Figure 23. Project Server 2010 – Efficient Frontier chart
The Efficient Frontier helps analysts identify the project portfolio that will deliver the maximum value under various constraint thresholds. The Efficient Frontier chart includes value criteria on the y-axis—for example, strategic value—and cost on the x-axis (see Figure 23). Each point on the Efficient Frontier line represents a different bundle of projects from the proposed portfolio. The Efficient Frontier line represents the most bang for the buck, or highest ROI. For example, Figure 23 shows that for a $10 million budget (the x-axis) it can achieve approximately 79 percent of the portfolio’s strategic value (the y-axis). Organizations can use the Efficient Frontier chart in two ways: To identify the point of diminishing return. Find the point where the curve begins to flatten, which indicates that you are paying more to achieve a disproportionately lower amount of strategic value. 2. To benchmark the selected portfolio against the Efficient Frontier. Compare the position of the selected portfolio in relation to the line that represents the Efficient Frontier. In reality, because of constraints like interdependencies, project alternatives, and mandatory investments, most portfolios are suboptimal and fall below the Efficient Frontier. Analysts can identify and work toward removing these constraints to move closer to the Efficient Frontier. 1.
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