Strategic Management:

Innovation Strategies

Innovation Portfolio

Developing Balanced Innovation Strategies

The Four Reasons

There are four reasons why you should use the portfolio approach to manage innovation.¹

1. Risk Management. The portfolio is a risk management tool. If you have more innovation initiatives under way than traditional firms, and you are prone to stretch farther within each initiative, without an overall view of your innovation efforts, you could easily wind up taking too much or too little risk.

2. Visibility. The portfolio provides visibility that allows your firm pace the introduction of new products and services. You should balance the introduction of revolutionary products with incremental improvements in others so as to maintain a steady flow. By having a comprehensive view of your initiatives over time, you can avoid either overwhelming or underwhelming the marketplace.

3. Timing of New Initiatives. The innovation portfolio will help you time when you start a new initiative or transfer a completed one into manufacturing or the marketplace.

4. Discovering Synergies. The portfolio illuminates potential leverage opportunities among technologies, processes, products, and markets. This capability will enable your firm to get more for each innovation dollar while reducing development cost and risk, reduce complexity and free up people to work on tasks that generate greater customer value.

Portfolio is much more than just a list of initiatives. You should also create charts that compare these initiatives across dimensions such as stretch, strategic fit, risk, potential return and resource requirements. By using different charts as lenses to compare initiatives, you can mix and match alternatives until you come up with the portfolio that's right for you.

Achieving the Right Balance Between Stretch and Strategic Fit

The first test for any innovation portfolio is achieving the right balance between stretch and strategic fit. If you engage in hyperreactiveness thinking and continually react to the latest market or technological trend, rather than following a course until there is a significant reason to change, you’ll fail. The key to avoiding such short-term thinking is to maintain strategic alignment and test the assumptions that drive new products and service decisions as you make these choices.

 Case in Point  Silicon Valley Companies: Deciding If Your Innovation Portfolio Has Enough Stretch

Adapted from Relentless Growth, Christopher Meyer

1. Balance between revolutionary and evolutionary initiatives. First, Silicon Valley companies assess the overall balance between revolutionary and evolutionary projects. The ultimate arbitrator of portfolio stretch if the innovation leaders’ judgment, experience, intuition, and luck... More