The document discusses portfolio frameworks for driving innovation through effective product strategy and management. It advocates using a 3 horizons model to classify initiatives based on their distance from the current business model. Horizon 1 focuses on defending and extending the current business, Horizon 2 on exploiting and expanding adjacent opportunities, and Horizon 3 on exploring future opportunities. It also discusses using outcome-based measures, prioritization frameworks, learning loops through experimentation, and portfolio visualization tools to help align initiatives with strategic goals and make intentional decisions.

1. GLOBAL SOFTWARE CONSULTANCY
©ThoughtWorks 2018 Commercial in Confidence
Accelerating Innovation:
Portfolio Frameworks
Sheen Yap, Principal, Product Strategy and Management, ThoughtWorks UK
1

2. WHY IS IT
SO HARD
TO INNOVATE?
OPTIMISED FOR TODAY
NEW CAPABILITIES
CULTURE CLASH
INSUFFICIENT IMPACT
3©ThoughtWorks 2018 Commercial in Confidence

3. FROM INCREMENTAL TO RADICAL INNOVATION
Principles for smart impactful change
4
Own a silo-busting
portfolio of
opportunities
Invest in, and be
guided by, data
©ThoughtWorks 2018 Commercial in Confidence
Run experiments;
run many of them
Learn through
collaboration

4. PORTFOLIO FRAMEWORKS
LINKS VISION TO EXECUTION
Ensure decisions are made at the right levels
Remove innovation vs defensive dichotomy
Connect to commercial levers of control
Make choices to be intentional
Visual devices for collaboration
Models for iterating upon
©ThoughtWorks 2018 Commercial in Confidence
H1: CURRENT
BUSINESS
Defend & Extend
H2: ADJACENT
BUSINESS
Exploit & Expand
H3: FUTURE
BUSINESS
Explore
TimeToday
Value
Seeds for tomorrow,
planted today
McKinsey’s 3 Horizons

5. DRIVING PRODUCT STRATEGY
THROUGH EFFECTIVE PORTFOLIO MANAGEMENT
6
CLEAR
CLASSIFICATION
©ThoughtWorks 2018 Commercial in Confidence
INTENTIONAL
PRIORITISATION
APPROPRIATE
MEASURES
LEARNING
LOOPS

6. DRIVING PRODUCT STRATEGY
THROUGH EFFECTIVE PORTFOLIO MANAGEMENT
7
CLEAR
CLASSIFICATION
©ThoughtWorks 2018 Commercial in Confidence

7. ©ThoughtWorks 2018 Commercial in Confidence
H1: CURRENT BUSINESS
Defend & Extend
H2: ADJACENT BUSINESS
Exploit & Expand
H3: FUTURE BUSINESS
Explore
TimeToday
Value
Seeds for tomorrow,
planted today
Project, products,
ideas or initiatives
3 HORIZONS MODEL
Make all everything visible
Classify based on business
model distance
H2 needs to have
replacement potential/size
H3 typically have disruptive
characteristics (e.g.
potential cannibalisation)

8. ©ThoughtWorks 2018 Commercial in Confidence
Same day pricing change
Consistent image capture
Use pre-transactional data
to price vehicles
Proactive logistics
communications
Additional vehicle specs
Recommend relevant
pre-publication cars
Sell vehicles pre-refurb at a
fixed price
Make preview show wider
range of products
Sell vehicles enroute,
awaiting sales etc
More imagesReduce Key customer
rebates
Reduce Key customer
rebates in NI
Loyalty exit
No quibble cancellations or
claims
Sell unrefurbishable
vehicles at a fixed price
Expedited deliverySell unrefurbishable
vehicles through e-bid
Sell vehicle data packet
H1: CURRENT MODEL H3: FUTUREH2: ADJACENT
H1: Improve how we sell
vehicles to increase net
revenue per
transaction
H1: Revise how we
incentivise key clients to
reduce cost of sales
H3: Use add-ons as a
way to find new
revenue streams
H2: Directly sell
unrefurbishable vehicles
to grow new customer
segment
H1: create engagement
activity to increase no of
transactions per
customer
EXAMPLE VEHICLE REMARKETER

9. DRIVING PRODUCT STRATEGY
THROUGH EFFECTIVE PORTFOLIO MANAGEMENT
10
CLEAR
CLASSIFICATION
©ThoughtWorks 2018 Commercial in Confidence
INTENTIONAL
PRIORITISATION

10. ©ThoughtWorks 2018 Commercial in Confidence
H1 H2 H3
OUTCOME-BASED STRATEGIC ALIGNMENT
H1 H2 H3
VISION
VS
? ? ?
Rule of thumb Situational Allocation

11. ©ThoughtWorks 2018 Commercial in Confidence
LEAN VALUE TREE
GOAL GOAL GOAL
VISION
BET BET BET BET BET BETBET BET
INITIATIVES INITIATIVES INITIATIVES INITIATIVES INITIATIVES INITIATIVES

12. ©ThoughtWorks 2018 Commercial in Confidence
Same day pricing change
Consistent image capture
Use pre-transactional data
to price vehicles
Proactive logistics
communications
Additional vehicle specs
Recommend relevant
pre-publication cars
Sell vehicles pre-refurb at a
fixed price
Make preview show wider
range of products
Sell vehicles enroute,
awaiting sales etc
More imagesReduce Key customer
rebates
Reduce Key customer
rebates in NI
Loyalty exit
No quibble cancellations or
claims
Sell unrefurbishable
vehicles at a fixed price
Expedited deliverySell unrefurbishable
vehicles through e-bid
Sell vehicle data packet
H1: Improve how we sell
vehicles to increase net
revenue per
transaction
H1: Revise how we
incentivise key clients to
reduce cost of sales
H3: Use add-ons as a
way to find new
revenue streams
H2: Directly sell
unrefurbishable vehicles
to grow new customer
segment
H1: create engagement
activity to increase no of
transactions per
customer
EXAMPLE VEHICLE REMARKETER
Vision: Ensuring that our organisation can be more profitable and
efficient in reselling vehicles in next 3 years, and continue to be the
supplier of choice to dealers

13. DRIVING PRODUCT STRATEGY
THROUGH EFFECTIVE PORTFOLIO MANAGEMENT
14
CLEAR
CLASSIFICATION
©ThoughtWorks 2018 Commercial in Confidence
INTENTIONAL
PRIORITISATION
APPROPRIATE
MEASURES

14. HORIZON-BASED OUTCOME MEASURES
15
H1 CURRENT H2 ADJACENT H3 FUTURE
PHASE MATURE SCALE START UP
BUSINESS QUESTIONS
HOW MUCH PROFIT WILL
IT GENERATE?
HOW QUICKLY CAN WE
GROW?
WHO WILL USE IT?
WILL ANYONE USE IT?
MEASURE OF VALUE PROFIT REVENUE/MARKET SIZE TRACTION*
EXEC ENGAGEMENT LOW REGULAR FREQUENT
©ThoughtWorks 2018 Commercial in Confidence
* uptake of service by intended customers

15. ©ThoughtWorks 2018 Commercial in Confidence
Same day pricing change
Consistent image capture
Use pre-transactional data
to price vehicles
Proactive logistics
communications
Additional vehicle specs
Recommend relevant
pre-publication cars
Sell vehicles pre-refurb at a
fixed price
Make preview show wider
range of products
Sell vehicles enroute,
awaiting sales etc
More imagesReduce Key customer
rebates
Reduce Key customer
rebates in NI
Loyalty exit
No quibble cancellations or
claims
Sell unrefurbishable
vehicles at a fixed price
Expedited deliverySell unrefurbishable
vehicles through e-bid
Sell vehicle data packet
H1: Improve how we sell
vehicles to increase net
revenue per
transaction from 1% to
1.25% above market
ave
H1: Revise how we
incentivise key clients to
reduce cost of sales
from 4.7% to 4.3% of
revenues
H3: Use add-ons as a
way to find new
revenue streams that
earn net positive £25 per
car on 50% of stock
H2: Directly sell
unrefurbishable vehicles
to grow new customer
segment into 500 new
customers
H1: create engagement
activity to increase no of
transactions per
customer by 10%
EXAMPLE VEHICLE REMARKETER
Vision: Ensuring that our organisation can be more profitable and
efficient in reselling vehicles in next 3 years, and continue to be the
supplier of choice to dealers

16. DRIVING INNOVATION
THROUGH EFFECTIVE PORTFOLIO MANAGEMENT
17
CLEAR
CLASSIFICATION
©ThoughtWorks 2018 Commercial in Confidence
INTENTIONAL
PRIORITISATION
APPROPRIATE
MEASURES
LEARNING
LOOPS

17. PORTFOLIO
PRODUCT
EXPERIMENT/SPRINT
DEFINE REFINE REFINE
HYPOTHESIZE
RUN
LEARN RE-HYPOTHESIZE LEARN
RUN
18
LEARNING CYCLES THROUGH ALTITUDES

18. Equip every Social Science researcher with
skills and tools they need to engage with Big
Data and New Technology (i.e. Computational
Social Science)
H2: Equip researchers
with the skills they
need
H2: Equip researchers
with the necessary
tools/SW
H2: Equip researchers
to collaborate with
data scientists
H2: Equip researchers
to access and work
with data sets
BET
H3: Help
researchers get
credit
H1: Book series/
journals
XOut of scope
PORTFOLIO LEVEL EXAMPLE PUBLISHER
INITIATIVES UNDER INNOVATION PROGRAMME
H1: Help
researchers
connect
Invalidated
BET BET
X
BET BET BET BET BET BET
By THEMSELVES
by OUTSOURCING
by COLLABORATING
Online Data Science
Courses for Social
Scientists ?

19. ©ThoughtWorks 2018 Commercial in Confidence
Target revenue size:
$1M/annum
Revenue model
@ $400 per course
Required throughput
= 2500 course starters/annum
50K Visitors
500K/pa
Reached
Purchase: 5%
2500
Course Starters
(actual purchase)
Completion: 10%
250 New Course
Completers
(value delivery)
Retention: 10%
2 Retained Course Completers
PRODUCT LEVEL FUNNEL MODEL
Customer Factory Blueprint
Referral: neg
Acquisition: 10%

20. EXPERIMENT LEVEL
LANDING PAGE
Q: Would anyone pay $400 per course?

21. EXPERIMENT LEVEL RESULTS
125K
Contacted
12.5K
Landed
1250
Left email
(625)
Purchase?
10% 10% (50%)
Test Goals
(Hypothesis)
12.3%
6.5% 39% (50%)
125K
Contacted
1663
Landed
204
Left email
(102)
Purchase?
6.5% (50%)
125K
Contacted
1761
Landed
687
Left email
(344)
Purchase?
26K
Opened
26K
Opened
Landing
page with
No Price
(control)
Landing
page with
$400
21%
21%
1.3%
1.4%
12.3%
proxy to 5% purchaseproxy to 10% acquisition

22. PRODUCT LEVEL REVISING THE OPPORTUNITY
Purchase
(6%)
Completed
(10% )
Retained
(10%)
Landing page
experiment
Current Year
2M
Population
500K
Contacted
Revenue =
$156,000 pa
Total Annual
Population
Contactable
(25%)
Open Rate
(20%)
Interested
(6.5%)
@£400 per
student
125K
Contacted
1663
Landed
204
Left email
(102)
Purchase?
21% 12.3% (50%)
26K
Opened
6.5%
100K
Opened
6.5K
Landed
390
Purchased
39
Completed
Not quite our target of $1M pa

23. PRODUCT LEVEL REBUILDING THE BUSINESS CASE
Purchased
(6%)
Completed
(10%)
Total Annual
Population
Contactable
(25%)
Open Rate
(20%)
Interested
(6.5%)
@$400 per
student
Yr 1
2M Pop.
500K
Contacted
Revenue =
$171,600 pa
100K
Opened
6.5K
Landed
390
Purchased
39
Completed
6.5%
Interest
Yr 2
2M Pop.
500K
Contacted
Revenue =
$215,263 pa
100K
Opened
8.1K
Landed
489
Purchased
49
Completed
8.15%
Interest
Yr 3
2M Pop.
500K
Contacted
Revenue =
$270,037 pa
100K
Opened
10.2K
Landed
614
Purchased
61
Completed
10.23%
Interest
Yr 4
2M Pop.
500K
Contacted
Revenue =
$338,748 pa
100K
Opened
12.8K
Landed
770
Purchased
77
Completed
12.83%
Interest
Yr 5
2M Pop.
500K
Contacted
Revenue =
$424,943 pa
100K
Opened
16.1K
Landed
966
Purchased
97
Completed
16.10%
Interest
Yr 6
2M Pop.
500K
Contacted
Revenue =
$533,070 pa
100K
Opened
20.2K
Landed
1212
Purchased
121
Completed
20.19%
Interest
Yr 7
2M Pop.
500K
Contacted
Revenue =
$668,710 pa
100K
Opened
25.3K
Landed
1520
Purchased
152
Completed
25.33%
Interest
Yr 8
2M Pop.
500K
Contacted
Revenue =
$838,864 pa
100K
Opened
31.8K
Landed
1907
Purchased
191
Completed
31.78%
Interest
Yr 9
2M Pop.
500K
Contacted
Revenue =
$1,052,313 pa
100K
Opened
39.9K
Landed
2392
Purchased
239
Completed
39.86%
Interest
Yr 10
2M Pop.
500K
Contacted
Revenue =
$1,320,075 pa
100K
Opened
50K
Landed
3000
Purchased
300
Completed
50%
Interest

24. ©ThoughtWorks 2018 Commercial in Confidence
Equip every Social Science researcher with
skills and tools they need to engage with Big
Data and New Technology (i.e. Computational
Social Science)
H2: Equip researchers
with the skills they
need
H2: Equip researchers
with the necessary
tools/SW
H2: Equip researchers
to collaborate with
data scientists
H2: Equip researchers
to access and work
with data sets
BET
H3: Help
researchers get
credit
H1: Book series/
journals
XOut of scope
H1: Help
researchers
connect
Invalidated
BET BET
X
BET BET BET BET BET BET
By THEMSELVES
by OUTSOURCING
by COLLABORATING
Online Data Science
Courses for Social
Scientists
PORTFOLIO LEVEL STOP, CONTINUE, PIVOT?

25. LATEST RESULT

26. RECAP AND CONSIDERATIONS
27
STEPS KEY QUESTIONS
Clear Classification What does your Portfolio look like from a Horizons perspective?
How does your Product/Project/Initiative fit within that?
Intentional Prioritisation How does the portfolio mix of contribute towards overall the goal?
How does your Product/Project/Initiative align towards that goal?
Appropriate Measures What are the right operating and governance models to be working under?
What are the right measures of success?
Learning Loops Can you execute in smaller slices to provide quicker feedback?
Can decision makers change investment mix based on the learnings?
©ThoughtWorks 2018 Commercial in Confidence

27. RECOMMENDED READING

28. ©ThoughtWorks 2018 Commercial in Confidence
SHEEN YAP
PRINCIPAL, PRODUCT STRATEGY & MANAGEMENT
syap@thoughtworks.com | thoughtworks.com
29