Prioritizing Your Innovation Portfolio
Updated: 2 days ago
Part 4 in a series
Read Part 1: A Portfolio Approach to Strategic Planning
Read Part 2: Plotting the Growth Vectors of Your Strategy
Read Part 3: Building Your Innovation Portfolio
Offense vs. Defense
In part 3 of this series on A Portfolio Approach to Strategic Planning we shared some tools and frameworks to help you build your innovation portfolio. Now we’re going to discuss some tools and frameworks to help prioritize what is likely a long list of projects within the portfolio that are competing for what is always limited time, attention, and resources.
We find it useful to start by understanding whether you should be playing offense or defense on any particular endeavor. It takes both offense and defense to win, but it’s important to understand the differing implications for each. This is related to the ‘extend the line/ bend the line/ transcend the line’ framework we have been referencing throughout this series, with a slightly different nuance on understand how good we need to be to achieve our tactical objective.
Playing to Not Lose vs. Playing to Win
When you are playing defense, the overarching objective is not to lose, so any efforts that go beyond achieving that objective amount to a waste of our limited resources that could better be reallocated towards achieving a different important objective.
Recently the team of a relatively small community bank with just a few locations and less than a billion dollars in assets talked to us about their goal to be what they kept calling best in class in digital banking.
We replied that that was a pretty tall order-- not to mention expensive; but they were undeterred. They had seen the future, it was definitely digital, they were convinced they had some world-beating ideas no one else had, and they were ready to go all-in to make it happen.
We then asked, assuming you could become best in class despite your limited resources, how long do you think you could maintain that lead before a multi-billion or multi-trillion dollar institution copied whatever you came up with?
Suddenly their bravado faded and they appeared deflated. Despite all of their enthusiasm and planning, they apparently hadn’t considered that sobering fact. So we asked them to talk more about their current situation and their future ambitions. It was full of buzzwords and consultants’ jargon, but the picture became a little clearer for us. We noted that what they were really saying was that today, they were pretty much worst in class in digital banking presently, and they clearly needed to address this deficit.
Understanding this context allowed us to refocus the conversation. We said that we have never heard any buzzwords or consultants talk about ‘okayest in class’ but that’s really what they should aspire to, because they can’t realistically win in a digital arms race against superpowers. The biggest risk when you’re playing defense, is spending too much time and money when ‘good enough’ is good enough.
Then we started to talk about where they could win. The more we talked, they actually had a few unique areas where they could potentially differentiate themselves from a sea of similar competitors.
Playing offense is all about winning, and most cases, that’s about finding that ‘blue ocean’ where they could build and maintain real differentiation. That’s not to say that whoever spends the most energy and resources always wins, but the real risk when playing offense is letting off the gas before you get to the finish line. Any resources conserved through avoiding waste in playing defense can be reallocated to make sure you can see through your offensive moves.
Current Competitiveness vs. Future Competitiveness
The way we like teams to map this out is by asking them to make an honest assessment about how good they are today at each project in their portfolio and comparing that to how good they need to be. We’ve set up this scaling from the perspective of external customers, but you could also repurpose it to think about internal users for projects that don’t impact external customers.
Then you need to take an honest assessment about how good you realistically need to be. For you overachievers, you don’t have to be at a level 5 at everything. In fact, it’s better if you can focus on just a few areas that really matter and where you can make a real difference.
You can then subtract the Current Competitiveness score from the Future Competitiveness score for each of the projects or ideas in your innovation portfolio to help you understand the gap between where you are today and where you need to be.
A negative gap number shows an area where you want to be careful not to overinvest, or potentially an area where you currently underinvesting may be overinvesting. For instance, there is not much ability or advantage today to differentiate in basic digital banking functionalities for consumers like bill pay or remote deposit capture.
You can’t afford to be out of the game, but it would be hard to definitively win the game, so you probably want to treat these as defensive tactics and see if there are any opportunities to reallocate any of these resources to fund more offensive activities. In particular, look at those projects in your portfolio that have positive gap number, meaning those areas where you have identified a need to be better in the future.
We also like to map out the scores on a two by two matrix that we call a Parity Map for a visual depiction of your innovation portfolio and highlighting those potential areas of underinvestment and overinvestment. Like all of the strategy maps in the Innovation Atlas, it only represents a snapshot in time, so you’ll want to revisit it from time to time.
Pay particular attention to how what were once very differentiated offensive strategies can evolve to become undifferentiated defensive strategies. Remote deposit capture was a differentiating innovation ten years ago, but is considered table stakes by most consumers today; just like now common features like airbags, ABS, GPS navigation, rearview cameras, smartphone integration and others were once advanced options in luxury automobiles.
That’s not to say you can’t find some ways to innovate and find new ways to win in digital banking, or any other part of your business; but don’t confuse staying in the game with winning the game.