Portfolio Management – broadening the impact of Innovation

Did you know that 84% of executives believe innovation is key to their company’s success and that 41% believe they are at risk of being disrupted, yet 78% of companies focus only on incremental innovation? We’re using innovation to serve short-term business goals at the expense of our longer-term business strategy.

How can we correct this misalignment between where we’re allocating our scarce innovation resources and where we say we want these resources to take us? Portfolio Management is this missing link.

A portfolio of opportunities

Focusing innovation resources for impact requires a strong portfolio of opportunities across and beyond current lines of businesses. Innovation leaders need to balance resources between the impact needed to serve the business and the risk the company can tolerate when deploying those resources.

Graph Strategos

The challenge leaders face is that the innovation process produces ideas in all the quadrants above, but often the ideas that get actioned are the ones that serve short-term, measurable business results. Unfortunately, this common behavior of opting toward “Low Hanging Innovation” at the expense of “Transformative Innovation” means missing out on ideas that enable future growth and renewal of the business.

We tend to favor short-term opportunities primarily because customers are usually very vocal about what they are looking for. However, medium to long-term opportunities result more from the hard work of pro-actively scanning the external environment for new trends, technology development, and unarticulated customer and non-customer needs. Portfolio Management is a way to check this natural behavior by providing a transparent link to the business strategy and aid in making the right decisions to balance both short and long-term impact.

Interested in how you start Portfolio Management for innovation?

How can Portfolio Management help make decisions?

Allocating resources for incremental and strategic impact is a balancing act in which innovation leaders must engage the management team.

Even the best-managed portfolios cannot magically provide the right investment decisions for managers. What it will do, though, is provide a visual of how resources are spread across different dimensions and stimulate discussions between the executive that leads to informed decision making.

An innovation portfolio is driven by a clear logic that is built on guiding principles that reflect:

  • Your underlying business values, vision, and strategy.
  • Your beliefs about how to balance and hedge resources for profitable growth.
  • Your beliefs on how to source ideas for innovation that results in the maximization of value for the collective set of those ideas.

Every company must find its own effective Portfolio Management system. For example, when the rate of technological change is high, the portfolio must lean toward renewal to remain relevant and provide superior benefits for customers; on the other hand, when operational consistency is needed, the portfolio will tend more toward incremental innovation. The guiding principle is the ease and transparency of decision-making that raises the level of innovation performance.

The ideas behind managing innovation as a portfolio are not new but the practice is often neglected or even absent in many companies. In all aspects of their business lives, managers constantly struggle between achieving the short term and developing the long term. Our message is that it has to be done and that managing a balanced innovation portfolio can help you stay on the tight rope.

Interested in how you start Portfolio Management for innovation?

Download our Guide to Innovation Portfolio Management and 7 steps to successful implementation.

Interested in how you start Portfolio Management for innovation?

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