UNInnovation.network Info@UNInnovation.

net @UN_Innovation

P O R T F O L I O S T R AT E G Y
STRATEGY MODULE

OBJECTIVES
The Portfolio Strategy tool will help you:

 Determine the overall riskiness of your portfolio of innovation projects

 Balance incremental and disruptive efforts across your innovation portfolio

 Identify opportunities to reallocate resources to better align to your needs and risk
appetite

BEFORE YOU BEGIN

 Start to think about your organization’s general ambitions for its innovation efforts. Is
there a particular preference for safe bets or quick wins? Does your organization see
value in disruptive innovation with the potential for great impact, despite risk of failure?

 You should have at least three innovation projects or initiatives in mind and understand
their size, risk, and anticipated impact. These can include both programmatic and
operational improvement projects.

STEPS YOU WILL TAKE

1. List each innovation project associated with an innovation goal for your team or
organization. This list will represent your innovation portfolio.

2. Score the solution and the challenge associated with each project. The tool
provides scoring guidelines to gauge how new a solution or challenge is in comparison to
your organization’s existing work.

3. Map each project on the portfolio strategy matrix and examine the balance of
projects to inform strategic decisions. Examine the balance of projects to inform
strategic decisions and identify opportunities for resource reallocation.

SEE IT IN ACTION
Learn how the United Nations Development Programme (UNDP) approached portfolio
strategy through the lens of two initiatives: the Innovation Facility and the Accelerator Lab
Network.
 OVERVIEW

With risk and discovery at its Portfolio Strategy Matrix

core, innovation—by nature—
lacks predictability. It is difficult New
Challenge DISRUPTIVE
to know whether an attempt to New solution, new
challenge, higher risk
turn a good idea into a scaled
solution will prove successful,
or how end-users will react.

CHALLENGE
ADJACENT
How can teams within the UN Reconfigured solution,
new or changing
System gain the rewards of challenge, moderate
risk
innovation while mitigating
accompanying risks? INCREMENTAL
Existing solution,
The answer lies in part in existing challenge,
Existing lower risk
managing innovation as a Challenge

portfolio that balances risk and

Existing Solution New Solution
SOLUTION
reward. The Portfolio Strategy
tool helps organizations and
teams examine whether they are taking on the right combination of projects based on their appetite for risk.

The Portfolio Strategy matrix is a framework to help users plot innovation projects according to how new the
solution (x-axis) and the challenge being addressed (y-axis) are perceived to be by the organization. Depending
on where the projects are plotted, they are categorized into one of three tiers of innovations:

 Incremental innovations address challenges that the organization is already focusing on through
minor enhancements to existing products, processes, or systems. They are quick wins that present a
relatively low level of risk.

 Adjacent innovations reconfigure existing solutions or apply existing solutions in new ways to
existing or new challenges. They tend to represent a moderate level of risk.

 Disruptive innovations are new solutions that focus on challenges the organization has never sought
to address. They are often higher risk but tend to pose the greatest opportunity for impact.

Because the Portfolio Strategy tool plots projects by risk, it may be tempting to curate a portfolio of purely
incremental innovation projects to provide the greatest likelihood of success. However, successful disruptive
projects, while riskier and time intensive, typically offer the greatest opportunity for transformational impact.
Leading practices suggest a mix of projects across the three tiers, with leading private sector organizations
often utilizing a 70-20-10 distribution (incremental, adjacent, disruptive innovations). However, the right balance
of innovations will vary across teams and organizations with different missions, mandates, operating realities,
and risk preferences.

PORTFOLIO STRATEGY (S.4.version1.06.2019) 1

 USING THE PORTFOLIO STRATEGY TOOL

Step 1: List each innovation project associated with an innovation goal for your team or organization.
If, for example, your organization focuses on food scarcity in urban areas, list all the solutions aimed at
addressing this issue. The same approach applies whether you are considering operational goals such as hiring
new staff or budgeting additional resources, or programmatic goals.

Step 2: Score the solution and the challenge associated with each project. Download the Project Scoring
worksheet and use the scoring guidelines below to assign a score to each of the projects identified in Step 1.

Solution Scoring

Score Guideline Example

This solution represents an incremental A city consolidates its emergency and general
1 enhancement or minor modification to an existing information hotlines to take advantage of economies of
solution that our team or organization uses. scale and simplify the user experience.

This solution represents a reconfiguration or

A non-profit organization creates a mobile application to
substantial alteration to an existing process,
2 allow users to access its services (which have not
approach, product, or technology that our team or
changed) virtually.
organization uses.

This solution represents a new process, approach, An international development organization employs its
3 product, or technology that our organization has first drones to conduct geographical surveys to support
never utilized. farming initiatives.

Challenge Scoring

Score Guideline Example

A non-profit’s finance function has always had to fill out,

This is a challenge that our organization or team is
1 process and manually integrate payment requests into
already addressing.
its accounting system.

This is an existing challenge our organization or team An agriculture ministry has long conducted food
2 has faced, but it has not been fully addressed or is inspection spot checks, but not at the frequency a new
just beginning to be addressed. regulation requires.

For the first time, a national security organization is

This is an entirely new challenge that our
3 having to address drones flying illicit drug shipments
organization or team has never faced or addressed.
over the border.

These challenges are not the same as your team’s or organization’s innovation goals. Each innovation goal will
often have multiple challenges that the team must overcome in order to be successful.

PORTFOLIO STRATEGY (S.4.version1.06.2019) 2

 Step 2 in Action: Consider the hypothetical example of a large multinational organization that hoped to double
the size of one of its divisions in its first year of operations. The organization convened its leadership team to
examine and score its list of innovative solutions to enhance current recruiting and training processes.

LIST OF INNOVATION PROJECTS

PROJECT NAME SOLUTION SCORE CHALLENGE SCORE

Nontraditional talent sourcing strategy 1 1

Leaderboard for referrals 2 1

Innovation certificate program 2 2

Revision of case interview process 1 1

Blitz serial interview day 2 1

Social media campaign 1 1

Artificial Intelligence data mining via
3 2
LinkedIn
“Bring a friend” supper club 1 1

Step 3: Map each project on the Portfolio Strategy Matrix and examine the balance of projects to inform
strategic decisions.

Consider the following questions:

• Does the mix of projects reflect the right combination of incremental, adjacent, and disruptive efforts,
given your risk appetite and innovation goals?

• If not, can the organization eliminate projects in one tier and reallocate those resources to efforts in a
different tier? Can the organization eliminate any redundant efforts?

PORTFOLIO STRATEGY (S.4.version1.06.2019) 3

 Step 3 in Action: The large multinational organization plotted its solutions on the Portfolio Strategy Matrix using
the assigned scores. The organization recognized that its only disruptive solution—an artificial intelligence (AI) tool
that would search LinkedIn profiles for potential candidates—had too long a development timeline to meet their
hiring needs. The organization deemed a second solution in the incremental tier—a “leaderboard” for internal
referrals—to have too little return for the associated risk.

Using the resources freed up by the elimination of these two projects, the organization launched a pilot of a
disruptive solution focused on using a neuroscience-based gaming platform to replace resume reviews – a project
with similar risk but much greater potential impact.

New
Challenge

Game-based application
platform

AI data mining via

LinkedIn
CHALLENGE

Innovation certificate
program

“Bring a friend” supper

club

Social media
campaign Leaderboard for
Revise case interview referrals
process
Blitz interview day
Nontraditional talent
Existing sourcing
Challenge

Existing Solution New Solution

SOLUTION

While a simple comparison of a high-risk, high-reward and a low-risk, low-reward project may indicate a similar
return (given their respective likelihoods of success), the consideration of the two projects should be distinct
within the innovation portfolio. Compare disruptive projects to other disruptive projects and incremental
projects to other incremental projects when making investment decisions. A team or organization’s risk
appetite should determine the overall mix of project types.

As projects evolve and develop, they can change tiers. Ongoing analysis of an innovation portfolio through the
Portfolio Strategy tool can help organizations monitor changes and make adjustments so that a portfolio
evolves along with the projects that comprise it.

Innovation can seem like a series of one-off activities. However, by adopting a portfolio-driven approach to
innovation management that balances risk and return, an organization or team can demonstrate both
immediate impact through innovation while simultaneously positioning itself to respond to future opportunities
and challenges.

This tool is valuable for helping organizations and teams decide whether they have the right mix of projects to
achieve their goals, and whether they are comparing the right projects to one another when making investment
decisions. If an organization decides its mix of projects does not reflect its appetite for risk or availability of
resources, leadership can consider using this knowledge to drive design considerations for their next ideation
effort, or reallocating resources to adjust a portfolio’s risk profile. Used in this way, the Portfolio Strategy tool
can play an important role in driving the development and execution of an effective innovation strategy.

PORTFOLIO STRATEGY (S.4.version1.06.2019) 4

 Case Study: UNDP Innovation Facility
and Accelerator Lab Network

In 2014, building on the innovation work done at the regional and country level, UNDP established the
Innovation Facility as a global mechanism to support innovation for development. Since then, the Facility has
developed a portfolio of over 140 innovation projects across 87 countries. In 2018, UNDP ventured to
build a different type of portfolio, developing a network of 60 Accelerator Labs that form a mechanism KEY TERMS
for strategic innovation at the global level.  “Right Mix”
 Innovation Portfolio
The Innovation Facility was created in response to an organic surge of innovation throughout UNDP,  Balance of Risk
driven by country offices that were experimenting with prototypes of solutions. As the number of  Breadth
innovation projects grew, UNDP tasked the Innovation Facility to support, organize, and structure these
efforts with an overarching strategy to meet UNDP’s innovation goals. To do this, the Facility needed to
determine what the right mix of innovation projects was for UNDP and whether their rapidly expanding
innovation portfolio meet this standard.

FIVE PORTFOLIO STACKS

R&D STACK NEW EVIDENCE & DATA
INNOVATION STACK
Scan the horizon for
trends and risks, and Use new data sources to
identify innovation expose insights, reveal
hotspots. latent trends, and
design better policies.
Ex: market research
Ex: Tracking poverty
through satellite imagery
EMERGING EMERGING FINANCES REGULATORY
COLLABORATION STACK INNOVATION STACK
MECHANISMS STACK
Leverage the growth of Redesign regulation
Design new interfaces financial technologies and systems to unleash
that mobilize and align and decentralization of new approaches to
interests of financing. policy and delivery.
stakeholders.
Ex: Support governments Ex: Examine back office
Ex: Tech-enabled ways for to leverage crowd- functions to reduce
governments to engage investment business bottlenecks in UNDP and
with people models governments alike

From the outset, there was an emphasis on finding a balance across a variety of topics to keep the organization
in line with emerging threats and opportunities, a mix of various emerging innovation approaches and a
balance of risk embedded in different methods. This led to a portfolio strategy around five areas – “stacks” –
that defined objectives for existing and future innovation at UNDP.

More recently, UNDP has recognized the need to create a mechanism for scaling innovation quickly and has
ventured to create another type of portfolio: the Accelerator Lab Network. Partly building on the early success
of the first cohort of policy labs (Moldova, Macedonia, Sri Lanka, Georgia, Armenia, Indonesia, Egypt), UNDP
began to identify locations for labs where UNDP will engage with local partners to find radically new
approaches that fit the complexity, speed, and scale of changes in the external environment.

One of the guiding protocols of the Accelerator Lab Network is to design and conduct experiments around
portfolios of solutions. The labs’ portfolios will aim for breadth across solution types such as technology, policy
interventions, coalitions of nonprofits delivering a service, or even business interventions.

Continued on next page

PORTFOLIO STRATEGY (S.4.version1.06.2019) 5

 Case Study continued

If you’re curious to learn more about UNDP’s experience with portfolio strategy, please reach out to Milica
Begovic at milicia.begovic@undp.org for the Innovation Facility and Gina Lucarelli at
gina.lucarelli@undp.org for the Accelerator Lab Network

Case studies highlight innovation in action across the UN. Because each organization’s chosen approach will be unique, the case
studies might not follow the exact step-by-step guidance in the tool and are primarily meant to serve as inspiration. If your
organization would like to share an experience about using this tool, please reach out to toolkit@uninnovation.network.

PORTFOLIO STRATEGY (S.4.version1.06.2019) 6

 REFERENCES

De Fiore, Alessandro and Rosani, Gabriele. “Two Questions to Ask Before You Set Up an Innovation Unit.”
Harvard Business Review, July 2018. https://hbr.org/2018/07/two-questions-to-ask-before-you-set-up-an-
innovation-unit.

Nagji, Bansi and Tuff, Geoff. “Managing your innovation portfolio.” Harvard Business Review. May 2012.
https://hbr.org/2012/05/managing-your-innovation-portfolio.

“The Importance of Achieving Diversification—and an Easy Way to Do It.” Charles Schwab. Accessed 26 July
2018.

Mui, Chunka. “3-Point Plan for Balancing your Innovation Portfolio.” Forbes. September 2014.
https://www.forbes.com/sites/chunkamui/2014/09/29/3-point-plan-for-balancing-your-innovation-
portfolio/#4ebe9f1d6533.

Cassidy, John et al. Developing Innovation Portfolios for the Public Sector. Deloitte, 15 August 2018.
https://www2.deloitte.com/insights/us/en/industry/public-sector/innovation-portfolios-public-sector-
organizations.html.

“Enduring Ideas: The Three Horizons of Growth.” McKinsey, December 2009.

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/enduring-ideas-
the-three-horizons-of-growth.

Viki, Tendayi. “Frameworks for Building Innovation Portfolios.” Medium. April 2016. https://medium.com/the-
corporate-startup/frameworks-for-building-innovation-portfolios-8e189b4d4189.

US Agency for International Development. Center for Innovation and Impact: Impact Brief, 2018.
https://www.usaid.gov/sites/default/files/documents/1864/impact-brief-2018.pdf.

US Agency for International Development. Idea to Impact: A Guide to Introduction and Scale of Global Health
Innovations, January 2015. https://www.usaid.gov/cii/guide-introduction-and-scale.

Note: The Portfolio Strategy tool is adapted from Monitor Deloitte’s Ambition Matrix methodology.

PORTFOLIO STRATEGY (S.4.version1.06.2019) 7