Internet investment portfolio, Accion Venture Lab


But it faced a major obstacle. The company was simultaneously pursuing more than Internet initiatives spread across seven business units. It had five separate on-line stores, including a software store, a Java store, an education store, a service store, and an add-on components store.

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Its sites ran on different systems, reflected different content and design guidelines, and incorporated different registration methods, search engines, and navigation protocols. The welter of uncoordinated projects confused customers, aggravated employees, and wasted money. Most damaging of all, it stood as a roadblock to a unified strategy. Sun decided to take action. On the basis internet investment portfolio the analysis, the internet investment portfolio quickly rationalized its Internet efforts, killing a number of projects outright, redesigning others, and combining many more.

It ended up with a coordinated, manageable portfolio of approximately 15 initiatives. Thanks to its new strategy, Sun is now well internet investment portfolio its way in advancing its Internet strategy. Many companies today are in the same position Sun was in three years ago.

In my consulting work, I have seen many large companies try to juggle literally hundreds of Internet initiatives, usually with little success.

Another company, a global services firm, has more than efforts under way. Then, the prospect of a single successful spinout appeared to outweigh the reality of dozens of money-losing ventures. Today, however, throwing money at the Internet is neither justifiable nor sustainable.

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Companies need a more disciplined approach. Like Sun, they need to manage their Internet initiatives strategically, as a balanced portfolio shaped by rigorous and consistent business criteria.

internet investment portfolio

In this article, I lay out a framework for doing just that. Developed through more than consulting projects with companies ranging from start-ups to industry leaders, the framework draws on traditional thinking about portfolio strategy but also reflects the unique characteristics of Internet business.

It provides a means for evaluating individual Internet initiatives as well as for creating a balanced portfolio that raises the odds of achieving an attractive return on overall investment.

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A New Take on Portfolio Strategy At its core, classical portfolio strategy is about the selective allocation of limited resources. By investing in a internet investment portfolio constructed portfolio of diversified businesses, companies are able to reap higher and more consistent returns over the long run.

The best portfolios reduce risk by balancing investments with different characteristics, combining, for example, long-term, speculative investments in new, potentially high-growth businesses with short-term investments in existing, profit-making businesses.

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All these frameworks reflect a common assumption: that the value-creation potential of a business can be assessed by analyzing internet investment portfolio market position within its industry together with the overall attractiveness of the industry. The Internet changes many things about business, but it does not change the need for a structured and balanced approach to investment. Indeed, the broad nature of Internet opportunities, from improvements in operating efficiency to inventions of entirely new business models and even industries, makes it more important than ever to think comprehensively about the whole investment portfolio.

But if the value of portfolio thinking remains intact, the traditional approaches to portfolio analysis need to be revamped for the digital age. Several key differences between Internet business and traditional business render the old frameworks obsolete. First and foremost, the evolution of e-business remains unpredictable—a fact underscored by the dizzying volatility in the stock prices of Internet companies.

internet investment portfolio

And without reliable data on market position, traditional planning frameworks become meaningless. Related to the uncertainty is the speed with which market conditions change.

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Traditional portfolio approaches assume long planning cycles, usually looking out at least five years and often as many as ten. An Internet portfolio, by contrast, must be reevaluated and adjusted every few months.

internet investment portfolio

Finally, traditional approaches are biased toward incremental investments in existing businesses. Because they presuppose the existence of well-defined industries with relatively stable economic and competitive traits, they do not even anticipate the kind of internet investment portfolio possibilities the Internet has opened.

The analysis of on-line initiatives must by necessity take into account softer, more qualitative information.

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In the planning framework I present here, therefore, market position and industry attractiveness are replaced with business viability and business fit. The Internet Portfolio Map By evaluating all Internet initiatives for viability and fit, a company can think practically and holistically about its digital portfolio.

By dividing the matrix into four quadrants, a company gains a rough guide to the best strategic course for each initiative: invest more in it, redesign it, sell it or spin it out, or kill it.

internet investment portfolio

For example, an initiative that rates high on viability but low on fit is an obvious candidate to spin out, while one that rates high on fit but low on viability may warrant a redesign to try to improve its economic prospects. As with all such frameworks, the Internet portfolio map is not intended to dictate a course of action; rather, its value lies in providing a structured and consistent way to assess a group of investments.

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The choices a company ultimately makes will hinge on its particular goals and circumstances. A Map for the Net A company can use this simple matrix to help set a strategic course for its Internet initiatives.

Using qualitative and quantitative measures to assess viability and fit, a company can then plot its initiatives on the map, which will suggest whether each should be invested in, redesigned, sold or spun out, or killed. Universal has ten different Internet projects in planning or under way, ranging from a business-to-business site for taking orders from wholesalers and retailers, to a Web store for selling branded merchandise to consumers, to a lifestyle portal for kids, to a recruiting site.

To evaluate internet investment portfolio projects, it has developed sets of criteria for evaluating viability and fit. It also shows that the company has five initiatives that look attractive for further internet investment portfolio as well as two that might be spun out. The averages for these measures are then plotted on a matrix at right.

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Internet investment portfolio quantitative and qualitative measures that Universal Soda used, particularly market-value potential, personnel requirements, and capability fit, will be employed by most companies.

In some cases, however, additional measures, such as speed of implementation, may be critical. In deciding which measures to emphasize, companies can follow a few simple guidelines.

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First, the size and maturity of a company matter a lot. For larger companies with more entrenched processes and cultures, the qualitative measures of organizational and cultural fit are often more important than the quantitative capital funding or near-term cash flow needs. Conversely, for a new venture with more limited capital resources and a nascent organizational structure, quantitative metrics usually matter more.

Second, if the initiative involves developing a new business model or entering a new industry, its market-value potential and speed of implementation will typically carry more internet investment portfolio. Finally, for larger portfolios, the ability to leverage capabilities and other potential synergies among initiatives should be carefully assessed.

It would bring the company into an entirely new business realm.

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One of the reasons companies have internet investment portfolio making sound decisions about Internet investments is the radically different nature of core and transformative opportunities.

Part of the power of the Internet portfolio map is that it uses a common set of measures to evaluate both types of initiatives. Once you see how the opportunities stack up in terms of their viability and fit, you are in a much better position to start making trade-offs among them. Different companies will need to strike different balances between their core and transformative investments. A company in a stagnant industry with weak growth prospects, for example, would likely be seeking a breakout strategy.

As a result, it would want to put more emphasis on transformative ventures. Yet if that same company has a bureaucratic, risk-averse culture, it may find that entrepreneurial initiatives fit poorly with its organization and thus should warrant relatively conservative investments.

The resolution of such tensions cannot be reduced to a formula.

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It is the rare company, for example, that can simultaneously pursue dozens of different initiatives. Based on my consulting experience, I recommend that large companies limit themselves to between ten and 15 projects.

More than that, and they risk spreading their resources too thin, creating redundant work, and confusing internet investment portfolio people. Over time, therefore, a company can shift its mix from the core to the transformative. When Sun Microsystems rationalized its portfolio, for example, most of the initiatives that made it through the screen were focused on enhancing the core business.

internet investment portfolio

Among other initiatives, the company consolidated its consumer stores into a single Sun-Store site, launched a customizable MySun portal for corporate clients, rolled out an on-line configuration tool that allows customers to design their own systems, and set up partnerships with eBay, TekSell, and Mercata to run Internet auctions to sell new and used products.

It placed a number of more speculative bets with very high-potential payoffs. It has, for instance, continued to find ways to leverage its Jini software to achieve an early-mover advantage in providing applications for new Internet devices, such as Web-enabled phones, digital assistants, and appliances.

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It also invested in a capacity-on-demand COD initiative that may have potential as a spinout. With one click, a customer can request additional processing power, and it is brought on-line immediately.

Because the COD system delivers value to both the manufacturer and internet investment portfolio customer, it could be the basis for a lucrative business in its own right. The company has long used portfolio planning.

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Over internet investment portfolio last dozen years, it internet investment portfolio created 12 diverse businesses, sold internet investment portfolio of them to FleetBostonand shut down two. So inwhen GBG turned its attention to Internet opportunities, it came as no surprise that it wanted to use the Internet portfolio map to aid it in parceling out its investments. It was a fruitful exercise, producing a list of both core and transformative initiatives that appeared internet investment portfolio have real potential.