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:

No one leader has a complete view of what digital ventures were being taken across the business
There are rarely enough truly innovative projects...
...and those that there are tend not to be directed at specific corporate goals
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:

How to reduce duplication (particularly in heavily matrixed organisations)
The objective of innovation within the organisation - what 'moonshots' are going to radically enhance delivery of the strategy?
The range of operating models at play and whether they match the evolution of the business
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
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.

Impacts of a handset leasing model on mobile telcos

Following yesterday's post, here's some related thinking on the impacts on operators of handset leasing. Handset sales represent around 25% of operator revenues in a typical European market, but generate only around 5% of margin. It may therefore be the case that the scenario described would lead operators to a more profitable structural model than exists today. Oil companies are consistently and acceptably profitable, despite being (literally in some cases) the ‘dumb pipe’ that operators are so desperate to avoid becoming. One of the reasons for the oil majors sustained profitability is clear focus on their role in the value chain – to supply the fuel that enables transportation, relying primarily on location, then brand and finally product innovation to compete. BP or Shell do not need to subsidise the purchase of a car in order to drive consumption of fuel because consumers are ‘hooked’ on it (it gets them from place to place) and there are many credible car manufacturers an

Value drivers for telecoms retail

I've been doing a really large number of driver trees recently - we've taken to using them on every project to get really into the guts of value creation for businesses and thus decide where to focus initiative development (How To Win, if you're keeping score). Anyhow, I had to pause for thought recently to work out how to represent the subscription aspect of telecoms retail for a client. Since it took me a minute, I thought I'd share... its lack of elegance suggests that its not quite right, although it was enough to demonstrate that there was a certain lack of coverage in the initiatives that my client was pursuing and thus spark a debate. Enjoy.

Chief Strategy Officers II - Career Development

Here's a follow up to my earlier post on the starting point of Chief Strategy Officer (CSO) careers in the FTSE 100 and S&P 500 companies - a visualisation of two steps in their careers: their first employer or job and the job they had before they got their current position. Lots of work went into this... so any insights that you glean from the visualisation would be great to hear about :). The CSO is a crucial strategic role on the executive (!) and the owner of the tone and philosophy of decision making across much of the business, knowingly or unknowingly. Scrutiny of their experience in defining the process and language of strategic management is therefore appropriate not just amongst their executive peers, but in my view amongst shareholders. The days when being very smart and able to analyse large amounts of data were enough to be a CSO are basically gone... has the profession moved on enough to cope?

Versatile Amphibian

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