Classical approaches
The Boston Matrix
In the Boston Consulting Group portfolio, a company’s various products are divided into four categories depending on their relative market share and market growth, according to their stage in the product life cycle: Question Marks, Stars, Cash Cows, and Poor Dogs. The product portfolio is a subset of the company portfolio that can be defined down to the level of the individual product (share of sales, profit, growth rates, etc.).
Source: Wikimedia
Three horizons
The idea of the three horizons is the observation that the same control mechanisms do not take effect in the different phases of development:
- Horizon 1 (0-12 months), also called the operational horizon. Operations refers to the present and the immediate future:
Here, the focus is on the day-to-day business. Horizon 1 ranges from daily to a few weeks to a few months into the future. Execution is often not touched by grand strategic visions that are supposed to become reality in a few years. - Horizon 2(12-36 months), also called tactical horizon:
Tactics is what gets us from today’s portfolio to tomorrow’s portfolio, that is, linking execution to strategy, that is, providing guidance on how to evolve today’s operation into the future state. - Horizon 3 (36-72 months), also called 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 the market, customers and the environment.
The original formulation of the three-horizon model focused on fixed time horizons. This rigid view is considered outdated, modern developments are interesting.
Our personal preference is Simon Wardley’s integrated view of the evolution of products, practices,
Consequences
The three horizons model proposes a distinction of goals, metrics and tools depending on the horizon.
|
Horizon 1 (0-12 months) |
Horizon 2 (12-36 months) |
Horizon 3 (36-72 months) |
|
|
Goals |
Maximize economic return |
Cross the chasm, |
Create new Business |
|
True North |
Maximize Flow |
Continuous improvement |
Disruptive ideas |
|
Key metrics |
Revenue vs. plan, |
Rate of sales, ?target accounts |
Buzz/word of mouth popularity (b2c), ?name of brand (b2b) |
|
Typical Tools |
Lean |
Scrum |
design thinking |
The three-horizon model is attributed to Mehrdad Baghai, Stephen Coley, and David White, “The Alchemy of Growth,” New York: Perseus Publishing, 1999.
Lean-Agile enhancements
Portfolios at SAFe
The portfolio level is the top level considered by SAFe. In a large company, there may well be several portfolios, each of which defines its own value streams and solutions. However, all of these portfolios are considered in the context of the corporate strategy: the enterprise strategy drives the portfolio strategies and those responsible for them in turn inform those responsible for the corporate strategy.
The important concepts are as follows:
- Value streams are longer-term development projects that create a continuous flow of new products and services. Value streams are implemented by one or more programs or (aka) Agile Release Trains in a Solution.
- Lean budgets are allocated to 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 proposes a portfolio Kanban system for business epics and for enablers. They shall ensure that the number of projects in which investment is made is limited.
- Epics are large undertakings in a portfolio. Business epics describe new functionality, while enabler or architecture epics encompass overarching technological changes that keep a system executable and future-proof.
- The portfolio back log is the top-level backlog in SAFe and contains the prioritized epics that have gone through the Kanban system and are awaiting implementation by a release train.
- Strategic themes are specific driving elements that link the portfolio vision to the overall strategy of the company.