Last version published: 13/03/2023 12:01
Publication number: ELQ-53283-18
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McKinsey’s Portfolio of Initiatives Framework Template
An editable PowerPoint Template Slide of McKinsey's Portfolio of Initiatives Framework Model, to develop a more coherent and long-lasting business strategy.
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The McKinsey Portfolio of Initiatives Framework Model was developed around 2002 by Lowell L. Bryan, a Director (Senior Partner), at McKinsey & Company. Its approach is to take into consideration that the future of business is not as foreseeable as it may appear. It's a relatively interesting combination of the Three Horizons Model Framework (see here: https://www.eloquens.com/tool/MdNgh891/strategy/strategic-planning-templates-models/mckinsey-s-strategic-three-horizons-model-framework-template ) and Courtney’s levels of uncertainty Model. The framework aims to position initiatives in a more flexible, and evolutionary framework in the context of an uncertain business environment. It attempts to position strategies as "actions", in a non-stop evolving portfolio of initiatives. The portfolio is constantly been updated (minimum every 6 months), initiatives taken away, new added. The process never stops.
As the idea is to make these initiatives evolve over time, it implies encompassing quite a number of potential consequences such as:
- changing the organization to new conditions
- changing capabilities
- making divestures
- making acquisitions
- changing the business model
See here for McKinsey's Explanations and Animation on the framework: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/enduring-ideas-portfolio-of-initiatives
The Framework is a Nine-Box Model with 2 axis and one dimension:
- FAMILIARITY (Familiar, Unfamiliar, Uncertain) - Y axis
=>Familiar: Superior Tangible Assets in terms of talents, knowledge, relationships, reputation
=>Unfamiliar: If the organization were to take strategic actions today, it probably does not have the best of the intangible assets needed to succeed (on the contrary to competition). At this level, initiatives need investments in a staged-gate process, as to level up the familiarity to be able to take on the associated risks.
=>Uncertain: these are actions that most actors on market are unaware of, that are early stage and fuzzy, but the potential for value creation seems to be substantial. The objective here is to acquire familiarity (planning, R&D investments etc.), so that when the timing is right, the company is one step ahead of competition.
- TIME (Short Term, Medium Term, Long Term) - X axis
=>Short Term: Current Earnings Impact -> 1 to 2 years
=>Medium Term: 2 to 3/5 years -> This is the "sweet spot" of most strategies, as this is were you tend to progressively own a competitive advantage
=>Long Term: 3/5+ years -> will affect the market valuation earnings much later down the line
and one metric (size of bubbles) - potential market valuation of initiative
-> all this at the same level of risk, answering the question for the leadership - do we have enough initiatives in these time periods, that are going to mature and generate earnings over time, close to aspirations and objectives.
- POTENTIAL MARKET VALUATION AT STAKE: this is to evaluate the attractiveness of the opportunity. The bigger the better. Generally, organizations tend to have a healthy mix of attractive initiatives in their portfolio.
- STAGED GATE PROCESS FOR INITIATIVES (green, black, red and blue color labels on graph):
1/ Knowledge: Diagnosis of the opportunity
2/ Actions: Design the Business Model, Business Plan
3/Prototype: Does the Action actually work
4/Scale: At that stage, it no longer belongs to the portfolio of initiatives and belongs to the day-to-day operations of the company
Leading to 9 strategic actions that I have taken the liberty to name and re-create logically (although not directly stated in the original model).
✅ Familiar x Short Term : DRIVE & EXPAND
✅ Unfamiliar x Short Term : SELECTIVELY DRIVE & EXPAND
✅ Uncertain x Short Term : NO GO ZONE
✅ Familiar x Medium Term : ACCELERATE GO TO MARKET
✅ Unfamiliar x Medium Term : PLAN GO TO MARKET
✅ Uncertain x Medium Term : SELECTIVELY PLAN GO TO MARKET
✅ Familiar x Long Term : UNICORN! INVEST HEAVILY
✅ Unfamiliar x Long Term : INCREASE INVESTMENTS
✅ Uncertain x Long Term : LONG TERM R&D INVEST
Hence, a company with or likely to acquire greater familiarity of a given market, is likely to outperform competitors, with quicker and better execution capabilities.
Depending on the positioning of a given company's initiatives, various kinds of "corporate strategic profiles" can emerge:
- BALANCED : Most Initiatives go from top left to bottom right -> RECOMMENDED EQUILIBRIUM
- RISK AVERSE : Stuck at the top
- NO FOCUS : All over the place
- SHORT-TERM FOCUS : Cramped on the top left (only near term opportunities they are too familiar with)
- SHORT-TERM, NO GROWTH : Stacked on the left
- LONG TERM, LIVE ON CREDIT FOR A WHILE : Stacked on the right
- VERY RISKY FUTURE : Stuck at the bottom
- TAKING RISKS TO STABILISE IN THE FUTURE : Most Initiatives go from bottom left to top right
Given the pertinence of the model for the 21st century, I decided to convert it into a model PowerPoint template that any executive or strategy team can use to access the "corporate strategic profile" of its organization.
The file is an editable Microsoft PowerPoint Template Slide + Excel Model, with an online or offline 16 step-by-step methodology, with pedagogical illustrations for each step.
Should you have any questions on using this top tier Management/Strategy Framework Template slide, you're welcome to reach out to me via Private Message.
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