Portfolio of Initiatives

A portfolio of initiatives, as discussed by McKinsey’s Lowell Bryan (I worked with Lowell in the New York Office) helps you balance near-term incremental efforts with the game-changing investments (in both new capabilities as well as understanding of new trends). Too much focus on incremental efforts, and you’ll find yourself unprepared as markets and technology evolve. Too much focus on disruptive efforts, and you’ll find your team too distracted to convert near-term wins. Therefore, it’s important to appropriately balance efforts across your portfolio of initiatives.

A CEO can think about corporate strategy not as a “portfolio of businesses” but as a “portfolio of initiatives” aimed at achieving favorable outcomes for the entire enterprise. Usually, these initiatives will be organized around themes—”convoys” if you please—focused on achieving particular aspirations, such as increasing the global reach of the enterprise, entering a new but related industry, or achieving the industry’s lowest marginal cost of production. Portfolio effects increase the likelihood that some of these aspirations will be achieved even if many others fail.

The chart is a 3×3 graph with axes of Risk and Time to Maturity.  The time to maturity bucket is fairly straightforward to most.  The definition of Risk is more interesting– it’s divided into 3 categories:

• Familiar
• Unfamiliar
• Uncertain

This approach reflects the thinking that if you aren’t failing, you aren’t trying very hard.  If you’re really investing in new territory, the goal is toimprove uncertainty and familiarity with experience in the space– that experience is captured via successful initiatives and the learnings from unsuccessful initiatives.  Hence, even if initial experiments fail, the portfolio benefits from the experience.

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