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To reallocate resources to greenfields, new markets and products is the most important activity an organization can undertake. Strong reallocators perform significantly better over time than low-reallocators do. Despite that, most companies, and especially public corporations, reallocate too little. And when they do invest in new initiatives, the projects are normally focused on short-term, incremental improvements. One could say that the portfolio of strategic initiatives is poorly balanced with respect to future threats and opportunities.
One way to overcome the balancing problem is to bring all initiatives together and evaluate them with the same yardstick, a yardstick that derives from the overall future-driven strategy. Often the initiatives are poorly coordinated and spread out through the organization. Bringing them all is often revealing and makes re-allocation easier. How well do different initiatives perform in terms of feasibility, ROI, strategic impact, et cetera? How much of the investments are put into initiatives of a transformative and disruptive character, and how much is of an incremental type? Is the balance between short-term gains and long-term bets right? Are we investing enough in low-cost exploration activities, or is everything put into short-term exploitation?
Our method for portfolio evaluation is straightforward and makes it easy to combine different types of initiatives in one single analysis.