Risk-Reward Bubble Diagrams in Project Portfolio Prioritization

Risk-Reward Bubble Diagrams are visual tools for achieving an overview of the different parameters of the project such as the added value of the project when selecting which projects to run. Hence, the Risk-Reward Bubble Diagrams are considered useful for portfolio structuring.

In the classical Risk-Reward Bubble Diagram, as suggested by Stage-Gate International among others, a chart is made with a measure of the Project Importance (e.g. Net Present Value, NPV) on one axis and a measure of the Ease of Project Completion on the other. Four squares, or quadrants, are now formed within the graph determining the desirability of each project. Projects in the quadrant yielding high value and high ease of completion are named “Pearls”, and are the most desirable whereas “White Elephants” projects with low value and low ease of completion are the least desirable. In between are the “Bread & Butter” projects with high ease but low value and the oysters that add high value but with little ease of completion.

On this graph, the projects are displayed as surfaces, where the size, shape, colour etc. may indicate the costs of the project, the uncertainty of the estimates, the strategic fit or other relevant parameters.

The Risk-Reward Bubble Diagram has been altered several times to match the different needs of different companies or project organisations with the more famous adjustments being the ones of Procter & Gamble and 3M.

In this article the use of classical Risk-Reward Bubble Diagrams and their altered alternatives in portfolio prioritization will be investigated with focus on their benefits and limits. The Bubble Diagrams will be put in perspective to the BCG Portfolio Prioritization Matrix, as these are typically grouped together, though their differences and commons are still discussed in the literature.