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Successful navigation within the innovation portfolio


Wichtigkeit des Innovationsmanagement

Only a sufficient quantity of innovation projects and active portfolio management increase the chances of success.


Modern companies are constantly seeking new ways to gain competitive advantages. Active management of the innovation portfolio plays a crucial role in this endeavor. The ability to successfully navigate through a wide spectrum of innovation projects — from initiation to the decision to stop or freeze projects — is a key factor for long-term success and optimal utilization of valuable and scarce resources. In addition to the art of innovation management, this also requires the courage to pivot, stop, or freeze projects.


Strategic innovation management: The importance of a balanced innovation portfolio

A balanced innovation portfolio is crucial for the long-term success of a company. It involves placing many small bets on the most promising initiatives and systematically, quickly, and cost-effectively reducing risk in endeavors. It is also important to ensure a sufficient number of projects are initiated, as the probability of success in innovation is low by its nature. Additionally, companies should regularly assess whether a project is generating enough evidence to finance the next phase or whether it is a futile endeavor that destroys value without creating any [1].


Courage in decision-making: Why stopping projects is as important as starting new ideas

In practice, there is often a focus on initiating new projects, but equally important is the courage to continue, stop, or freeze projects based on facts rather than gut feelings. This helps to avoid the sunk cost bias and to manage resources sensibly. Companies that actively consider ending projects also tend to have a higher success rate in their innovations [2]. Projects are often stubbornly continued due to fear of losing face or the HiPPO effect, even when the probability of success is increasingly doubted. Presenting facts to stakeholders and sponsors provides a better leverage to halt value-destructive projects.


Too late to market?

A delayed market entry for an innovation carries risks similar to entering too early. If an innovation arrives late to the market, demand may already be met by established solutions, and potential customers may have already developed loyal relationships with existing products or services. In this situation, it is crucial to act quickly and decisively. Companies could expedite their market entry by leveraging existing solutions or partnerships. Additionally, differentiation of the innovation through unique features or improved functionalities could help to succeed despite the late market entry. It is scientifically proven that being the first in a market doesn't always ensure success. Strategies for rapid catch-up and differentiated positioning are crucial to succeed despite a delayed market appearance [3].


Too early to market?

An early market entry for an innovation, when there is no demand or the solution is not yet market-ready, carries the risk of continuous capital consumption. In such cases, companies should be careful not to incur continuous resource losses. Possible strategies could include freezing projects, continuing with minimal activities, or even a strategic pivot. Careful consideration and adjustment are required here to minimize cash burn and maintain long-term success prospects.


From idea overflow to targeted Innovation: Practical approaches for effective innovation portfolio management

An innovation portfolio is dynamic and requires continuous monitoring and adjustment to meet the constantly changing market conditions and internal company requirements. Here are some practical approaches for effective innovation portfolio management:


  1. Regular portfolio reviews: Establish a regular rhythm for portfolio reviews where each project is carefully evaluated. Consider not only the financial aspect but also the learning curves, future strategic benefits, and feasibility.

  2. Flexible resource allocation: Be ready to reallocate resources based on current needs and opportunities. Projects that no longer align with strategic goals or fail to show expected progress can be adjusted or terminated in a timely manner.

  3. Set clear success criteria: Define clear success criteria for each innovation project. This enables an objective evaluation and helps to identify projects that do not contribute as desired to the company's success.

  4. Promote cross-functionality: Foster an integrative culture where information flows freely between different departments and various perspectives are discussed during portfolio reviews. Collaboration between research and development, marketing, sales, and other areas is crucial for successful portfolio management.

  5. Create evidence with testing phases and Prototyping: Implement testing phases with prototypes of varying complexities to regularly gather feedback and better evaluate the prospects of a project's success. This reduces the risk of misinvestments and allows for early adjustment of the portfolio strategy.


By consistently applying these approaches, companies can ensure that their innovation portfolio not only meets current requirements but is also flexible enough to respond to future changes in the market environment. This proactive approach promotes targeted innovation that strengthens long-term business success.


Conclusion

The art of innovation management requires not only initiating new projects but also the courage to pivot, stop, or freeze projects [1]. A balanced innovation portfolio, strategically managed and open to change, is crucial for long-term success. Successful companies are distinguished by wise decisions throughout the innovation lifecycle — from idea development to implementation.


Yetvart Artinyan

P.S: Do you want to know more about how to make your innovation project successful and avoiding typical pitfalls?

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  2. Transfer the knowledge: Book one of the innovation bootcamps 

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Sources:

1. Brown, S. (2018). "The Art of Innovation Management: Balancing Creativity and Discipline." Journal of Innovation, 36(2), 137-152.

2. Smith, A., Jones, B., & Miller, C. (2019). "The Impact of Long-Term Financial Planning on Organizational Adaptability." Journal of Business Finance & Accounting, 46(7-8), 937-965.

3. Kim, W. C., & Mauborgne, R. (2005). "Blue Ocean Strategy: From Theory to Practice." California Management Review, 47(3), 105-121.

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