There are many graphing and charting techniques that are employed for depicting the “balance” of a portfolio of projects by showing the performance of various projects on two or more criteria or dimensions. The portfolio mapping diagram which displays project risk and reward is the most widely used and highly popular. It displays probability of success on y axis and reward on X axis. The projects are usually plotted on the diagram as per their approximate success probabilities and payoffs.
A bubble diagram represents a famous variant of portfolio mapping that employs a circle or ellipse for identification of every project in place of a single point. The extra information related to the analogous project is provided by varying the shape, size, colour or shading of the circle. For instance, the shape of the circle may be used for representing the initial costs of the project.
The risk-reward portfolio mapping involves keeping the projects into various categories as per the quadrant they fall into. It is followed by labelling of the 4 quadrants of the diagram as shown below.
· Pearls: They have high probability of success and generate high payoffs
· Oysters: They are long shots, but with high payoffs
· Bread & Butter: They are low-risk projects with low rewards
· White Elephants: They are low probability and low payoff projects
Portfolio mapping tools acts as useful devices for displaying the attributes of projects, however they do not offer basis for making decisions regarding how to trade off those attributes. Moreover, they do not tell what balance among the various attributes is best for the project portfolio.
Portfolio Planning Matrix
The portfolio planning matrix is the graphical tool used by large companies for analyzing and managing their portfolios of SBUs (strategic business units). The company’s SBU’s are located within the cells of the matrix in this tool. The results assist the companies in making decisions regarding the investments to be received by SBU’s. It also assists in identification of the businesses that should be leftover and addition of new businesses to the portfolio.
The portfolio planning matrix is also called as BCG Growth-Share Matrix. It was developed by the Boston Consulting Group (BCG) in the 1970’s. This version represents four quadrants of the matrix that representing low versus high opportunities for growth and low versus high levels of market share.
In this tool, the identification and placement of company’s SBU’s in the matrix is done as mentioned below.
· Cash Cows : Mature SBU’s that yield excess cash due to their dominant market shares in slow-growth markets are kept in the lower left quadrant. These are labelled as Cash Cows.
· Stars : Mature SBUs that eat up cash and have good potential due to their high shares of high-growth markets are kept in the upper right quadrant. These are labelled as Stars.
· Question Marks: SBU’s that needs cash to stay workable and have low shares of high-growth markets are kept in the upper right cell. They are labelled as question marks.
· Dogs : SBU’s that simply yield enough cash to break even and have low shares of low-growth markets are kept in the lower right quadrant. These are labelled as Dogs.