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What is Innovation Portfolio Management?
Innovation portfolio management is a term that describes the maintenance and progression of an organization’s various innovation projects. A successful innovation portfolio process will ensure that each project aligns with the organization’s innovation strategy and moves through the organization’s stage-gate pipeline on time. Once innovations are launched, innovation portfolio managers will measure and track their performance against a set of KPIs to ensure that they are delivering value and ROI to the organization.
What are the Benefits of Innovation Portfolio Management?
Keeping a close eye on your innovation portfolio helps you determine the various risks associated with each project and take action to neutralize them. A portfolio manager may only decide to take a project forward once he or she is confident that the risks associated with it have been removed or minimized sufficiently. As a result, good innovation portfolio management will drastically reduce the chances of innovation projects failing.
Innovation portfolio managers use a variety of KPIs and metrics to assess the performance of innovation projects, both as they are progressed toward completion and once they have been commercialized. Portfolio managers will keep tabs on costs as innovations move through the pipeline and all innovations will be rigorously monitored against financial KPIs. If projects aren’t pulling their weight, they can be either be adjusted or discarded altogether.
Prioritize Strategic Growth Areas
Innovation portfolio management enables you to ensure that there’s always an alignment between your overall innovation program and the wider strategy and objectives of the company. It’s also important for the innovations in the pipeline to strike the right balance and across the three horizons of innovation, ensuring an appropriate prioritization of short, medium, and long term efforts.
Innovation Pipeline Visibility
Transparency is one of the most important things for any innovation initiative, not only for your participants but also for leadership and decision makers. Innovation portfolio management allows you to build and share a roadmap so that everyone knows where your innovation program is heading and how you plan on getting there.
What Are the Challenges of Innovation Portfolio Management?
The quality of the information and data available to you as a portfolio manager is absolutely vital, especially as many of your decisions will be around expected future events and outcomes
If you have a company-wide innovation program you can sometimes have thousands of innovations and solutions to review and manage, which simply can’t be done manually
Portfolio management is a highly strategic activity, so the person responsible for it needs to have a strong remit from senior leadership to make important decisions with a wide potential impact
As if all of the above aren’t enough to be contending with, the goalposts of portfolio management are often changing. Strategies may change direction, and the market may shift unexpectedly
How to Build an Innovation Portfolio Management Process
Let’s take a look at the key steps within an effective innovation portfolio management process.
If you have been selected to build or manage an innovation management portfolio, then you need to become an expert in your domain. The first thing you should try to do is get a comprehensive understanding of the wider innovation process across your company. These are some of the areas you should investigate.
One of the biggest questions is, how are innovations being populated at the front end of your portfolio. This is sometimes referred to as the ‘Fuzzy’ front end of innovation, because it can involve many disparate channels, including trends, patents, and ideas from many different sources. Most companies are not leveraging all potential channels, so there’s usually plenty of room for expansion in this area.
Once innovations have been added to your funnel in one form or another, there needs to be a process of evaluation to identify the solutions you want to implement. This stage can have many steps, including refinement, experimentation, prototyping, expert review, and much more.
Sometimes referred to as the implementation or commercialization stage, this is where your innovations become a reality. This step often involves the assignment of team members to different projects and tasks that can contribute towards the rollout of your solution. As the portfolio manager you should be heavily involved with this process.
The key thing to determine straight away is your portfolio’s purpose: what should your priorities be? The answers should come from your innovation goals and objectives, and these should be aligned with you overall company strategy. If neither of these are already defined, then congratulations – you are the one who needs to investigate and define the priorities yourself! Here are some examples of the most common options:
One of the most common innovation priorities for any large company is efficiency. This can include a wide array of approaches, from lean agile efforts, to process improvement, operational excellence, and more.
Identifying new ways to reach your customers is always a top priority for large organizations. This can come in the form of brand new products or services, or just an adaptation of an existing product to meet a larger audience.
They say the customer is always right, and this is no different when it comes to innovation. This can be especially relevant if you’re operating in a highly competitive market and need to improve customer satisfaction. However even if your position is stable, it’s always important to adopt a customer-centric mindset and improve the experience you offer to them.
Once you have a clear picture of what problems the portfolio is trying to solve and what type of projects are eligible, it’s time to determine the approach you will use to manage your portfolio and segment your activities.
The purpose of the three horizons is to avoid a lopsided or imbalanced innovation pipeline. It can be tempting to always seek the quick wins and immediate ROI, however this short-sighted approach an leave you vulnerable to disruptive innovations that take a lot longer to develop and implement. The most successful companies employ a balanced approach with a proportional investment of resources across all three of the horizons.
Similar to the three horizon approach, the innovation ambition matrix is a template that can help you to prioritize the solutions in your innovation portfolio. Rather than separating innovations into three horizons, this approach involves distinguishing between three distinct innovation approaches: core, adjacent, and transformational. This encourages evaluation of innovations against a range of factors when compared to the simpler horizon approach.
Now you know what the portfolio needs to achieve, and how to track it, you can start to monitor their performance to see if your projects are on track. At this stage you should also be looking at how much investment is going into each stage-gate in the workflow to identify any areas ripe for optimization, and keeping an eye on revenue potential to ensure you’re investing in the right areas.
This is often the first obstacle to a successful innovation program. If you can’t reach the audience that you are trying to engage with your initiative, then you can’t populate the front end of your funnel and progress any further. There are many ways to overcome this, including internal marketing, gamifications and incentives, tools and integrations, and more.
If you’ve already achieved engagement with your system and generated a healthy number of initial solutions, then the next problem you might face is filtering those solutions to make them more manageable. There are many evaluation techniques you can employ, but the most effective thing you can do at this stage is move to a tool that supports this process.
This is quite often the final hurdle to delivering impact from your innovation. You have a final shortlist of valuable ideas and you need to bring them to life. Most of the time the budget is the biggest issue at this stage, but it’s also sometimes difficult to engage the right people and ensure they have everything they need to proceed.
What is Innovation Portfolio Management Software?
Innovation portfolio management software is designed to help you build a business case for each of your innovation projects, manage their implementation from end to end and track their performance against your strategic objectives.
How does Innovation Portfolio Management Software work?
The purpose of innovation portfolio management software is to provide all the tools you need to assess and make key decisions about your innovation projects effectively, from their inception right through to their launch and performance in the market. With so much information and data necessary to making the right decisions at the right time, the software’s key function is to do all of the hard work for you: to make calculations and present data in a way that makes decision making as straightforward for you as it can be.
Below is a summary of the key activities involved in innovation portfolio management. But beware: not every software solution will provide all the tools for the job.
The Innovation Portfolio Management Process:
Seed: Kickstart New Projects
The seed phase is when you create new projects and get them started. They might be stand-alone projects, or they could be derived from other aspects of your innovation management program, such as ideas that have been crowdsourced, or start-ups or technologies that have been scouted. You should be able to label these projects according to a range of classifications such as domain, category, impact and others.
The best innovation portfolio management solutions will integrate with your existing project management tools, such as Monday, Jira, and others, and offer APIs that will feed in updates from those other systems.
Plan & Evaluate: Manage and Assess Your Pipeline
Once your portfolio is in place, there will be an ongoing responsibility to monitor and assess each of the projects within it, the portfolio as a whole, and your process. Your software should make it easier to evaluate each project by providing a straightforward process to do so and by allowing you to engage any appropriate review teams or experts. At this stage, collaboration is key: you’ll want your teams to communicate with one another to discuss and evaluate your projects and your software should offer a variety of collaborative features and scoring methods to facilitate this.
A stage-gate system or ‘pipeline’ will help you to visualize the status of each project and determine whether there are any bottlenecks in your process. Some of the factors you can consider when assessing your overall process are the passing rate of each stage-gate, the time taken to pass through each stage, and the overall time to market of your projects. Questions you might ask to understand the performance of your portfolio include:
- How many of my projects end up on budget?
- How many of my projects are going to be completed on time?
- Are my projects receiving all the resources they need?
Prototype & Build: Identify Risks and Manage Impact
As projects move toward completion, it’s important that any risks associated with them are identified and managed. Your software should allow you to log these risks and prioritize them accordingly for each project, as well as view their status across your portfolio. You should also be able to assign them to relevant owners on your system, who should be best-placed to minimize their impact or even neutralize them.
It’s important to note, however, that you won’t be able to remove all risk from your projects. Projects in Horizon 3, for example, have a much higher risk profile due to the inevitable uncertainty of planning years into the future. The key is to identify these risks early and take all the steps available to you to minimize them.
Your innovation portfolio software should also enable you to measure and track their impact on your organization, both positive (ie, their profitability), and negative (such as the costs or other resources required). Your system should be able to make all of these calculations for you and provide robust reporting features to assess overall impact across various teams, topics, and product lines etc.
Commercialize: Implement your Chosen Solutions
Now it’s time to manage the company-wide roll out of your solutions. The software should allow you to break down the idea or solution into manageable pieces and assign ownership to relevant team members. The platform should include features which allow you to allocate budget and assign tasks to bring the idea to life, and offer a wide range of analytical tools to measure and report on their performance.
Measure: Calculate and Track Impact & ROI
The final stage of any innovation portfolio management process is to continuously measure the impact of your various projects and the return on investment that they are delivering to your organization. The best portfolio management solutions will offer a diverse range of tools to enable you to visualize your portfolio’s performance in a number of ways, and against various KPIs and criteria.
You should be able to use your software to quickly generate any reports you need to deliver to your stakeholders, and the software should be sophisticated enough to allow you to drill down into all of the data on your system to find the insights you need.
Step into your personal innovation cockpit. Ensure your innovations translate into impact by tracking your whole innovation portfolio and measuring the value it delivers over time.
Benefits of Q-impact
Efficiently manage a tailored process involving all relevant stakeholders
Use intuitive tools to manage every aspect of your innovation portfolio and track them across teams
Measure and analyze your projects’ impact on revenue or savings, and track KPIs relating to your innovation ROI
Projects are created from any combination of ideas, technologies and start-ups
Don’t Just Take Our Word For It…
We are very satisfied with our experience of both the Qmarkets platform and the team behind it. The Qmarkets platform assisted us to streamline our innovation efforts and help materialize the important ones.
Qmarkets allowed us to make incredible progress and gain meaningful input and insights from the public.
We’re seeing ROI in both savings and earnings, with ideas to improve processes, existing products and services, and even new businesses and markets.
…And that’s innovation portfolio management! Now you have a good understanding of the subject and how to build and manage an innovation portfolio effectively. Next up, learn out about the other approaches within the innovation management ecosystem by visiting the pages below.
Idea management is the structured process of collecting, screening developing, and implementing ideas that can help your organization to be more innovative and efficient.
Continuous improvement is exactly what it sounds like – the practice of continually improving and incrementally enhancing the performance of a company’s products, processes, or services.
Innovation & technology scouting allows companies to bypass these obstacles and deliver new products, services, and solutions that can dramatically enhance their value proposition.
Trend management refers to all the activities involved in scouting for and acting upon trends to fuel an organization’s innovation efforts.