Portfolio Strategy
The Boston Matrix
The Boston Consulting Group portfolio divides a company’s various products into four categories based on their relative market share and market growth, depending on their position in the product life cycle: question marks, stars, cash cows and poor dogs. The product portfolio is a subset of the corporate portfolio that can be defined down to the level of the individual product (share of sales, profit, growth rates, etc.).
Source: Wikimedia
Three Horizons
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The idea of the three horizons is based on the observation that different development phases require different control mechanisms:
- Horizon 1 (0-12 months), also known as the operational horizon. Operations relate to the present and the immediate future:
the focus here is on current day-to-day business. Horizon 1 ranges from daily to a few weeks to a few months into the future. Execution is often not affected by grand strategic visions that are to become reality in a few years. - Horizon 2 (12-36 months), also known as the tactical horizon:
Tactics is what moves us from today’s portfolio to tomorrow’s portfolio, i.e. connecting execution with strategy, i.e. providing guidance on how to develop today’s operations into tomorrow’s state. - Horizon 3 (36-72 months), also known as the strategic horizon, determining the direction of future business:
Strategic considerations and decisions live in horizon three. They determine the future direction. We need a vision of where we want to be in the future in terms of market, customers and environment.
The original formulation of the three-horizon model focuses on fixed time horizons. This rigid view is considered outdated; modern developments are more interesting.
Our personal preference is Simon Wardley’s integrated view of the evolution of products, practices,
Consequences
The three-horizon model suggests a distinction of goals, metrics and tools according to horizon.
| Horizon 1 (0-12 months) | Horizon 2 (12-36 months) | Horizon 3 (36-72 months) | |
| Goals | Maximize economic return | Cross the chasm, Start contributing significant revenues | Create new Business |
| True North | Maximize Flow | Continuous improvement | Disruptive ideas |
| Key metrics | Revenue vs. plan, Market share, profitability | Rate of sales,?target accounts | Buzz/word of mouth popularity (b2c), ?name of brand (b2b) |
| Typical Tools | Lean Kanban | Scrum Scaled Agile Framework | Design Thinking Lean Startup |
The three horizons model is attributed to Mehrdad Baghai, Stephen Coley and David White, “The Alchemy of Growth”, New York: Perseus Publishing, 1999.
Lean-Agile Portfolio Evolution
Portfolios at SAFe
The portfolio level is the highest level considered by SAFe. In a large enterprise, there may well be several portfolios, each defining its own value streams and solutions. However, all these portfolios are considered in the context of the corporate strategy: the enterprise strategy drives the portfolio strategies, and the portfolio owners in turn inform the corporate strategy owners.
The important concepts are as follows:
- Value streams are longer-term development efforts that create a continuous flow of new products and services. Value streams are implemented through one or more programs or (also known as) Agile Release Trains in a solution.
- Lean budgets are provided for solutions or Agile Release Trains. The budget for an iteration of a solution or a release train (program increment) is available to product management.
- Portfolio Kanban systems. SAFe suggests a Portfolio Kanban system for Business Epics and for Enablers. They ensure that the number of initiatives in which investments are made is limited.
- Epics are large initiatives in a portfolio. Business Epics describe new functionality, while Enabler or Architecture Epics encompass overarching technological changes that keep a system operational and future-proof.
- The portfolio backlog is the top-level backlog in SAFe and contains the prioritized epics that have passed through the Kanban system and are waiting to be implemented by a release train.
- Strategic topics are specific driving elements that link the portfolio vision with the company’s overall strategy.
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