Project Portfolio Management Efficient Frontier Charts

The efficient frontier represents the maximum output (such as profit) that can be achieved for a given input (such as cost). To manually find the efficient frontier for portfolio, you would take the output value for each project and divide it by its corresponding input value and then order the projects from highest to lowest. For example, ordering a portfolio by profit/cost would rank the projects by the most units of profit per unit of cost. In the Efficient Frontier Chart below, Project Columbia has the highest profit-to-cost ratio and Project Cetus has the lowest profit-to-cost ratio.

Project Portfolio Management Efficient Frontier Chart Analysis

An efficient frontier represents a single attribute dimension, thus, for example, portfolios along a Profit versus Cost efficient frontier may be far away from a Profit versus Risk efficient frontier. This is another reason that Optimizing to overall SMART score is so powerful: it considers multiple dimensions simultaneously to give you “best compromise” results that can be studied in different efficient frontier dimensions.

The charts below compare six different portfolio models, represented by bubbles, in four different efficient frontier charts:

  • SMART Score versus Cost
  • Profit versus Cost
  • Probability of Success versus Cost
  • Strategic Value versus Cost

Different Project Portfolio Management Efficient Frontier Charts

Notice how the portfolios shift in their relationships to each other and the efficient frontier lines.

Clicking on a Portfolio View in the Legend displays that portfolio view in the chart so that you can compare it in relationship to the efficient frontier and other portfolios. Clicking in the “Sel” or “Pic” column checks the row and causes the projects associated with the checked Portfolio View to be displayed in the legend.

See Comparing Portfolios Against Efficient Frontiers for additional details about using efficient frontiers to compare projects in project portfolio management.

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