All but the smallest organization are likely to want to include more than one innovation project in their strategy. While a decision matrix helps you compare projects, you also need diversity in your innovation portfolio. Portfolio management helps you to achieve this.
Balancing Your Portfolio
For a balanced portfolio, you need a mix of decision criteria: the risk of failure must be balanced with the reward of success. This requires an analysis of potential obstacles against potential benefits for the innovation. In general, a safe innovation will be based on what your company does well. More risky innovations are radical in nature. While the risk of such innovations is greater, the potential rewards are also significantly more attractive. You may decide to back a couple of high-risk projects if they are small because they could move you to a new game – and if they fail only a small amount of resources will be waster – but it would be foolish to base all your hopes of progress on risky ventures that may never work out.
Quick Tips: Hedge Your Bet
Aim to reach a balance across your portfolio between risks and rewards, so that you have a mixture of probable successes and more risky – but potentially more profitable – experiments.
Gaining An Overview
It is useful to develop an overview of your portfolio not just in terms of the risks and rewards. But also in terms of how much you are allocating to each project. This can be done by using a bubble chart, which is generated by plotting your projects as circles on a graph against potential risk and potential reward. The more resources a project requires, the larger its corresponding circle on the chart. This chart gives you an instant view of what resources are allocated to what levels of risk and reward. It can show you immediately if you have too many resources tied up in risky projects that are unlikely to succeed in the end. Equally, you can see if you are putting too much investment in a safe bet that is unlikely to generate significant rewards.
Quick Tips: Be Fair
Scrutinize all innovation projects equally ad fairly. Do not start up a project just because one individual wants it to happen.
Managing Your Portfolio
- The number of innovation projects in progress at any one time is limited
- Innovation projects have targets and are abandoned if targets are not met
- Priority is given to innovation that meets strategic goals
- Innovation projects are subject to careful selection
- There is no limit to the projects you can take on, so your spread your resources too thinly
- You are reluctant to kill off projects if they are not working out
- Unimportant projects succeed at the cost of strategically valuable innovations
- You do not have clear criteria for selecting projects
Promoting Ideas for Change
Unless you are a top manager in your organization, chances are that you will need to “sell” your ideas for change at some point. Maybe you are an entrepreneur pitching an idea to a potential investor or you have a great idea about how to make things work more efficiently in your organization. In either case, you will need support if your idea is to become a reality.
Making the Business Case
Whatever the starting point, the destination will be the same: you need to convince someone else that your idea is great and that it will work. And that they will get their investment (of time and money) back. And they need to believe in you and your capacity to deliver all of this. The problem is that you believe in your idea is unlikely to be enough – you need to put together a compelling business case to convince others that your idea has practical potential.
Organization need to innovate, but they cannot do everything. They need to explore options and then make tough decisions about which ideas they will back and why. You can influence these decisions to our advantage – if you know your organization is trying to put together a portfolio of projects that balances risks and rewards, you can try and make them include yours in the mix. But you need to present your idea in such a way that its merits are clear. Ask yourself how you can engage them – can you show them a prototype so they can add their comments? Do you have the answers to questions they might ask you? And do you come across as being passionate about the project – will they believe in you?
Quick Tips: Rehearse Your Pitch
Practice “selling” your idea to others, inviting critical comments and suggestions for how to improve it. Anticipating the big questions before you make the pitch to decision-makers will help ensure your message gets across.
Covering All the Angles
Making a compelling business case is the heart of innovation. Decisions will not get made on the basis of personality and passion alone – you need to be able to convince decision-makers to spend resources on a project that will work. Is there a market, will the technology work, can you protect the idea, what will it cost, and what are the likely benefits? Showing that you have thought the project through and have answers to any difficult questions they might throw at you will enhance your chances of a successful pitch.
Building a Good Business Case
- Outline Your Idea – A short and simple explanation of your idea – hot it is new and what it will do. Remember it is not what you think but how they see it, so try and present it in terms of what it will do for them. You might try mapping it on a strategic position map.
- Market Analysis – Who is it targeted at? Who wants it, why do they need it, and why don’t they have it yet? How big is the market? Is it growing, declining, or static?
- Competitors – Who else is out there, what do they offer, how will this ide get ahead of them, how might they react, and how do you protect yourself from that?
Why It Will Work – What do you know, and what prior knowledge, skills, experience, and networks can you bring to the table?
- Rewards – What will you get if you succeed – money, market share, and customer satisfaction – and how long you will have to wait until you get them?
- Costs – How much will it cost, and what do you need to make it happen?
- Risk Factors – What might pose problems and how will you get around them?
- Project Management – Who will take this forward and how? What reassurances can you offer that you can do it?