Portfolio Management for Innovation Projects

Description

Project Portfolio Management for Innovation Projects

Balance of Projects:

To improve the success rate of the research and development investments, the portfolio needs to be balanced between innovations that protect the core business, adjacent innovations and transformative ones. There are many suggestions how to achieve that balance.

A common one is to use a classification between the degree of innovativeness and risk of the innovations.

Assessment of current Product Portfolio:

Applying the S-curve. There is a so-called development phase in which the new technology is still in a laboratory stage. The performance is still low. During the transition phase, the technology gets exposed to market forces and increases in performance. If it survives, it will enter the exponential phase. During this period, the performance is raising at an exponential rate. After some time, the performance will stagnate. This happens when a technology is reaching its physical limits. Finally, at the end of the lifecycle, the performance is even shrinking as competition is done mainly via cost reductions which might reduce the performance. If the main product is very mature and on the upper side of the S-curve, it is recommendable to increase the spend on especially transformative innovations. The more the advance on the stagnating upper level is, the more urgent is investment into transformative innovations.

Portfolio cleaning

Application of market forces to early stage innovations , prioritize projects that compete for the same resources

Trend Assessment

Another important aspect is to address the right trends in the fields of market, technology and society. Innovations that are linked to identified trends should be prioritized. To identify such trends there are different approaches (which can be combined):

- Use the Trends of Technology Evolution as a reference to identify possible next steps of a product. The Trends of Technology Evolution were developed from historic patents and show generalized lines of development. They enable the development of next logical steps of a product.

Real Options for Evaluation of Business Value
Current decision-making process is based on presentations followed by discussion of the management team. In the current process, there are phases (ideation, MVP, pilot and scale-up) with respective presentations. Especially for project with high demand for resources, there is a demand for business case or an assessment for scientific or monetary benefits.

The quantitative assessment, however, remains a challenge.

· Future statements are difficult

· The variability is high

· New applications of the same product are difficult to judge at current state

· Methods like the Business Model Canvas are useful on a qualitative level, but usually fail to deliver quantitative assessments

Real options are a modern tool on how to make decisions regarding investments when the future is uncertain.

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