3. Prioritization Frameworks - Investment Portfolio

In this section, we will explore the Investment Portfolio framework, which approaches prioritization with the mindset of an investor. The idea is to evaluate initiatives based on factors such as the potential return, level of risk, certainty, and the company’s appetite for risk. This framework helps guide decisions by considering opportunity, effort, certainty, and the current business context.

The Investment Portfolio Approach

When using the Investment Portfolio framework, you think like an investor looking at their portfolio. You want to maximize returns while minimizing risk, balancing short-term and long-term gains. It’s important to consider the business environment and the company’s overall strategy. There are times when the company may be willing to take bigger risks for higher potential rewards, and other times when a more conservative approach is necessary.

Key Factors to Evaluate:

Opportunity: What is the potential value of this initiative? Does it represent a low, medium, or high opportunity for the business?
Effort: How much work is required to implement the initiative? Is the return worth the effort?
Certainty: How confident are we that the initiative will succeed? Do we have enough data or insights to reduce risks?
Risk Appetite: What level of risk is the company willing to take at this moment? Can the company afford to take more speculative bets, or does it need more reliable returns?

The Investment Portfolio Matrix

This framework can be visualized using a 2x2 matrix. The Y-axis represents opportunity (low, medium, or high), while the X-axis represents certainty (low certainty means higher risk, high certainty means lower risk).

Each quadrant in this matrix helps you decide how to approach different types of initiatives:

1. Quadrant B (High Opportunity, High Certainty)

This is the ideal scenario, where you have a high opportunity and high confidence that the initiative will succeed. These are “low-hanging fruit” and should be prioritized for immediate execution because they represent both high value and low risk.

2. Quadrant A (High Opportunity, Low Certainty)

This quadrant includes high-opportunity initiatives but with a higher level of risk or uncertainty. These are speculative initiatives where further research or discovery is needed. If the company has a higher risk appetite, it may choose to take a chance and proceed with these initiatives. Otherwise, it’s advisable to gather more data before making a decision.

3. Quadrant D (Low Opportunity, High Certainty)

Initiatives in this quadrant are safe bets, but they offer lower potential returns. The risk is low, but the opportunity is not significant. These initiatives can still be valuable but should not take priority over high-opportunity projects. If the company has the resources, it can proceed and look for ways to extract more value as the initiative evolves.

4. Quadrant C (Low Opportunity, Low Certainty)

This quadrant represents the riskiest initiatives with the least opportunity for return. These are typically not worth pursuing and should be deprioritized. The combination of low opportunity and high uncertainty makes these initiatives too speculative to justify the effort.

Investment Portfolio in Action: A White-Label Course Platform Example

Let’s apply the Investment Portfolio framework to the same hypothetical scenario of a white-label course platform. The platform provides the infrastructure for organizations to offer courses, but does not create the courses itself. Here are the four initiatives we need to prioritize:

Implementing Pix Payment – Allowing customers to pay using Pix.
Enabling Marketing Email Scheduling – Providing the ability for customers to schedule marketing emails.
Adding More Automation Triggers – Offering more triggers for automation workflows within the platform.
Improving Home Screen Usability – Enhancing the usability of the main interface for end users (students).

1. Pix Payment (Quadrant D: Low Opportunity, High Certainty)

Pix payments represent a relatively low opportunity based on current demand, as only a small number of customers have requested this feature. However, we have high certainty that implementing it will solve a specific problem for a subset of users. Given the high certainty but low opportunity, the recommendation is to launch it and iterate as needed, especially since it’s a low-risk project.

2. Marketing Email Scheduling (Quadrant B: High Opportunity, High Certainty)

Enabling the scheduling of marketing emails has a high opportunity because it will bring our product up to par with competitors and improve the efficiency of our users’ marketing efforts. We also have a high level of certainty about the need for this feature, as indicated by customer support requests and competitor analysis. This initiative should be a top priority due to its combination of high opportunity and high certainty.

3. More Automation Triggers (Quadrant A: High Opportunity, Low Certainty)

Adding more automation triggers represents a high opportunity because it would enhance the platform’s flexibility and align us with competitors. However, we have less certainty about the specific triggers that users need and the actual impact of implementing them. In this case, we would need to do more research, such as user interviews or discovery sessions, to gather additional data before proceeding. If the company has a higher risk tolerance, it could proceed speculatively, but gathering more data would be a safer approach.

4. Home Screen Usability (Quadrant B: High Opportunity, High Certainty)

Improving the home screen usability offers a high opportunity because it directly impacts the end users (students), and we know that usability issues are causing frustration and generating support tickets. Additionally, competitors face similar problems, and solving this would differentiate our platform in the market. With high certainty about both the opportunity and impact, this initiative should be a high priority.

Conclusion

Using the Investment Portfolio framework, we can categorize initiatives based on their opportunity and certainty, which helps align the risk and reward profile of the company with its strategic goals. For the white-label course platform, the prioritization would be as follows:

Marketing Email Scheduling – High opportunity, high certainty (Quadrant B).
Home Screen Usability – High opportunity, high certainty (Quadrant B).
Pix Payment – Low opportunity, high certainty (Quadrant D).
More Automation Triggers – High opportunity, low certainty (Quadrant A).

This method provides a clear, rational approach to deciding where to invest resources, considering both risk and return. It also allows flexibility to adapt to the company's risk appetite and changing market conditions.