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Creating a Sustainably Advantaged Portfolio
One of the central objectives of corporate strategy is for executive management to think holistically about a company’s portfolio of businesses—conceiving and spearheading ways to make the aggregate value of a company’s holdings durable over time, and greater than the sum of its parts.
This vital mission comprises two central questions:
- In which businesses should we invest? and:
- how do we create value within and across our businesses?
- In other words, where will we play? and, how will we win? at the portfolio level.
Our experience suggests that the most successful portfolios exhibit four broad characteristics. They are strategically sound, value-creating, resilient and sustainable. Perhaps this seems obvious—but in our experience because it requires consideration and testing across a wide range of seemingly incomparable attributes—companies seldom apply this Sustainably Advantaged Portfolio approach.
Perhaps the greatest difficulty lies in the fact that there is no standard version of a Sustainably Advantaged Portfolio. Every portfolio is different, and it is difficult to weigh trade-offs between strategic soundness, value, resilience, and sustainability.
In our paper we put forward a framework and methodology to manage these trade-offs and to construct a Sustainably Advantaged Portfolio.