Portfolio Management Insights: Opportunity Gap

This morning’s R&D had me reviewing some previous work on Expected Commercial Value calculations.  One of the flaws or should I say weaknesses at lower levels of Portfolio Management Maturity is a the assumption that delaying a project only shifts to the right when a project yields value.  This however is most often not the case.  When evaluating each project’s value for a Portfolio one needs to account for both NPV of funds expected, NPV of funds received, AND also a potential reduction is value received as a result of a short recovery period and project lifecycle.

Consider this first scenario: Buying a new automobile.  While the utility may not change on a new vehicle purchased towards the end of the year its market value certainly drops as one gets closer to the next model year.  Another scenario: The utility value is sensitive to when in the lifecycle a initiative is executed (e.g., having a large shipment of ice cream available for summer in New York vs. fall).

As such Enterprises with more mature Portfolio Management capabilities will consider this factor in portfolio decisions.

Opportunity Gap

 

 

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About briankseitz
I live in PacNW in a small town and work for Microsoft as a Enterprise strategy and architecture SME. I enjoy solving big complex problems, cooking and eating, woodworking and reading. I typically read between 4-8 business and technology books a month.

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