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LearnFoundations of Innovation
Module 8•Unit 5 of 7•10 min

Portfolio Thinking

A crucial insight about the pathways: they are not mutually exclusive. The goal is not to pick one pathway, but to build a portfolio of innovation efforts spread across several. A healthy business harvests declining foundations, captures value from current ones, and creates new ones - all at once. The only real constraint is your ability to properly fund, manage, and execute the portfolio you choose.

A balanced portfolio

One widely cited benchmark for balancing an innovation portfolio is the 70-20-10 guideline: roughly 70% of innovation investment in the core (capture), 20% in adjacent opportunities, and 10% in transformational, new-to-the-world bets (creation).[1] The exact numbers vary by industry and ambition - the point is to be deliberate about the balance rather than let near-term pressure crowd out the future.

~70%

Core (capture) - Pathways 1-2

~20%

Adjacent - Pathways 3-4

~10%

Transformational - Pathways 5-6

Illustrative - the point is a deliberate balance, not the exact split. Interestingly, the returns are often roughly inverted: the 10% transformational share can drive an outsized portion of long-term value.

Left unmanaged, portfolios drift toward safe, near-term capture, because those returns are proven and pressing. The risky Value-Creation bets - the ones that secure your future - get quietly starved. Deliberate portfolio management exists precisely to protect the long-term share from being eaten by the urgent.
Rate your innovation portfolio
We deliberately balance capture, adjacent, and creation bets3/5
We protect long-term bets from near-term budget pressure3/5
We can actually fund and execute everything we have committed to3/5
We have at least one genuine new-to-the-world (Pathway 6) effort3/5
Not usDefinitely us
Discuss

Roughly what is your organisation's split across core, adjacent, and transformational innovation? Is the long-term share protected, or getting squeezed?

Try this at work this week
Estimate your current core/adjacent/transformational split. If transformational is near zero, propose funding one small Pathway 5 or 6 bet - the future rarely gets built by accident.

Sources

  1. Nagji, B. & Tuff, G., "Managing Your Innovation Portfolio", HBR, 2012 (70-20-10).
  2. Global Innovation Institute (GInI), Foundations of Innovation - Growth Pathways.
  3. Bansi Nagji & Geoff Tuff, Monitor / Deloitte research.
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The Seven Pathways
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Case Study: Choosing Pathways