PPM software vendors think risk is value

When watching vendors present PPM software, note their "what if" analyses. The vendor presents a scoring model and selects projects via optimization. Then the vendor changes the weights of the scoring model and selects projects again. The vendor shows how the "optimal" portfolio changes.

The vendor presents the "what if" analysis as a valuable feature but the demonstration actually reveals risk. It shows that project selection is sensitive to the scoring model's weights. Meanwhile, the best set of weights is something that one doesn't know. If a method's success depend on information you do not know, why would you use it?

Fortunately, if used properly, the "what if" analysis is useful. By identifying projects that are selected in a variety of situations one can create portfolios that are robust to uncertainty. These portfolios are always suboptimal, never being the best one for any situation, but they perform well in a great variety of situations, which provides security form unknown-unknowns and all kinds of events that affect outcomes.

This robustness is called state flexibility. One can read about state flexibility and see other methods of creating state flexible portfolios in my discussions, "Why C-level executives reject PPM's recommendations" and "Action flexibility and state flexibility in PPM."

Although state flexibility improves performance, the best methods for managing pipelines (phase-gate systems) may be my new, burgeoning framework: pipeilne physics. For an introduction, see my discussions:

• How to make drug development more productive.
• How discovery impacts development.
• Managing drug development pipelines.

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