoring
- Voting Methods
- Pairwise Comparisons
- Value-Complexity Analysis
- Forced Ranking
- The Eisenhower Matrix
- RICE Analysis
Mostly Quantitative Portfolio Prioritization Methods
- The Kano Model
- Weighted Scoring and Business Scorecard
- The McAllister Framework
- Cost-Benefit Analysis
- Discounted Cash Flows (DCF)
Some Information About Portfolio Management
However, before we start, you may want a primer on Portfolio Management. I suggest you start with my 5-minute video, that answers the question, ‘What is Project Portfolio Management?’
For a more detailed introduction, I recommend you watch my interview with Murali Kulathumani: ‘Introduction to Portfolio Management – with Murali Kulathumani.’
But, perhaps most valuable, as a warm-up to this article is this video, Project Portfolio Management: How to Craft a Portfolio in 5 Steps:
And, finally, if you are wondering – as you should be – how Artificial Intelligence can help with your project portfolio prioritization, watch my fascinating conversation with Stuart Easton of Transparent choice, ‘Decision-Making AI for Project Portfolios – with Stuart Easton’.
Mostly Qualitative Portfolio Prioritization Methods
Let’s start with the techniques that require little or no numerical analysis. These are simple to apply and many work very well in facilitated workshop sessions. If you need to learn more about facilitation, I recommend our videos:
- How to Facilitate a Meeting | Video
- How to Facilitate Productive Project Meetings – interview with Rich Maltzman
To keep the list to just 10, I have had to be selective and also combine similar approaches. There is no better example than the first…
MOSCOW and KYIV
MoSCoW Analysis is a very familiar prioritization approach that may Project Managers will use to prioritize feature or scope items that the project:
- Must deliver – essential
- Should deliver – high value
- Could deliver – Moderate value
- Won’t deliver – not enough value to justify the cost and risk
However, let’s face it… Since Russia launched an unprovoked war against Ukraine, who really wants to use MoSCoW Analysis? Not me. That’s why I suggested the equally useful, but more palatably named KYIV Analysis, in which we:
- Keep the project
- Yes, we do it if we can
- If we have extra budget we’ll do it
- Very unlikely we’ll do it
By the way, we have an old video (from before the Russian invasion of Ukraine) answering the question, ‘What is MoSCOW Analysis?’
A similar approach that works as a graet group discussion is the Balloon Game. We pretend we are in an air balloon, with all our projects. As the weight of them threatens to sink the balloon back to the ground, we must vote out projects that don’t justify their weight.
- The first person to go will nominate a project and ecxplain why it should be thrown out.
- The team votes. If more than half of the team votes to throw it out, it’s gone
- Repeat with the second person making a nomination
- Continue, until the remaining projects all get a positive vote to remain, or you have thrown out enough that your resources are sufficient for those that remain.
If you cannot get enough votes to throw out enough projects. Restart with a 33% vote enough to remove a project.
Prune the Tree
This is a method often used to prune product features. But, we can equally start with a tree of projects, with the trunk being the portfolio goal, and big branches representing major projects, and smaller branches representing smaller, subsidiary projects. The original tool was created by Luke Hohmann, to help product managers prioritize product feature requests.
I would adapt the idea so that we start by collectively drawing a portfolio tree that has:
The strategic purpose of the portfolio – or even the organization’s mission
- Major Branches (limbs)
Each branch represents a major program that delivers a substantial contribution to the strategy
- Small Branches
Each small branch represents a project that could sit within the program to deliver benefits
Each fruit represents a benefit delivered by the project (branch) from which it hangs.
Infrastructure, resources, or expertise that we need, to deliver the projects
Like the balloon game, we now facilitate a conversation about which branches to prune and which to protect.
Opportunity scoring focuses on the perceptions of the end-user or customer for the products, services, or processes that each project will produce. It asks how the project would score on each of two criteria:
- How important are the products of the project to the users or customers?
- How well-served and how satisfied are they, by what is already available to them
Clearly, even if something is important to your stakeholders, if there are already satisfactory options available to them, the project will deliver little marginal value. We plot projects on a chart like this one…
Where your stakeholders are under-served, lie opportunities to deliver significant value.
There are many ways that you can facilitate a group to vote positively for the best projects. My favorite approach is to give each person a fixed number of votes and a rule for how to vote:
- Fewer votes than projects
One vote per project – vote for the best. Modify this by allocating first, second, third preference votes
- More votes than projects
Give everybody, say, 100 votes (maybe in the form of stick dots)
Allow each person to use their votes as they wish, allocating more votes to projects they consider best, and fewer or none to the weaker projects.
Randomly pick two projects. Ask the group to discuss them, and then get a vote on which is stronger. If there is a 2/3 majority for one, the other goes out. Return the remaining project or projects to the pool and pick two new, random projects. Continue until you have eliminated enough projects.
If you are working alone, you can draw up a grid like the one below.
In each cell, write the letter corresponding to the stronger project. Then add up the numbers of each letter, to give each one a relative score. Discard the lowest-scoring projects and retain the highest-scoring ones.
In this approach, we chart the potential value of each project against the complexity or risk of implementation.
In the chart above, we can see that we would:
- Prioritize any low risk-high return projects
- Avoid taking on high risk-low return projects
- Cautiously adopt a small number of big bets – looking for ways to simplify or de-risk them
- Be careful about being seduced into taking on too many deckchair projects.
These are easy, but return little value for our efforts. Like moving the deckchairs around on the Titanic, they can be busy work that makes little difference to strategic priorities.
This is all about making a set of cards, one for each project and disciplining yourself or your team to arrange them in a definitive order, from the best to the worst. I find people dislike this approach. It’s simple to understand, but fiendishly difficult (and often divisive) to do.
Other methods in this section can help with forced ranking, but sometimes it is just best to accept that two projects are just ‘different’ – neither being definitively ‘better’ than the other.
The Eisenhower Matrix
This is an old favorite prioritization tool, that we most often use to assist time management. However, we can equally rate projects by:
How much difference they will make to things that matter, or how much the things they will impact matter to us
How much we consider access to the benefits of the project to pressing in time terms
As a result, we will get:
- High Importance, High Urgency project opportunities
These are our top priorities and we should get them underway as soon as possible
- High Importance, Low Urgency project opportunities
These are valuable opportunities, and we should make time to plan and schedule them to ensure they get the resources they need, in good time.
- Low Importance, High Urgency project opportunities
These need careful evaluation. Yes, these are pressing projects, but does the benefit justify the resources we need? And are there other, less resource-intensive ways to secure the benefits.?
- Low Importance, Low Urgency project opportunities
We should certainly push these to the back of the queue. But, realistically, will they ever get to the front? Maybe we can just cut them out now.
RICE Analysis requires a small calculation, based on simple estimates. We calculate a RICE score for each project as:
S = R.I.C/E
RICE Score = (Reach * Impact * Confidence)/Effort
So, we need to make simple estimates of:
How many users, clients, or customers will benefit from the project? Score:
- 16 if over 1 million
- 8 if fewer than 1 million
- 4 if fewer than 100,000
- 2 if fewer than 10,000
- 1 if fewer than 1,000
- 0.50 if fewer than 100
- 0.25 if fewer than 10
How much impact will the project have on the typical stakeholder? Score:
- 16 if life-changing
- 8 if Massive
- 4 if High
- 2 if Moderate
- 1 if Low
- 0.5 if Minimal
How much confidence do we have in our estimates? Score:
- 1.00 if High
- 0.75 if Medium
- 0.50 if Low
How much effort will this take, in person-months?
Mostly Quantitative Portfolio Prioritization Methods
My final five portfolio prioritization methods all require more robust data, more complex analysis, or greater attention to detail. The discounted cash flow analysis also requires a level of financial/mathematical sophistication.
The Kano Model
The Kano model should remind us of some of the qualitative approaches above, like Opportunity Scoring and Value-Complexity Analysis. What shifts it into my Quantitative category is that we now base our analysis on direct customer or user perceptions.
Rather than describe it in full, I will note that we can apply this Product feature prioritization tool to portfolio project prioritization, and leave it to video-Mike to explain…
Weighted Scoring and Business Scorecard
Scoring each project against a number of criteria or business objectives is a great way to ensure the projects you select will best support your strategy. There are two related ways you can apply this principle.
- Balanced Business Scorecard approach
Select a small number of overall business priorities or functional necessities, like financial performance, HR development, customer satisfaction, and process efficiency. Then ensure that the selection of projects for your portfolio provides appropriate value across all the dimensions that matter to you – with none getting more project weight than it deserves.
- Weighted Scoring approach
Determine a small number of evaluation criteria to apply to each project, like: projected net financial benefit, ease of implementation, and user or customer satisfaction. Then decide how much weight to apply to each of these criteria, for example, x3, x1, and x2 in our examples. Then score each project for its performance against each criterion. Apply the weighting factors to the scores and add them up. This gives each candidate project a score.
The McAllister Framework
The original model, which I’ve adapted, was the brainchild of a former Director of Product at AirBnB, called Ian McAllister. We start by defining the important strategic themes for the organization or portfolio. Then, we prioritize them and allocate a broad estimate of resources to each, to reflect their relative priority for investment.
Next, we generate project ideas – including any you already have – for each strategic theme. For each candidate project, we estimate the potential impact, in broad (order of magnitude) terms. We also estimate the cost of each project’s costs.
Finally, we prioritize the projects within each theme, according to value (see below = Cost-Benefit Analysis). We can then select the top projects for each theme, going down the list until we reach a project for which there are insufficient resources.
This is a simple (in concept) approach. For each project, develop a model (on a consistent basis) for the cost to implement and the benefit you will get from it. You can then calculate the value of each project either as:
- Net Value = Benefit – Cost
- Value Ratio -= Benefit / Cost
- Return on Investment = (Benefit – Cost) / Cost
And, for a deep dive into the subject of value delivery in projects, I have a detailed, full-length article, Value Delivery: The Driving Force that should Motivate your Projects.
Discounted Cash Flows (DCF)
The most sophisticated approach to financial measures of the value of a project is with a Discounted Cash Flow (DCF). There is a lot to say about this, so I shall simply refer you to my extended article (with a video explainer): How to Create a Discounted Cash Flow – DCF Made Easy.
What are Your Favorite Portfolio Prioritization Methods?
Please share your own favorite Portfolio Prioritization Methods in the comments below. I am especially interested to read about any tools, frameworks, or models that are new to me.