Why You Need A Portfolio Valuation Model for Continuous Product Development Planning

The majority of organizations that plan, develop, and deliver software rely on a yearly planning process to identify and approve projects for funding.

This process requires that leaders identify things that they think will be valuable months in advance, create cost estimates to support the budget request, and identify some expected benefits.

Cost becomes the way that we determine if something is valuable, not the outcomes that the initiative should deliver.

The problem with only focusing on cost is that you are managing the wrong part of your balance sheet. All of your product development should be thought of as an investment that delivers value. Your challenge? How do you define value?

Just because something delivers value doesn’t inherently make it valuable.

A company that is always chasing the next deal isn’t focused on strategy, they are focused on sales and revenue targets. And yes these have value, but working tactically brings higher risks to business continuity.

So how do we know if what we are doing will provide long-term value?

By aligning value to strategies. This way as you consider new technology projects you will be focused on having value conversations along with the investment costs associated with an initiative.

The Portfolio Valuation Model I’ve created is based upon proven Investment theory and generates a value score that corresponds to expected outcomes.

The model is easy to use once the model is developed and agreed upon.

The Valuation Model resides at the Intake level of your Program Management. Value scores are generated for all initiatives and then prioritized in the Portfolio Kanban via those scores.

The Portfolio Valuation model is designed to answer these three investment questions:

Should we do it? — Does it align to our strategic objectives? Does it ‘move the needle’

Can we do it? — Can we leverage our current capabilities to support the initiative?

Will we do it? — If we decide it’s strategically aligned and we can either build it or buy it, does the cost of the investment align to the expected value realization?

At one organization the model made transparent that the projects they were working on provided little value related to their cost and allowed leaders to have a more appropriate conversation about replacing an aging ERP system.

Value creates the space for having sometimes difficult conversations.

I’ll be giving a talk on my Portfolio Valuation Model at the Enterprise Agility World Conference 2022

If you would like to learn more now please reach out to me at michael@soundagile.com