Balancing your portfolio

I haven’t posted in a while because I’ve been navigating lots of change at Scribd; not an unusual story these days. Now, as the interim CEO and CFO, I wasn’t sure if this article I’d written beforehand would still feel relevant. 

But actually, it does. Because balancing a portfolio matters to both positions, perhaps everyone. Right now, we are in the middle of 2024 planning. We had our quarterly board meeting this week focused on our plans for 2024, discussed where we’re investing and innovating, and asked ourselves: “Can we do it all?” 

It’s all about balancing our portfolio. 

Many companies spend all of their time and resources working on the moonshot - their big, risky idea that’ll establish them in the market. 

If you’re a small, venture-backed company, everything is a moonshot. You’ve got an idea, and you’re shooting for the stars. But then you eventually (hopefully) get to a stage where you have customers, and your work is spent on improving your products. 

That’s when you start to think about what gives you a return on [your] investment. When you move beyond a moonshot, your focus becomes growth and profit. Not growth and UNprofit. 

At that point, you’ll no longer want to invest all your money in moonshot ideas. But what about innovation? You’ll also want to continue thinking about your next big thing. An easy (and obvious) example of this is Apple. They’re always thinking about innovation…the ipod, the watch, etc…they have entire teams working on the ‘next big thing.’ 

When you’re profitable, you must dedicate some of your profits to the next big thing. For us, like most, we’re currently thinking about generative AI. So, our product team sketched out what new features could look like and what needs to be tested and done to get them out to our consumers at scale. 

It could be a game changer for our company. As CEO, that’s attractive, and as CFO, I tend to see it as the next shiny object everyone wants to chase. In order to develop our new products, we need resources. At the last update, building the new features would require 25 people (a 10% headcount increase) and a few million dollars in compute costs.

You see the potential, but you also don’t know if it will be successful. So, the job is not to chase too many or spend too much on shiny objects. You need to be disciplined. Yes, chase some ideas - because there could be a big payoff. But, there should be some pursuits with lower risk as well. 

You need to keep your portfolio balanced.

Ensuring your company stays profitable is like being the adult in a room full of teenagers. You know things are ‘going on,’ and at the same time, there has to be some sort of discipline. Sometimes, you’re faced with making tough decisions, and that isn’t always fun.