Innovation portfolio management is a process of converting strategic priorities and objectives into innovation activities. This gives your business the chance to identify innovations with high potential and removing those projects with high risk or low potential.
Innovation portfolio management is a risk management tool that is essential to minimising the risk factor of a business when it comes to resources and investment involved when multiple innovation actions are being accessed. No innovation is certain – each initiative has its risk profile.
Not only is innovation portfolio management a risk management tool but it is also a time management tool that observes and evaluates the time required to start a new initiative.
This helps the business to maximise on profit for all innovations whilst decreasing the production costs and risks. Because of its purpose, innovation portfolio management is all about stable planning and controlling of a portfolio of initiatives designed to provide value for the entire business (Vizologi). Its primary goal is to try and make the unpredictable more predictable.
How to manage an innovation portfolio?
1) Identify/implement an innovation strategy
Does your business have an innovation strategy? If not, create and implement an innovation strategy before moving forward and communicate it clearly with everyone.
2) Understand the vision
What are the business goals and objectives? It is important to understand the business’s goals and how they are related to your innovation strategy. Communicate clearly where the business wishes to position itself in the future and what the tipping points are.
3) Understand your risk tolerance
Before you set your scope for innovation you have to first understand your risk tolerance. Does the business have a high or low tolerance for risk? What type of environment does it operate in?
4) Select projects for the portfolio strategically
Selecting all initiatives might sound achievable, but this increases your risk levels. Pay particular attention to the allocation of resources and time before adding all the initiatives to the portfolio. You don’t want to select all initiatives when you know you don’t have sufficient resources.
One of the most important decisions is analysing how to connect the skills required for the projects with the day-to-day activities of the business. Skill integration and alignment are critical, it must be organised and managed in the right way, the right mandate and under the conditions that will help both the business and initiative succeed.
Managing innovation requires a significant shift for most businesses, which are used to a less orderly approach but, the pathway to such discipline is clear. Once you develop a shared sense of the role of innovation in driving the business’s growth and competitiveness, the next step is to make sure that the company’s current innovation landscape is in sync with your goals.