Now that we have examined the pros and cons of the purely financial approach to portfolio let us turn our attention to a more balanced approach called the “scoring model”.
The essence of the scoring model approach is to come up with several variables that the executives consider important when assessing the value of their future projects. This is usually done during the project portfolio workshop where the instructor explains the theory behind the scoring approach, provides several examples of the scoring models developed by other companies and then asks the executives present to engage in a brainstorming exercise. The fundamental nature of this exercise is to generate as many relevant criteria as possible and record them on the whiteboard or a flipchart. These criteria may include, for example:
- Strategic alignment
- Market attractiveness
- Fit to existing supply chain
- Time to break-even
- Product and competitive advantage
- Leverage of core competencies
- Technical Feasibility
- Risks, etc.
Once the discussion is over, the facilitator hands the red marker to the first person in the room and announces the following rules: