5 Reasons to Start With Innovation Portfolio Management Today

Did you know that effective innovation portfolio management can double your revenue? Organizations taking this seriously, delivered twice more revenue than companies approaching it in an ad-hoc manner (Accenture 2020). At RevelX we cannot stress the importance of effective innovation portfolio management enough. We also wrote a playbook in which we share our knowledge and best practices on innovation portfolio management. It is available for all who are interested.

But what is innovation portfolio management exactly? And why is it such an important part of your business operations?

When we speak about portfolio management, we mean “the art of developing and successfully managing a roadmap of innovation projects that will enable you to deliver on your innovation strategy.”

What does that mean? This definition has 2 components. Innovation portfolio management first of all involves creating a roadmap of innovation projects and secondly it is in line with the innovation strategy that your organization pursues.

By properly setting up, managing, analysing, and scaling up your innovation projects, you work towards achieving the innovation goals within your organization. That means growth and can be related to your financial goals but can also be related to your goals for sustainable development, for example.

It is clear that innovation portfolio management can increase your revenue and help your organisation grow steadily within its sector. Those, in itself, are major benefits and good motives to start with innovation portfolio management today. Here we discuss 5 more subtle, but not less significant, reasons why this is so important.

1. Create alignment between company strategy and your innovation pipeline
Every organisation should have an innovation strategy. It is part of its vision statement and a way for a business to plan growth and development. By investing in innovation portfolio management, you align your innovation projects with this vision of the future.

Too often departments within a business are aware of the innovation strategy, but do not work together to achieve its ambitions. True, they work towards their own individual goals, but sometimes forget the goals of the company as a whole. Extensive innovation portfolio management has a clear plan that points everyone involved into the same direction again.

An important result of innovation portfolio management is an alignment between your innovation pipeline and your company’s innovation strategy; across the board.

2. Balance your portfolio between horizon 1,2, and 3
By managing and planning your innovation projects properly, you can predict their impact on the business. It is key to balance your short-term projects and long-term innovations properly in your portfolio. The short-term projects are there for immediate success and the long-term ones support your vision and transform your business.To achieve this balance, you divide the projects in your portfolio into 3 different groups.

• Horizon 1 (1-3 years ahead): these are the short-term projects that help sustain innovation in your company and maintaining and strengthening the core.
• Horizon 2 (2-5 years ahead): these projects focus on developing emerging business and exploring and discovering new expansions. They support the growth of the business.
• Horizon 3 (5-12 years ahead): these innovations are often technology related and they create new possibilities and competencies. They will transform your business, but they need time.

3. Optimal use of your resources
Let’s face it; often the plans are solid, and the motivation is high. The problem is finding the time. money and the manpower to carry out your innovation initiatives. Many projects get stuck because of the lack of resources available to make them a success.

One of the biggest reasons for innovation management to fail is because the portfolio contains many projects and not enough people to run them. As a result, these projects get left and do not bring in the revenue when they should have.

Going through your current innovation projects, getting rid of the hobby horses and dead horses, and placing projects firmly into one of the above-mentioned horizons, allows you to schedule the available manpower efficiently. And because your innovation portfolio is aligned with the overall innovation strategy of your company, you have a good case for getting the resources you need from your management.

4. Create clarity for your innovation teams
Innovation projects usually reach across several departments. When you do not plan the projects properly, its contributors will not know what to do. That causes confusion and that can put the project on hold.

Making a portfolio of innovation projects, aligned with your company’s innovation strategy, placed on a timeline and with dedicated resources, gives everyone involved clarity on what needs to be done and what teams need to do to make it to the next stage. There should be a clear leadership team for each project, so the executing parties know who to go to with questions or suggestions. And, of course, this team should organise regular meetings to keep everyone on track.

To create more structure, means creating more understanding. That in turn means smoother progress and larger chance of success.

5. Shorten the time to market
Finally, by planning, scheduling, aligning and optimising your innovation projects, the time to market will be shortened. You will set targets, appoint dedicated project members and engage your directors. Do that well, and your innovation project will stay on track, until the deadline is reached.

Obviously, when your innovations are brought to market sooner, you will create a competitive advantage for your organization and keep innovation teams motivated.

You ensure that your projects do not come to a standstill but are gradually finished according to their appointed horizon. There will be regular horizon 1 projects and a horizon 2 project every now and then. The large ground-breaking horizon 3 projects will be completed even less often. However, they will make the largest impact and show the world you belong to the top.

Once you get into innovation portfolio management and the first results become visible, you will not want to go back. And like so many things in life, getting everything set up right will be relatively time-consuming at first, but once the ball gets rolling and Innovation Portfolio Management will become embedded in your company’s processes and methods, the results will follow quickly.

Luckily, you do not have to do this alone. RevelX has built up an extensive experience in designing and implementing innovation portfolio management processes within a wide variety of clients. Innovation Portfolio Management is not a one size fits all but must be fitted within the characteristics of your organisation. Successful implementation is therefore incredibly important and transcends the theoretical frameworks of innovation knowledge, but will depend on a strong internal support base, leadership support, the right responsible representatives, etc.