How can innovation portfolios help manage risk?

1 What are innovation portfolios?

An innovation portfolio is a collection of innovation projects or initiatives that an organization pursues to achieve its goals. Each project or initiative can be categorized according to its type, level, and time horizon. The type of innovation refers to the degree of novelty or change that the project or initiative introduces to the market, the customer, or the organization. The level of innovation refers to the scope or scale of the project or initiative, whether it affects a product, a service, a process, a business model, or a system. The time horizon of innovation refers to the expected duration or outcome of the project or initiative, whether it is short-term, medium-term, or long-term. By mapping your innovation portfolio along these dimensions, you can visualize and assess the balance and diversity of your innovation efforts.

2 Why are innovation portfolios important?

Innovation portfolios are important because they help you manage risk in several ways. First, they help you avoid putting all your eggs in one basket, which can expose you to the danger of losing everything if one project or initiative fails or becomes obsolete. By diversifying your innovation portfolio across different types, levels, and time horizons, you can reduce the impact of any single failure and increase the chances of success. Second, they help you align your innovation strategy with your organizational goals and capabilities. By allocating your resources and attention to the most appropriate and relevant projects or initiatives, you can optimize your performance and impact. Third, they help you adapt to changing conditions and opportunities. By monitoring and evaluating your innovation portfolio regularly, you can identify and exploit emerging trends, customer needs, and competitive advantages.

4 How to manage an innovation portfolio?

Managing an innovation portfolio requires a systematic and dynamic approach that balances exploration and exploitation, learning and execution, and flexibility and control. You need to establish clear criteria and metrics to measure and compare the performance and potential of your projects or initiatives. You need to allocate and adjust your resources and support according to the needs and stages of your projects or initiatives. You need to review and update your innovation portfolio regularly to track progress and results, identify and resolve issues, and make decisions about continuation, termination, or scaling. You also need to foster a culture and environment that encourages and rewards innovation, collaboration, and experimentation.

5 How to improve your innovation portfolio?

Improving your innovation portfolio requires a constant and proactive effort to seek feedback, insights, and ideas from various sources and stakeholders. You need to involve your customers, employees, partners, and other external actors in your innovation process, to understand their needs, preferences, and expectations, and to co-create value with them. You need to scan your external environment, to spot and anticipate trends, opportunities, and threats, and to benchmark and learn from your competitors and best practices. You also need to challenge your assumptions and beliefs, to test and validate your hypotheses and prototypes, and to experiment and iterate with different options and alternatives.