Managing Your Innovation Portfolio – Bansi Nagii and Geoff Tuff

Every organization, even if they are market leaders of their respective products, need to
innovate to stay in the business. There should be a sense of urgency, focus on market share,
proper measurements and accountability to commitments to drive innovation. Instead of having
a buzz around different innovative projects, there must be careful planning done to understand
needs to be done and the organizational structure should be altered to help in execution of the
process changes inherently required to drive these projects. The key take-aways from this paper
are as follows:

 The very first step in driving innovation is to understand what the organization needs.
Innovation Ambition Matrix can be used to identify where the organization stands with
respect to the innovation activities that are existent within the firm. An organization,
depending on the type of industry, the level of competition within the industry and the
stage of development at which the organization is in, will have a ratio of core, adjacent
and transformational innovative projects that it must take up. The typical ration for
manufacturing industry is 70:20:10 for core: adjacent: transformational, but it varies
widely between industries. The leaders of the organization should agree upon the best
ratio that needs to be maintained and should work on bridging the ratio gap from current
state to best state envisioned.
 Once the right balance of total innovation portfolio is identified by the organization, the
next step is its execution. To implement these projects, it is important that the
organization should be restructured to have the required resources and capabilities. For
core and adjacent innovative projects, there is not much restructuring required since it
will be built on existing platform and architecture. However, for transformational
innovative projects, there is a need for different set of people with different skill set, and
different technological support systems to do things differently.
 The funding for transformational activities should be kept different from regular PnL of
the business. A stage gate process is usually not applicable for transformational projects.
From the existing library of options, the viable options need to be identified, business case
need to be developed, demonstration need to be displayed, and product development
need to be started for transformational projects before its launch. These are long term
projects and should not be judged on the metrics used for core and adjacent projects.
Transformational projects should be tracked on patents developed by R&D team and such
noneconomic and internal metrics.

Thus, firms that are pursuing innovation need to understand the levels to which they
should aim for core, adjacent and transformational innovation. It is important to have
transformational innovation because this has the highest return on investment (70%) and
without this, the firm will stagnate over time and die away to competing firms. Firms should
support the transformational innovation by separate funding, hiring different set of talent,
separate its operation from normal business, have a non-linear pipeline management and
identify nonfinancial metrics to measure its progress.