3 Ways Portfolio Thinking Transforms Business Strategy

What does the word portfolio mean to you?

The phrase portfolio can conjure up thoughts of your personal investment portfolio or even, the person who’s entrusted to oversee your personal assets.

The entire first page of search results behind the phrase portfolio management delivers items pertaining to investment services or the ‘art or science of matching investment choices to specific objectives’ within one’s investment portfolio.

The word portfolio can also refer to a collection of achievements, artwork or other creations of significant value to a person.  We might display a portfolio or share it with others to demonstrate our capabilities or track record in an effort to build trust and confidence.

In total, the word portfolio is highly emotional and engaging, isn’t it?

From making the right investment choices to building a collection of accomplishments, a portfolio represents a valuable asset that we’re motivated to protect and enhance. Naturally, something that’s emotional or engaging drives focus, energy and extensive thought.

So, what on earth is ‘portfolio thinking’ and what does it have to do with growing your business?

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Portfolio Thinking Pulls The Market In

Typically, there are two approaches that organizations utilize in building a growth strategy. In starting with a growth objective, a strategic planning effort might take on a internal-based, top-down approach that sees opportunity through the current business, brands, products or services.  Conversely, an external-based strategic approach sees opportunity from the marketplace back into the business.

Which one most describes your business?

There may be times in the life-cycle of a business that one approach might trump another, but largely, creating a long-term growth strategy will demand an externally-based approach.

Portfolio thinking asks ‘what else should or could we be doing to enhance or expand the business?’  Portfolio thinking encourages us to go wide before getting narrow, triggering curiosity and research.  Portfolio thinking says ‘what are we missing’.  Portfolio thinking orients the entire strategy process to the outside first.

Portfolio Thinking Organizes Opportunity

Similar to making personal investment choices, portfolio thinking is the art and science of identifying, selecting, organizing and managing growth opportunities.  An externally-based focus surfaces possible insights and growth opportunities that present a unique fit to a specific competency you might possess, an audience you currently serve, or perhaps a new market expansion initiative.

A portfolio strategy is not only a roadmap for achieving your growth targets, but it becomes a foundation for how you organize and manage each opportunity within the organization.

Let’s consider a manufacturing business in the lawn and garden space.  The business might choose to organize a portfolio of market expansion opportunities by growth forecasted, geography, channel or perhaps, trend.  Therefore, a portfolio based on growth forecasted or trend in lawn and garden care might organize across the following three buckets:  self-propelled equipment, ‘connected’ equipment (IoT – Internet of Things), and robotics.

While maintaining a leadership position in a more mature space such as self-propelled equipment is important, beginning to build businesses that intersect with future, high growth markets is critical.  In this example, portfolio thinking should help management structure these opportunities according to their respective life cycle stage.  In this example, one market is mature while the other market is in development.

By organizing the business growth strategy into a portfolio, you can make smart choices about both where and how to allocate time, money and resource.

Portfolio Thinking Creates Ownership

Perhaps most intriguing, portfolio thinking creates a sense of ownership.  As the owner of a portfolio, you’re heavily invested in caring for that portfolio’s performance.

Within an organization, you might designate or organize talent around a specific pillar within your portfolio of growth opportunities.  Simplistically, you might choose to align more seasoned talent to a core pillar (existing products, existing markets) in the portfolio, while selecting specialized or expert talent to a non-core (new products, new markets) pillars in the portfolio.

So, let me ask you – could portfolio thinking be a missing link in your business strategy?  If implemented, how could portfolio thinking impact your execution of strategy?

Portfolio thinking pulls the outside in.  It organizes growth.  And, it drives ownership.

Could it be that kind of thinking that you need to break-through tough growth challenges?

 

If you found this article helpful and know colleagues who may also have interest in the topic, please don’t hesitate to share!

The Strategy of Choice for 2016 is the best starting point for your growth plans this year.  If you haven’t read it yet, it’s a 3-minute read at most with a self-assessment tool to get you out of the starting blocks in Q1.  Check it out.  

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