Managing Your Value Proposition Portfolio

“A value proposition portfolio is like a gravitational system—each element either contributes to the overall pull or dilutes it.”

In 2023, ARM Holdings—the Cambridge-based semiconductor powerhouse—found itself generating over 70% of its revenues from outside its original core market of mobile devices. What began as a focused company designing energy-efficient processors for mobile phones had evolved into the intelligence behind everything from data centres to automotive systems to the Internet of Things. Yet unlike many technology companies that lose their way during expansion, ARM maintained remarkable coherence throughout this journey.

How did ARM manage this transition without diluting its gravitational pull? The answer lies in disciplined portfolio management—the systematic approach to balancing exploitation of existing strengths with exploration of new opportunities.

ARM’s approach was methodical. Each new market they entered maintained uncompromising fidelity to their core essence of energy efficiency, architectural consistency, and partnership-based business model. Rather than chasing every opportunity, they sequentially expanded into markets where their technological advantage created natural pull—establishing dominance in one area before moving to the next, always maintaining their ecosystem-oriented licensing approach.

This disciplined expansion stands in stark contrast to Sonos, the premium audio company whose gravitational confusion provides a cautionary tale. Sonos began with hardware excellence in wireless home audio but expanded into voice assistants and content services without a clear essence translation, creating tension between their hardware foundations and software ambitions. The result? Customer confusion, fragmented resources, and diluted gravitational pull that competitors exploited.

The difference between ARM and Sonos illustrates the central challenge of this chapter: how to manage multiple value propositions without diluting your gravity. As your business grows, you’ll face increasing pressure to expand beyond your initial offering. Without deliberate management, this expansion often weakens rather than strengthens your position as the obvious choice.

The Portfolio Tension

Every business faces a fundamental tension as it grows—the pull between focus and expansion. This tension exists because attention, resources, and positioning clarity are fundamentally zero-sum. Customers have limited cognitive capacity to understand what you stand for. Your organisation has limited resources to execute with excellence. And your market position has limited elasticity before it snaps into incoherence.

Most businesses dramatically underestimate this tension. They add products, services, and markets reactively, viewing each addition in isolation rather than considering its effect on the gravitational whole. A decision that makes perfect sense in isolation often weakens your position when viewed as part of a portfolio.

The CEO of ASML, the Dutch semiconductor equipment manufacturer, once explained their focused approach by saying: “We could have diversified into adjacent markets many times, but we chose to go deeper rather than broader. Lithography is complex enough to occupy a lifetime of innovation.” This discipline has made ASML the world’s only supplier of the extreme ultraviolet lithography machines required for manufacturing advanced semiconductors—a position of extraordinary gravitational strength.

This portfolio tension creates three critical questions you must answer:

1. How do you expand beyond your initial offering without diluting the gravitational pull you’ve built?
2. How do you maintain coherence across multiple propositions so they reinforce rather than confuse your market position?
3. How do you manage the operational reality of delivering different value propositions without fragmenting your organisation?

The Essence Coherence Imperative

The foundation of successful portfolio management lies in essence alignment—the degree to which each proposition connects to your organisation’s irreducible core purpose and values.

Remember from earlier chapters that essence is the fundamental “why + how” that drives everything in your organisation. It’s not something you can change with each market opportunity. Rather, it’s the constant that all your value propositions must express, albeit in different ways for different contexts.

ARM’s essence revolves around energy-efficient computing architectures licensed through a partnership approach. Every market they’ve entered—from mobile to automotive to data centres—expresses this same essence. When evaluating potential expansions, ARM doesn’t just ask “Can we do this?” but rather “Can we do this in a way that’s authentic to our essence?”

This creates what we call the Essence Coherence Imperative: All value propositions in your portfolio must connect to your core essence, though they may express it differently for different contexts.

The danger comes from what I call “adjacency creep”—the progressive distancing from essence through seemingly logical steps. It works like this: Your first expansion is closely connected to your essence. Your second expansion connects to the first, but is now once removed from your essence. By the third or fourth iteration, you’ve wandered far from your core, creating propositions that may be commercially viable individually but collectively create gravitational confusion.

Nokia’s expansion from telecommunications to mobile computing to digital mapping illustrates this danger. Each step seemed logical in isolation, but the cumulative effect was essence dilution that competitors exploited. By contrast, Nintendo has maintained remarkable essence coherence across generations of gaming hardware by ensuring each proposition expresses their commitment to joyful, accessible play.

You can test essence coherence by asking these questions about each proposition in your portfolio:

1. Purpose Alignment: How clearly does this proposition express our fundamental why?
2. Values Coherence: How consistent is this proposition with our core beliefs?
3. Identity Resonance: How naturally does this proposition reflect who we are?
4. Heritage Connection: How well does this proposition build on our authentic history?
5. Culture Compatibility: How aligned is this proposition with our operational reality?

The answers reveal whether your portfolio strengthens or weakens your gravitational field. A portfolio of essence-aligned propositions creates compound gravity—each offering reinforcing the others through shared essence. A portfolio of essence-disconnected propositions creates gravitational confusion—each offering competing with the others for attention and resources.

The Four Portfolio Management Approaches

Based on our study of companies that successfully manage multiple propositions, we’ve identified four distinct approaches to portfolio management, each with specific advantages and challenges:

1. Focused Portfolio

Definition: Disciplined concentration on a singular proposition, continuously refined and deepened over time.

Example: ASML maintained extraordinary focus on lithography excellence, resisting diversification to become the world’s only supplier of EUV lithography systems for advanced semiconductors.

When Appropriate:

• Limited resources require concentration
• Market dominated by generalists with mediocre offerings
• Need for clear differentiation in crowded market
• Opportunity for significant depth advantage

Management Disciplines:

• Relentless refinement of core proposition
• Continuous depth development
• Expansion resistance (saying no routinely)
• Excellence focus in one dimension

Measurement Approach:

• Depth indicators (technical leadership, expertise gaps)
• Competitive advantage metrics (win rates, pricing premium)
• Essence consistency measurements

The strength of a focused portfolio comes from gravitational concentration—all your resources directed at becoming exceptional in one area. This approach works particularly well for smaller businesses competing against larger rivals, as it allows you to build gravitational mass in a specific area rather than spreading resources thinly across multiple fronts.

In-N-Out Burger’s deliberate menu limitations exemplify this approach. While competitors continuously expanded menu options, In-N-Out maintained a focused portfolio of burgers, fries, and shakes—becoming exceptional at the basics while competitors diluted their execution with complexity.

2. Sequential Portfolio

Definition: Progressive evolution of one primary proposition that builds on previous strengths while extending into new areas.

Example: ARM Holdings evolved from mobile processor designs to embedded systems to automotive computing to data centres, maintaining essence coherence while sequentially expanding into new markets.

When Appropriate:

• Established market position provides foundation
• Steady growth goals rather than dramatic leaps
• Evolutionary rather than revolutionary market
• Need to maintain consistency while expanding

Management Disciplines:

• Timing decisions (when to expand vs. deepen)
• Transition management between phases
• Momentum preservation during evolution
• Heritage continuity across transitions

Measurement Approach:

• Transition metrics (adoption rates, market acceptance)
• Heritage preservation indicators (customer retention)
• Momentum continuity (growth trajectory maintenance)

Sequential portfolios balance preservation with evolution. Rather than maintaining multiple propositions simultaneously, you evolve one primary proposition over time—each evolution building upon the previous while extending into new areas.

Adobe’s transformation from desktop publishing software to Creative Cloud to experience platform exemplifies this approach. Each evolution built on previous strengths while adapting to changing market realities. The key discipline is maintaining essence continuity while progressively evolving your proposition.

3. Nested Portfolio

Definition: Layered propositions serving the same customers’ expanding needs, creating increasing embeddedness through complementary offerings.

Example: Salesforce expanded from sales automation to customer service to marketing to analytics to integration, creating a layered ecosystem serving the same customer base with increasingly comprehensive capabilities.

When Appropriate:

• Strong existing customer relationships provide foundation
• Diverse customer needs beyond current offering
• Scale requirements make customer acquisition expensive
• Opportunity to increase share of wallet

Management Disciplines:

• Proposition articulation clarity (distinct but related)
• Cross-selling governance (when and how to expand relationships)
• Compatibility insurance (ensuring offerings work together)
• Integration standards (creating seamless customer experience)

Measurement Approach:

• Cross-proposition adoption rates
• Relationship depth metrics (products per customer)
• Integration indicators (seamless experience measures)

Nested portfolios create concentric circles of value around the same customer base. Rather than expanding to new customers, you expand to serve more needs for your existing customers. This approach works particularly well for businesses with high customer acquisition costs, as it maximises lifetime value from existing relationships.

Aesop, the Australian skincare company, has methodically expanded from facial cleansers to moisturisers to hair care to home fragrances—maintaining a coherent botanical essence and design aesthetic while progressively meeting more customer needs.

4. Adjacent Portfolio

Definition: Related propositions serving different but connected customer groups, leveraging core capabilities across distinct markets.

Example: Ocado evolved from online grocery retailer to technology provider for other retailers, maintaining operational excellence essence while serving completely different customer segments.

When Appropriate:

• Saturated core market limits organic growth
• Transferable capabilities applicable to new contexts
• Diverse market opportunities that connect to essence
• Need to balance focus with growth ambitions

Management Disciplines:

• Essence transfer across contexts
• Balanced resource allocation between propositions
• Connection maintenance between businesses
• Brand architecture decisions (connected vs. distinct)

Measurement Approach:

• Essence consistency across markets
• Capability leverage metrics
• Cross-fertilisation indicators

Adjacent portfolios create separate but related value propositions for different customer groups. Unlike nested portfolios that serve the same customers more comprehensively, adjacent portfolios serve different customers in connected ways.

YNAP (Yoox Net-A-Porter Group) exemplifies this approach with distinct but related online luxury retail propositions: Net-A-Porter (full-price women’s luxury), Mr Porter (men’s luxury), The Outnet (discounted designer fashion), and Yoox (off-season luxury). Each serves different customer segments while sharing infrastructure and essence.

The Portfolio Evolution Patterns

Beyond these four approaches, successful companies follow distinct evolution patterns as they develop their portfolios over time:

1. Depth First

Definition: Deepening value within an existing proposition before expanding to adjacent areas, focusing on category leadership before extension.

Example: ASML achieved overwhelming dominance in lithography before cautiously expanding into related services and capabilities.

Evolution Pattern:

1. Vertical excellence development
2. Category leadership establishment
3. Careful adjacent expansion

Governance Requirements:

• Excellence standards definition
• Expansion criteria (when ready to broaden)
• Maturity indicators for readiness assessment

Depth-first evolution builds gravitational mass in one area before attempting expansion. This pattern works particularly well in complex technical markets where reputation for excellence creates sustainable advantage.

ARM followed this pattern by establishing dominance in mobile processors before expanding to other computing contexts. By building overwhelming strength in one area first, they created the gravitational mass necessary for successful expansion.

2. Breadth First

Definition: Rapidly expanding to related propositions to serve more needs or markets, establishing ecosystem presence before deepening individual elements.

Example: Slack quickly expanded from team messaging to multiple collaboration capabilities, establishing broad platform presence before deepening specific features.

Evolution Pattern:

1. Core offering launch with minimum viable functionality
2. Rapid adjacent expansion to related needs
3. Subsequent integration and deepening of capabilities

Governance Requirements:

• Coherence standards across expansion
• Quality baselines for all offerings
• Integration frameworks for unified experience

Breadth-first evolution quickly establishes presence across a connected ecosystem before competitors can stake claims. This pattern works well in fast-moving markets where platform dynamics create winner-take-most scenarios.

Asos, the online fashion retailer, followed this pattern by rapidly expanding into multiple clothing categories, establishing broad market presence before deepening specific categories. The risk of this approach is sacrificing depth for breadth, potentially creating shallow offerings that competitors can outperform.

3. Vertical Integration

Definition: Moving up or down the value chain to control more elements of customer experience, capturing margin or ensuring quality through expanded scope.

Example: Ocado developed automated warehouse technology for its own retail operations before offering this technology to other retailers, vertically integrating from retail to technology.

Evolution Pattern:

1. Core offering establishment in one value chain position
2. Progressive acquisition of upstream or downstream capabilities
3. End-to-end control development

Governance Requirements:

• Value chain expertise beyond core domain
• Capability development in new areas
• Margin analysis for integration economics

Vertical integration expands your control of the customer experience while potentially capturing more value. This pattern works well when quality control is crucial or when structural inefficiencies in the value chain create margin opportunities.

Apple’s control of hardware, software, retail, and services exemplifies this approach. By progressively integrating more of the value chain, Apple ensures quality while capturing more customer value.

4. Ecosystem Development

Definition: Creating complementary propositions that strengthen the core through network effects, building an interconnected system that increases overall value.

Example: ARM developed tools, programs, and partnerships that strengthen their core processor designs, creating an ecosystem where complementary elements increase the value of the primary offering.

Evolution Pattern:

1. Core offering establishment with natural connection points
2. Complementary services or products development
3. Progressive integration into cohesive ecosystem

Governance Requirements:

• Ecosystem health metrics
• Partner relationship management
• Interoperability standards

Ecosystem development creates mutually reinforcing value propositions that collectively build gravity. This pattern works well for platform businesses where network effects create competitive advantage.

Nintendo’s integration of hardware consoles, first-party games, and third-party development exemplifies this approach. Each element strengthens the others, creating a gravitational system that competitors struggle to match.

The Value Proposition Portfolio Assessment

To evaluate your portfolio’s gravitational coherence, we’ve developed a comprehensive assessment framework examining four critical dimensions:

1. Essence Alignment Evaluation

Rate each proposition’s connection to your core essence:

• Purpose Alignment: How clearly does this proposition express our fundamental why?
• Values Coherence: How consistent is this proposition with our core beliefs?
• Identity Resonance: How naturally does this proposition reflect who we are?
• Heritage Connection: How well does this proposition build on our authentic history?
• Culture Compatibility: How aligned is this proposition with our operational reality?

Each rated from 1 (Disconnected) to 5 (Deeply Aligned)

2. Gravitational Contribution Assessment

Evaluate each proposition’s impact on your overall gravitational field:

• Proposition Strength: How powerful is this value proposition on its own?
• Synergy Impact: How does this proposition strengthen others in the portfolio?
• Cannibalization Risk: How might this proposition weaken others in the portfolio?
• Resource Demand: How much gravitational energy does this proposition require?
• Positioning Clarity: How clear is this proposition’s relationship to overall positioning?

Each rated from -2 (Strongly Negative) to +2 (Strongly Positive)

3. Market Resonance Measurement

Assess how effectively each proposition connects with its target market:

• Customer Adoption: How strongly do customers embrace this proposition?
• Advocacy Generation: How effectively does this proposition create champions?
• Competitive Defensibility: How well protected is this proposition from imitation?
• Growth Trajectory: What is the momentum direction for this proposition?
• Brand Association: How strongly do customers connect this proposition to your identity?

Each rated from 1 (Weak Performance) to 5 (Strong Performance)

4. Economic Sustainability Analysis

Evaluate the business model viability of each proposition:

• Margin Structure: How economically viable is this proposition?
• Investment Requirements: What ongoing resources does this proposition need?
• Revenue Stability: How predictable is income from this proposition?
• Cost Synergies: What operational efficiencies exist with other propositions?
• Scale Potential: How effectively can this proposition grow with reasonable resources?

Each rated from 1 (Challenging Economics) to 5 (Strong Economics)

By combining these four dimensions, you can calculate an overall Portfolio Coherence Score that indicates your portfolio’s gravitational health:

• Strong Coherence (80-100%): Portfolio creates compounding gravitational advantage
• Moderate Coherence (60-79%): Portfolio generally reinforces overall gravity with minor conflicts
• Mixed Coherence (40-59%): Portfolio contains both supportive and dilutive elements
• Weak Coherence (20-39%): Portfolio significantly dilutes gravitational pull
• Incoherent Portfolio (0-19%): Portfolio creates substantial gravitational confusion

Based on these scores, the Portfolio Decision Matrix guides strategic actions for each proposition:

Portfolio Action	Essence Alignment	Gravitational Contribution	Market Resonance	Economic Sustainability
Invest & Expand	High (4-5)	Positive (+1 to +2)	Strong (4-5)	Strong (4-5)
Optimize & Strengthen	Medium-High (3-4)	Neutral to Positive (0 to +2)	Medium-Strong (3-5)	Medium-Strong (3-5)
Realign & Refocus	Medium (3)	Mixed (-1 to +1)	Mixed (2-4)	Mixed (2-4)
Harvest & Contain	Low-Medium (2-3)	Neutral to Negative (-2 to 0)	Medium (2-3)	Medium (2-3)
Divest or Transform	Low (1-2)	Negative (-2 to -1)	Weak (1-2)	Weak (1-2)

This assessment isn’t just a one-time exercise. It provides a governance framework for ongoing portfolio management, helping you make coherent decisions as your business evolves.

The Essence-to-Execution Connection

Managing a value proposition portfolio requires more than strategic frameworks—it demands operational alignment across multiple offerings. This is particularly challenging as organisations often develop silos around different propositions, destroying the coherence that creates gravitational advantage.

ARM Holdings addresses this challenge through a unified architecture that guides all product development. Their architecture principles serve as essence translation mechanisms, ensuring that new propositions maintain consistent principles while addressing different markets. This architectural coherence prevents fragmentation while enabling diversification.

Similarly, when Ocado transformed from online grocer to technology provider, they maintained operational excellence essence through consistent technology and process standards. Despite serving completely different customers (consumers versus global retailers), their underlying technology platform embodies the same essence across contexts.

The operational key lies in creating governance systems that connect essence to execution across the portfolio:

1. Essence Translation System

This ensures essence flows consistently into all propositions through:

• Clear essence articulation that all teams understand
• Proposition development guidelines that translate essence to specific contexts
• Alignment review processes that assess proposition-essence coherence
• Executive oversight maintaining essence integrity across offerings

ARM’s architecture principles, ASML’s technology roadmap, and Aesop’s formulation philosophy all serve as essence translation systems that maintain coherence across diverse offerings.

2. Proposition Development Process

This provides structured approach to creating and evolving offerings through:

• Stage-gate system with clear decision criteria
• Cross-functional review mechanisms
• Consistent documentation standards
• Essence alignment verification at each stage

YNAP’s multi-brand portfolio maintains coherence through structured development processes that ensure each brand (Net-A-Porter, Mr Porter, The Outnet, Yoox) maintains its distinct positioning while sharing underlying infrastructure and essence.

3. Portfolio Review Cadence

This establishes regular assessment of overall portfolio health through:

• Multi-level reviews (individual proposition, portfolio segment, complete portfolio)
• Consistent timing framework (monthly monitoring, quarterly review, annual assessment)
• Cross-functional participation
• Clear output requirements driving action

Brambles/CHEP, the Australian logistics company, maintains portfolio coherence through structured review cadences that assess how their circular economy pallet management services align with their sustainability essence across markets.

4. Conflict Resolution Process

This manages tensions between propositions through:

• Systematic identification of potential conflicts
• Clear resolution frameworks based on essence alignment
• Defined decision authorities and escalation pathways
• Transparent implementation guidance

Ocado’s transformation required sophisticated conflict resolution processes to balance their retail and technology businesses, ensuring consistent execution while serving fundamentally different customers.

Implementation Across Organisation Types

The principles of portfolio management apply across different business contexts, though implementation varies based on organisation type:

Startups

For early-stage businesses contemplating their first expansion beyond core offering:

• Maintain relentless essence clarity before attempting expansion
• Develop explicit expansion criteria based on essence alignment
• Consider sequential approach before attempting multiple simultaneous propositions
• Build governance frameworks early, even if simplified for current scale

The founders of Wise (formerly TransferWise) maintained extraordinary discipline as they expanded from international money transfers to multi-currency accounts to investment products. Each addition aligned with their essence of financial transparency and fairness, creating a coherent portfolio that strengthened their gravitational pull.

Growing Companies

For businesses managing proliferating propositions during growth phase:

• Formalise portfolio governance as offerings multiply
• Implement structured assessment frameworks to evaluate new opportunities
• Develop integration mechanisms to prevent siloed development
• Build measurement systems tracking portfolio coherence

Monzo, the UK digital bank, carefully managed their expansion from prepaid cards to current accounts to savings products to business banking. By maintaining their essence of transparency and customer control throughout, they created a coherent portfolio that strengthened their position against traditional banks.

Established Businesses

For mature organisations rationalising complex legacy portfolios:

• Conduct comprehensive portfolio assessment
• Develop transformation plans for disconnected propositions
• Build governance systems for ongoing management
• Address organisational silos that fragment execution

When Microsoft underwent its transformation under Satya Nadella, they conducted a thorough portfolio assessment that shifted resources from essence-disconnected propositions (like Windows Phone) to essence-aligned opportunities (like cloud services and productivity tools). This portfolio realignment reconnected Microsoft to its essence and created extraordinary gravitational growth.

Measuring Portfolio Coherence

Beyond the formal assessment framework, you need ongoing measurement systems to track gravitational coherence across your portfolio. These systems monitor both quantitative metrics and qualitative indicators:

Quantitative Metrics

• Cross-proposition adoption rates: How many customers use multiple offerings
• Referral patterns between propositions: How offerings generate demand for others
• Resource efficiency across portfolio: How effectively resources serve multiple propositions
• Revenue and margin consistency: How financial performance aligns across portfolio
• Customer perception alignment: How consistently customers understand your positioning

Qualitative Indicators

• Sales confusion signals: How clearly sales teams articulate proposition relationships
• Customer feedback patterns: What customers say about portfolio coherence
• Internal navigation challenges: How easily teams understand the complete portfolio
• Decision-making inconsistencies: How aligned decisions are across propositions
• Leadership alignment indicators: How consistently executives describe portfolio strategy

These measurements provide early warning of coherence issues, allowing you to correct course before gravitational confusion affects market performance.

The Coherence Advantage

ARM Holdings’ success demonstrates the sustainable advantage of coherent portfolio management. By maintaining uncompromising essence alignment through sequential expansion, they’ve created a gravitational system where each proposition strengthens the others.

The result is extraordinary—ARM designs now power over 95% of the world’s smartphones and an expanding universe of connected devices, creating compound returns on their focused investments in processor architecture. Their licensing model generates over £2 billion in annual revenue with gross margins exceeding 95%, all while employing fewer than 10,000 people.

This gravitational advantage comes not from being everything to everyone, but from being something very specific to carefully chosen markets. ARM’s portfolio success comes from disciplined essence translation—maintaining their core value of energy efficiency across diverse applications.

As you develop your own value proposition portfolio, remember that coherence isn’t about rigid uniformity. Different propositions can express your essence in different ways for different contexts. The key is maintaining the gravitational centre that connects them all—the essence that makes you not just a choice, but the obvious choice.

In the next chapter, we’ll explore how this portfolio management approach evolves through different gravitational phases as your business matures—building, focusing, and redirecting gravity as markets change. For now, focus on the discipline of coherence—creating a portfolio where each proposition strengthens rather than dilutes your gravitational pull.

“Most businesses don’t fail because they lack good propositions; they fail because they lack coherent propositions.”