Some projects create value through execution, others through learning. Manage them all the same way and most of the money ends up back in today’s business.
Many organizations stay busy, disciplined and aligned, and still struggle to grow. SmartOrg’s David Matheson has worked with leadership teams across industries. In his experience, the obstacle to growth is rarely strategy or alignment. Even sophisticated portfolio processes tend to favor projects that are easier to explain, forecast and justify. Over time, hundreds of reasonable decisions add up to a portfolio built for today’s business.
David saw this with the president of a specialty materials division with roughly $5 billion in annual revenue. He calls her Ruth. Her teams were capable and her businesses performed well, yet each year most resources flowed back to the core.
What changed things was not more discipline, but four shifts in how the division looked at its portfolio.
1. Make the cost of every project visible
Ruth’s division had piled up projects that used resources without creating much value. Most had logical justifications. Some had influential sponsors. Many had simply been around for years. Together, they were blocking bigger opportunities.
These projects were surviving because their opportunity cost stayed invisible. In one portfolio discussion, a division leader David calls Carl agreed with his team that three opportunities created far more value than the rest. Those three used nearly all the available marketing resources, so pursuing them meant everything else had to wait. Carl objected: “But Project D is critical.” Funding D, David replied, meant compromising the three opportunities the team had already agreed mattered most. Project D was Carl’s own favorite, an initiative he had quietly protected for years. Once he saw its opportunity cost, he ended it himself.
As the same trade-offs became visible across the division, the division eventually cut roughly 30 percent of its portfolio.
2. Ask two questions about every remaining project
Long scorecards, from strategic fit to technical risk, can bury the two questions that show how a project will create value: How big could this become if it succeeds? And how difficult will it be to make it succeed?
The first question is about the size of the prize: if the project succeeds and matures, would it matter to the company? Judge the project at full scale, as it would look once fully grown, rather than at its first launch. Teams often frame hard projects around a safe first step, such as a few early customers or a limited launch, to make the proposal feel credible. That step may be sensible, but it is not the size of the prize.
Measure every project in the same money terms, such as net present value (NPV), which shows what a project’s future earnings are worth today, or its profit in its best year. Without one shared measure, each project leader picks the metric that makes their project look best, and the discussion turns into advocacy.
Check: the 5 percent test.
A quick check for portfolio leaders whenever a project carries a “strategic” label. Picture the successful, mature version and ask: could it change the size or performance of the relevant business by 5 percent or more? If yes, it deserves a different kind of conversation.
The second question is about the odds: can the organization pull this off in a way that creates business success? This is the project’s difficulty, measured as the probability of reaching a meaningful business outcome within a relevant time and investment frame. Cost, time and technical complexity matter, but they are not the core question. A project can be technically hard but commercially straightforward, or technically simple but commercially improbable.
David and the division applied these two questions to the remaining projects in Ruth’s organization, estimating the size of the prize and the odds for each. The portfolio already held enough potential value to meet the growth objectives, and the scores revealed two very different kinds of projects. About half the value came from familiar projects with known customers, established technologies and reliable business cases. The other half came from a handful of much larger bets: enormous prizes with low odds.
3. Sort projects into four types and manage each on its own terms
Ruth asked which ones to focus on. In David’s view, that question assumed every project should be managed the same way, yet the two questions had already shown that her projects differed sharply in both size and odds.
Her question assumed every project should be managed the same way: pick the winners, fund them, drive execution. That works when value depends on execution. Some projects create value through learning instead.
David maps every project on two axes, size of the prize and difficulty, to create what he calls the Innovation Screen. The grid sorts projects into four types:
Bread & Butter projects (small, easy) create value through execution. Plans, budgets and milestones work, because the organization knows enough to make those promises meaningful.
Pearls (big, easy) create value through scaling. The prize is large and the odds are good, so the work is to remove friction and get them to full size fast.
Oysters (big, hard) create value through learning. The work is to find the uncertainties that matter most and resolve them quickly and cheaply. Most will fail; the few that prove out become Pearls.
White Elephants (small, hard) consume effort without enough upside. They create value when someone stops them, or when a bigger idea inside them is redirected and the project becomes an Oyster.
The types are not fixed. A portfolio gains value when White Elephants stop, when Oysters become Pearls, and when money follows the projects whose value is rising.
An advanced materials company shows how reframing a project can move it to a better box on the Innovation Screen. Its technology dramatically shrank the antennas in military vehicle radios, yet the finance team found the economics disappointing: military procurement was slow, and adoption would be gradual. With a modest upside and a hard path, the project, as originally framed, sat in the White Elephant box.
The team then asked what would make the project worth doing. The answer was standardization. Standardization would also sidestep slow procurement and speed up adoption.
If the technology became standard across military vehicle platforms, the opportunity would grow dramatically, turning the project into an Oyster with one critical uncertainty. The project itself had not changed. The team’s understanding of it had.
To tackle it, the company’s CEO called the CEO of a major vehicle manufacturer. The manufacturer wanted smaller antennas, but only after seeing them proven in military pilots. So the team redesigned its pilot to include the manufacturer. That slowed the program slightly, which traditional project metrics would count as a setback. David counts it as a big win: the goal was not to advance the project but to improve the opportunity, and bringing in the manufacturer made the business case a winner.
For Ruth, this changed the job. She no longer had to decide which projects deserved support. She had to understand what each one needed to become more valuable.
Check: one question per type.
Here are four questions for leaders preparing a portfolio review:
Bread & Butter (modest prize, high odds): What milestones, budgets, and deadlines will keep these projects delivering on time and on cost?
Oysters (large prize, low odds): What is the single critical uncertainty for each project, and what is the fastest, cheapest way to test it?
Pearls (large prize, high odds): Which approvals, processes, or resource limits are slowing these projects down, and which can we lift to speed them up?
White Elephants (modest prize, low odds): Can we reframe this project into a bigger opportunity, as the antenna team did, and if not, how do we stop it and redeploy the people?
4. Move money when the evidence changes
In many organizations, budgets stay attached to past approvals. Projects keep their funding because they were once approved and are making progress, rather than because they still look attractive. David calls this momentum budgeting: promising projects scale too slowly, and weak ones die too late.
Each type also needs its own governance. Discipline and accountability drive Bread & Butter projects, but the same approach undermines Oysters, which need learning loops and room to pivot.
The alternative is to move resources whenever new evidence changes a project’s value: when an assumption fails, when uncertainty drops, or when an Oyster becomes a Pearl. The decisions that matter most often fall between initial approvals and annual reviews, at the moment new evidence changes what is possible. Leaders who act in those moments shift money and people toward the projects gaining value and away from those losing it, so the strongest ideas grow faster and the weakest stop sooner, freeing resources for the next opportunity.
Ruth began with what looked like a familiar problem: too many projects, too few resources, not enough growth. The real problem was a portfolio process built to allocate resources rather than to increase the value of each opportunity. A portfolio, David argues, is a collection of beliefs about the future. Managing it well means turning those beliefs into evidence faster than competitors, and moving money accordingly.
