Digital portfolio strategy: how to use 70:20:10

I thought it'd be useful to write a little about a little framework we've started to use quite a lot in Digital Strategy to categorise digital activities in an organisation's portfolio.

The background to this is in the work we do to align executives on what digital means in their context and where they have capability gaps. We tended to find a couple of common issues:

1. No one leader has a complete view of what digital ventures were being taken across the business
2. There are rarely enough truly innovative projects...
3. ...and those that there are tend not to be directed at specific corporate goals
4. Organisations lack a means to take the lessons from innovation and apply them to optimise the main business

In my experience about 70 percent of the energy (capital, time, attention) of a business should be directed on optimising the core activities. These are pure return on investment (ROI) calculations where a simple business case can be created. At the opposite end, ten percent should be on hedges against disruption and attempts to create 10x improvements through active disruption. These are return on risk (ROR) decisions made up of individually smaller initiatives that need to be managed like a venture portfolio. Between these two categories are the remaining 20 percent, which are hybrids that use semi-proven concepts from the ROR portfolio to extend the core. In the long term you hope that these can be used to enhance the entire core.

Hopefully the above makes the framework very easy to understand! To use it requires a detective process that uncovers all of the digital investments that are being made and places them on the framework. The axes are designed to give initiatives that enhance efficiency with digital practices and technology as much prominence as those that grow the top line.

What you'll find is that there are likely to be only a few initiatives that actually fall on the diagonal where radicalness of the concept matches the radicalness of the operation that creates it. That's fine - the purpose of this framework is to lead to a conversation about:

1. How to reduce duplication (particularly in heavily matrixed organisations)
2. The objective of innovation within the organisation - what 'moonshots' are going to radically enhance delivery of the strategy?
3. The range of operating models at play and whether they match the evolution of the business
4. How to make sure that ideas funded in a 'Series A' in the Disruptive Zone can be prototyped in a larger scale in the Hybrid Zone
5. What outcomes the organisation is after in each zone and how those can be measured

Having baselined the situation using the framework, new digital initiatives can be classified and decisions about the way in which they deliver targets can be made effectively. Hopefully having clarity over the latter will reduce tension about the ownership of innovative initiatives - wherever they sit, they should deliver the corporate strategy and there should be clarity about how they will be incorporated into the operating practices of the core, killed or spun out in the future.

Setting up an organisation to do all of that isn't all that easy, of course. I've written about that particular thorny issue in the past... and if I find a minute in the next few days I'll write about a few new ideas we've been working on with clients.