Innovation-led growth, at its core, hinges on how resources are allocated; it’s not simply a matter of creativity or generating new ideas. The challenge lies in prioritizing a portfolio of initiatives in a way that aligns with a company’s strategic goals and prepares it for the future.
Often, companies fall into the trap of using a single lens to prioritize their initiatives. For instance, they might focus solely on those with the lowest risk and highest EBITDA impact. While this approach might seem practical, it often leads to an unbalanced portfolio, favoring incremental innovations over bolder, more transformative opportunities. As a result, companies risk becoming vulnerable to market disruption down the line.
To avoid these pitfalls, it’s essential to employ a mix of analytical methods—or lenses—when prioritizing initiatives. These methods should always reflect the company’s overarching strategic intent. For example, if a company aims to generate 50% of its revenue by 2030 from markets where it currently has no presence, then neglecting a market-type analysis would be a critical oversight.
There are numerous ways to examine a portfolio of new initiatives. The key is to select lenses that are closely tied to what the company aspires to achieve through innovation-led growth. So, which lenses should you consider? Let’s explore the some possibilities we’ve seen best work in practice:
The ‘Confidence/Risk’ portfolio views
These views are excellent for assessing the remaining risks of new growth initiatives in relation to their potential benefits. This framework allows leaders to evaluate impacts on top-line growth, operational cost optimization, and ROI, facilitating strategic decisions that effectively balance risk and reward.
- Revenue Potential by Confidence or Risk
- Cost Saving Potential by Confidence or Risk (if applicable)
- ROI Potential by Confidence or Risk
This view is particularly suited for applying Monte Carlo simulations, enabling you to gauge the most realistic likelihood of revenue generation, cost savings, or ROI for each portfolio item. It empowers company leadership to prioritize projects, whether by choosing those with the highest confidence levels, even if the returns aren’t the most exciting, or by opting for higher-risk projects with greater potential returns if the company has a higher risk appetite.
Additionally, this lens can serve as an excellent conversation starter with project teams, prompting discussions on ways to boost confidence and reduce risk. In summary, this view is invaluable when deciding which projects to invest in and scale immediately and which ones need further de-risking.
The ‘Investment-to-Date’ portfolio views
These views are ideal for illustrating how much has been invested in various portfolio items (projects or ventures) compared to their potential future returns. This perspective can also help address sunk cost bias, as it clearly shows the potential upside relative to the investments already made.
In this view the most common ways of looking at the portfolio are:
- Investment-to-date by Revenue Potential
- Investment-to-date by ROI Potential
- Investment-to-date by Cost Saving Potential (if applicable)
Much like in the case of the previous cluster of lenses, for a better conversation around the potential upside we would advise the use of Monte Carlo simulations.
The ‘FTE Investment-to-Date’ portfolio view
This set of views closely resembles the ones mentioned earlier but, instead of assessing investment in monetary terms, it evaluates the portfolio based on the effort invested, measured in full-time employee (FTE) equivalents. The most common ways to break down the portfolio using this view include:
- FTE Investment-to-date by Revenue Potential
- FTE Investment-to-date by ROI Potential
- FTE Investment-to-date by Cost Saving Potential
The Serviceable Addressable Market Size portfolio view
This portfolio view offers a clear perspective on the size of the market each initiative targets in relation to its current stage of development based on the company’s idea or product lifecycle framework.
In practice, some companies have chosen to replace the ‘Maturity Stage’ axis with other metrics that better align with their goals, such as ‘FTE Investment-to-date,’ ‘Total Investment-to-date,’ or even ‘Confidence Level.
The Innovation Type portfolio view
This is arguably one of the most widely used approaches for analyzing a company’s portfolio, primarily because it provides a clear snapshot of the company’s potential risk of disruption.
In this portfolio view, one axis categorizes each portfolio item by its type of innovation—whether it’s core, adjacent, or transformational—while the other axis shows the maturity of each item based on the company’s idea or product lifecycle framework.
It’s worth mentioning that, in some instances, we’ve recommended companies replace the core/adjacent/transformational classification with alternatives that better fit their specific context. Examples include categorizing innovations by offering, process, business model, or customer experience.
Conclusions
In innovation-led growth, you ultimately have to determine what matters most for your company, deciding which perspectives to embrace and which to set aside. Some views will naturally be more relevant than others, depending on what you want your portfolio to achieve in the future. Also worth noting is that the views presented above represent only the most common ways of assessing a portfolio; depending on your particular context, you may choose to create other views that are more relevant to your objectives.
The discussion around which portfolio views to use boils down to two key factors: understanding the company’s strategic direction and building consensus with the stakeholders who control the budget for these initiatives.
At its core, portfolio mapping should serve as a means to an end, not just as an academic or theoretical exercise. In most cases, this end involves effective resource deployment and initiating new initiatives to drive future growth in the identified ‘gaps’.
