Understand that funds are limited. This is not rocket science. You can spend money only once. The main consequences for our portfolio considerations are therefore to remember what we already committed to do. This the part of “run the business”. We made commitments and we better keep them, otherwise we lose trust of our customers. At the same time, we need to be innovative and build our future. We call this “grow the business”. In consequence, part of our capacity needs to be allocated to innovation. For some business, we even need to reserve capacity to follow up on yesterday’s business. The latter also counts towards “run the business”.
How shall you split the capacity? There is no golden rule. One good approach is to use “yesterday’s weather”. Take data from your history. Then you know what you did in the past. Compare your actual performance with how you would like to perform and adjust the capacity allocation.
Adjusting the capacity allocation cannot be done in short cycles. It is unlikely that in relatively steady state conditions, more frequent up-dates that twice a year should be necessary..
However, respect your running contracts. If you allocated to much capacity to “run the business” you need to either increase your capacity or stop running projects to shift weight to “grow the business”. In other words, consider carefully if you take the new project… For that decision, ask your Portfolio Management system.
For disruptive changes that force changes in the strategy, dramatic adaptations may be advisable.
Investment Horizons, the Three Horizon Model and the distinction between Strategy, Tactics and Execution are closely linked.