Watch the full episode on YouTube: https://youtu.be/2Pogc5louZA
A business model portfolio is how leadership teams stop the core business from killing everything that looks different. In Part 3 of The Innovation Show’s Strategyzer series, founder and author Alex Osterwalder returns to explain why established organisations suppress their own innovations — and how the right governance fixes it.
Aidan opens with two quotes that frame the whole conversation. Steve Blank: “Exploitation pays your salary. Exploration pays your pension.” And Theodore Levitt: “Organizations by their very nature are designed to promote order and routine. They are inhospitable environments for innovation.” The tension between the two — exploration versus exploitation — traces back to James March, and was popularised by Michael Tushman and Charles O’Reilly in Lead and Disrupt.
Core business antibodies: nobody is acting in bad faith
Clay Christensen framed the problem around products in The Innovator’s Dilemma. Osterwalder argues it is bigger than that. Anything that looks different — a new revenue stream with different margins, a new channel, even a new product sold to the same customer — triggers what he calls antibodies. Because people are simply trying to do a good job, there is no ill intent. A salesperson maximising commission on the established product is doing exactly what the system rewards.
The SonoSite story makes the trap concrete. CEO Kevin Goodwin heard from clients that they wanted a smaller, cheaper ultrasound device than the laptop-size Titan, so the company built one — the handheld iLook. Customers loved it, yet nobody bought it. When Goodwin joined his top salesperson on a call, the rep never took the new device out of the bag. His commission was better on the Titan. As a result, Goodwin realised the whole reward structure had to change.
Why exploration is a top-down challenge
Bottom-up energy is rarely the problem; plenty of people are passionate about selling and building new things. However, without incentive redesign, dedicated sales support and leadership attention, the system quietly smothers them. Leadership attention naturally flows to big things — yet everything big, including Amazon Web Services, started small. The job of a leadership team is to protect the small things that could become big.
Osterwalder points to Bracken Darrell at Logitech, who talked about trees, plants and seeds. The peripherals core was the trees: big and strong, but eventually they fall. Darrell proactively shifted 70% of resources towards the plants and seeds. Similarly, Jeff Bezos was obsessed with Amazon dying while at the very top — the reason behind the famous Day One culture. Aidan adds the “Rita McGrath test”: look at a CEO’s agenda, because what appears there is what the organisation will treat as important.
Mapping a business model portfolio: the luxury hotel example
Osterwalder shares the prework he designed for a luxury hotel chain whose CEO proactively asked for help with exploration. Before a one-day governance workshop, the senior team completes three exercises: map the core business models, compare an exploit business model with an explore one, and place every business — city hotels, beach resorts, island retreats, residences, villas, yachts, private jets — on the business model portfolio map.
The exploit side of the map plots each business on two axes: return, and death-and-disruption risk. Profit engines sit top right; engines at risk still earn but face attack. Consequently, gaps become visible fast. Luxury hospitality is shifting from lodging to experiences, and a team that only manages hotels has nothing in the explore portfolio to meet that shift. Once leaders see the portfolio, they can design governance around it: reviewing explore and exploit initiatives every quarter, with real time carved out. As Osterwalder told one bank CEO, symbolism matters — people need to see the top actively involved in exploration, and the best leaders go far beyond symbolism.
The one exception to “start exploring today” is a turnaround. Hubert Joly told Osterwalder that Best Buy needed two years of pure exploitation to survive — and then immediately began to explore.
About the guest — Alex Osterwalder
Alex Osterwalder is the founder of Strategyzer and co-creator of the Business Model Canvas. He is the author of Business Model Generation, Value Proposition Design, Testing Business Ideas, High-Impact Tools for Teams, The Invincible Company and Business Model Generation for Kids. Find the business model portfolio map and many more free tools at strategyzer.com — Innovation Show listeners get 20% off the paid playbook library with code INNOVATIONSHOW20.
About the host — Aidan McCullen
Aidan McCullen is the host of The Innovation Show, a Thinkers50-recognised podcast, the 2025 Thinkers50 Innovation Award recipient, and the author of Undisruptable: A Mindset of Permanent Reinvention (Wiley). A former professional rugby player turned change and innovation specialist, Aidan works as a keynote speaker on AI, disruption, innovation and change for organisations in Ireland and worldwide, and runs workshops that help leadership teams reinvent before they have to. Connect with him on LinkedIn or at theinnovationshow.io.
About The Innovation Show
The Innovation Show is the Thinkers50-recognised podcast where square pegs find their place in a world of round holes. Each week, Aidan McCullen hosts world-class authors, scientists and practitioners on disruption, innovation, change, transformation, leadership and creativity. This series is brought to you by Kyndryl, who run and reimagine the technology systems that drive advantage for the world’s leading businesses — learn more at kyndryl.com/institute. Subscribe to the Thursday Thought on Substack for a chance to win one of Alex Osterwalder’s books, with thanks to Kyndryl.
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Frequently asked questions
What is a business model portfolio?
A business model portfolio is the full set of existing businesses a company exploits and new businesses it explores, managed together. Alex Osterwalder’s portfolio map plots each business by return and by death-and-disruption risk, so leadership teams can spot vulnerable profit engines and gaps in exploration before it is too late.
What is explore vs exploit?
Explore vs exploit describes the tension between running today’s business world-class (exploitation) and searching for tomorrow’s growth (exploration). The idea originates with James March and was popularised by Tushman and O’Reilly in Lead and Disrupt. As Steve Blank puts it, exploitation pays your salary; exploration pays your pension.
Why does the core business kill innovation?
Not through ill intent. People optimise for what the system rewards — revenue, margin, bonus, promotion — so anything different, from a new product to a new business model, gets starved of attention. Osterwalder calls these organisational antibodies, and says only top-down governance, incentive redesign and leadership attention overcome them.
What is the SonoSite sales incentive story?
SonoSite built the iLook, a smaller, cheaper handheld ultrasound customers asked for, yet sales stalled. CEO Kevin Goodwin joined his top salesperson on a call and watched him pitch only the larger Titan — his commission was better on it. The story, told by Clay Christensen, shows how incentives quietly kill new products.
What are trees, plants and seeds in portfolio management?
It is Bracken Darrell’s framing from his time leading Logitech. Trees are the big, profitable core businesses that will eventually fall; plants and seeds are the emerging businesses that need resources now. Darrell proactively reallocated resources from the core to the plants and seeds before decline forced his hand.
Where can I find Alex Osterwalder’s portfolio map and tools?
The business model portfolio map and many other tools are free to download at strategyzer.com, and the paid playbook library turns them into step-by-step outcomes. Innovation Show listeners get 20% off paid playbooks with the code INNOVATIONSHOW20.