Innovation tool & template
How to create a
Balanced Portfolio
The PMS Map
The PMS map is a core strategic tool used in Blue Ocean Strategy
It was created by Prof. W. Chan Kim and Prof. Renee Mauborgne.
Creating a Balanced Portfolio
Are you clear about the future growth trajectory of your business? Do you have a balanced portfolio of
products and services that provides cash flow today and assures profitable growth for tomorrow? If so
how do you know? How do you create a balanced portfolio for your business that maximises profit from
existing products and services whilst creating innovation for future growth?
One of the most difficult aspects of strategic planning is creating a clear and encompassing picture of
how the business is performing and where the opportunities for ongoing growth exist. Creating a visual
representation of strategy can help managers better predict and plan the companys future.
The PMS Map is a strategic tool that helps you visually analyse your current portfolio. It will allow you to
establish which of your products/services will grow in the long term and which will decline. It will help
you identify the risks within your current portfolio and the opportunities for profitable growth.
In strategy workshops this exercise has proven to be powerful in awakening managers to their true
situation. It often results in a significant ah-huh moment. When we make future growth projections
based on traditional measures (revenue, profit, market share, customer satisfaction) we blinker ourselves
to what is really happening within our business. Growth projections based on traditional measures are
focussed on the past, which has proven itself unreliable when predicting the future.
The PMS map transforms our concerns and ideas into a visually compelling picture that exposes growth
risks and opportunities for the business.
The PMS Map Explained
The PMS Map (pioneer, migrator, settler) analyses a company or industrys product portfolio and reveals
the growth potential of existing and planned products and services. The idea is to plot your companys
existing products into pioneer, migrator or settler and then plot future offerings into the adjacent
column (is a product on a decline or growth trajectory?). The PMS map will give you an understanding
of the growth trajectory of your business in a way that revenue, profit, market share and customer
satisfaction cannot.
Settlers
A settler is a product or service offering that is not significantly different from other competitive
offerings in the marketplace. It is a me too offering. This does not mean that the product/service is not
profitable. In fact many cash cows are well-established settlers. However a settler product is in slow or
declining growth.
Migrators
A migrator product or service is representative of a product that offers significant competitive value. It
may be the leading product in its category and offers customer value that exceeds that of its close
competitors. However it doesnt offer innovative value; and therefore it is vulnerable to disruptive
competition.
Pioneers
+61 3 9016 3795 I robynne@[Link] I [Link]
Berg Consulting Group Pty Ltd I Level 10, 50 Market Street I Melbourne VIC 3000
A pioneer is a product or service that offers unprecedented value. It stands out from the competition
because its customer value offering is leaps ahead. As a result it has attracted a mass following of
customers. A pioneer product yields substantial profitable growth. It is most likely a blue ocean
offering.
How to Read a PMS Map
Lets look how you can interpret different PMS maps.
Where a PMS map shows a current portfolio with only settlers you are
looking at a company with a low growth trajectory. It indicates a company
whose efforts are chiefly targeted towards beating the competition in head-
to-head battle. This is not to say these products are not profitable. There is
every chance that KPIs are indicating strong profit, good market share and
high revenue. However those KPIs are not indicating the brutal truth; that
the companys business is in slow decline even whilst by all appearances it is
performing well.
You can also plot your industrys offerings on a map (ie all competing products in the market today). If
your industry reveals that all existing products/services are settlers, this may be an indicator of
opportunities to shift market boundaries and create a pioneer product/service in this space. Examples of
settler industries in existence today include motor vehicles, banks and insurance companies and
furniture retailers.
In this second map we see a portfolio where both current and planned
offerings consist of a lot of migrators. This map indicates a company that is
probably leading the market place. Its KPIs will indicate a profitable
business with significant market share. However, it is not exploiting its
potential for growth and runs the risk of being marginalised by a company
that creates a blue ocean strategy and offers unprecedented customer
value.
An example of this is Research in Motion (RIM), the creators of blackberry mobile phone. For a few
years they were the industry leaders in smart phone and had secured most of the market in their
category. It is most likely their PMS would have looked much like this one. Because of its market
positioning RIMs strategic focus was based on incremental improvements and innovations. Then Apple
entered the smartphone market with the iPhone and the rest, as they say, is history. And so, effectively,
was the blackberry. PMS maps showing migrators making incremental innovations to stay ahead of the
game, can expose a risk of a new entrant disrupting the market through offering value innovation.1*
*
Value Innovation is the core principle of Blue Ocean Strategy. It refers to the simultaneous pursuit of differentiation and low cost strategies: creating greater value
at a lower cost. (To better understand value innovation dont miss the article in our next edition of Disrupt news. Not a subscriber? Click here to subscribe).
+61 3 9016 3795 I robynne@[Link] I [Link]
Berg Consulting Group Pty Ltd I Level 10, 50 Market Street I Melbourne VIC 3000
This map is representative of a balanced portfolio. It shows that the business has a few settler products
and services. Management has determined that they will probably remain in slow growth. These
products/services still provide good revenue and profits (ie. cash cows).
Management will maximise profit for settler products in order to support investment in innovation for
new products and services. This portfolio also suggests that management has identified that an existing
product offers the genesis for a blue ocean strategy idea. The organisation can use its existing
capabilities, brand and supply chain to create a new product that shifts market boundaries and creates a
pioneer (blue ocean).
Profit will also be maximised with existing migrator products/services through incremental innovation
ensuring that exceptional customer value and market share continues.
Overall we see is evidence of continued focus on towards pioneers (blue oceans). Management is
focussed on creating pioneers or blue oceans to ensure profitable growth and offering exceptional
customer value that is difficult to replicate. Google could be seen as a business that continues to focus
on pioneers and blue oceans.
The central idea is to create a balance portfolio that supports sustainable profitable growth by shifting
management focus towards pioneers. This is not to say you should ignore your settler and migrator
products. If a settler is no longer offering margins and becoming more costly to stay competitive, you
may decide for strategic realignment. However many settlers and migrators are invaluable to sustaining
revenue, profit and profile whilst nurturing innovation which can often be costly at the outset. The idea
is to wisely balance across the portfolio to ensure both profitable growth and cash flow.
Strategic Exercise - Plotting Your PMS Map
Bring together your team of executives and any staff or stakeholders whose knowledge can
contribute to the mapping process (eg: product managers, valued suppliers etc).
Begin by discussing your current product/service offerings
Identify first which of your products/services are settlers. These offerings may still make your
company good revenue, but they wont offer future growth. Plot them as circles on the map.
(Download map template).
Identify and plot any products/services that are migrators. This means your business is amongst the
leaders in the market and generating significant revenue.
Finally does the business have a pioneer? Pioneers are rare. If you think you have a pioneer but its not
yet proving successful, plot it with a ? in the centre.
Now plot a future portfolio. How will your service offerings move in the future? Are there migrators
that will become settlers? Do you have a settler that with change could become a migrator? Where is
the opportunity amongst existing offerings to enact a strategic move that creates a pioneer?
PMS Map Template
+61 3 9016 3795 I robynne@[Link] I [Link]
Berg Consulting Group Pty Ltd I Level 10, 50 Market Street I Melbourne VIC 3000
The PMS map template (download template) can be used to demonstrate and communicate your
current portfolio. We recommend that when you first draw and plot your PMS that you draw the map
on a whiteboard or flip chart (ideally the management team will stand around the flipchart this aids
the analytical and creative thinking of the collective). Once you have agreed your PMS map you can
copy over to this template for publication and or discussion with other groups.
+61 3 9016 3795 I robynne@[Link] I [Link]
Berg Consulting Group Pty Ltd I Level 10, 50 Market Street I Melbourne VIC 3000
