This Harvard
Business Review article, by Bansi Nagji and Geoff Tuff, tells people why Managing Your Innovation Portfolio is so
important to the company’s management. As we all know, one company's long-term
prosperity largely depends on its innovation ability in the currently dynamic
market. However, if individuals within the company innovate on their own way,
the company is hard to coordinate and achieve its previously expected goal. Virtually,
it increases the cost of innovation investment. In order to get effectively stable
returns, a successful company must have a balanced innovation portfolio.
Innovation needs
creation and change. The authors found that the companies with the most
outstanding performance of innovation could clearly articulate their own
“innovation ambition.” They developed a tool called “the Innovation AmbitionMatrix.” It put the innovation portfolio into three levels: core offerings, adjacent efforts, and transformational
initiatives. In this way, it provides managers with a framework to examine
all the innovation projects inside the whole business; and also it set up a
method to help managers discuss company’s innovation portfolio with clear
innovation ambition. In this article, the
authors made a research in three industrial sectors: industry, technology and
consumer goods. They found successful managers could find an appropriate
balance point for integrating all levels of innovation in the whole company.
They possess the right tools and abilities to have different innovation
projects managed as a whole. With the
change of various industries or different developing stage, the balance point
of ideal resource allocation may change accordingly. With this, the authors advocate “total innovation”
for smart management. That is to focus on five core management areas “talent, integration, funding, pipeline
management, and metrics.” The authors point out that it is important to
manage comprehensively with conscious and careful innovation.
Let us think
about some of successful companies around us. What is it that makes the Apple,
General Electric, DuPont, such kinds of companies excel in an intensively
competitive market? Of course, the outstanding product is an important element.
However, if you delve into it, you will find behind the success of these
companies a more fundamental reason is management innovation. Nowadays, many
companies treat innovation management as an important strategy for company’s developing
perspective. But most of them, innovations are still in the form of a series of
disordered activities. It is dynamic but hard to coordinate. So it is the most
exciting and significant challenge for good management. To work out, managers
need to set up an effective and comprehensive system with a balanced innovative
portfolio. They must be clear how to
make all kind of innovation activities coordinate towards overall target. For
example, the managers need to understand the characters of their employees and
company, and figure out how to balance employees’ needs with company’s
incentive method. It is important to establish corresponding incentive
mechanism according to employees’ passion. In one way, this article greatly directs
practicing managers with actual significance of enterprise innovation.
Managing Your Innovation Portfolio. Full Text
Available By: Nagji, Bansi; Tuff, Geoff. Harvard Business Review.
May2012, Vol. 90 Issue 5, p66-74. 8p. 3 Color Photographs.
I agree on the importance of managing your innovation portfolio. It is easy to fall behind or be ahead of time. What I mean by this is that many organizations that do not put importance on creating new products or implementing new processes can be left behind and many times are not able to catch up. However, it is equally as important to manage when to implement your innovations. You do not want to be too early on products before there is a market for them. Also, being to early can be costly to you as a company as well as to the consumer.
ReplyDeleteYes, Mark. You are correct. As we know in our management strategy class, market pioneers often enjoy first-mover advantages. Innovation portfolio is not just required, but needs to be taken in a timely manner. Not just is in forms, but is in quick actions. Many failed companies are not just because of absent of the portfolio, but lost opportunity because of the delay in the action.
DeleteWe were reading and talking about innovation and diversification in recent weeks more often and lot of brainstorming was done in classroom. I wonder if we can say that core and adjacent efforts in innovation can be the innovation projects undertaken for efficiency and quality improvement of the services or products that are already part of company’s portfolio. Transformational initiatives are considered for a major overhaul of the organization to move the organization on the product-process plane.
ReplyDeleteI do agree with views provided in the paper. It is very important to clearly communicate about the within innovation projects to efficiently use it as organizations' advantage rather than making it as a pain point.
This is a good article which explains innovation in a steady above average return firms. In my opinion, the drawback of this article is that it explains innovation in only outperforming firms. It does not explain innovation in firms which have average or below average returns. Most of the innovation is actually needed by firms whose return is below average or is average and is not steady. A below average firm needs to think on its innovation to become steady in a market. But the problem is that the expenditure used in the research and development section is a dead cost. If the firm develops new product then they gain competitive advantage in the market, but they don’t produce an innovative product then the expenditure used to make that product goes waste.
ReplyDeleteThe article brings a good pointm in that innovation must be managed in order to be a successful firm. I like how it brings up the point that it must be in one mentality and having that clear innovation portfolio greatly helps the firm have one mentality. I believe that at times having a good management team will help the firm manage innovation. The firm must also create the right enviroment for innovation and by having a clear strategy, this can really make innovation be a bit easier to manage since everyone will have the same strategy in mind.
ReplyDeleteIn my opinion the hardest part will in the transformational initiatives, how the firm will be able to handle something that may change the firm completely. The management team must be able to be able to direct those initiatives in a way that will help the firm. Great Read, it was enjoyable.
I agree. Clear innovation portfolio really helps the organization. The right innovation environment will guarantee the implementation of innovation strategy. The transformational initiatives need the bold courage and long-term vision from executives. The innovation portfolio needs to be carried out with coordination and cooperation within the whole organization.
DeleteI also agree with your comments in this article, it is very important for management to focus on innovation development in a company. For example the company Google tries to cater to new innovation from its employees by setting up a relaxed environment for it employees to work in. Google focuses on making its employees happy by allowing them to work in an environment that focuses on catering to their personal needs, which I believe brings out a more productive and creative employee. Constant innovation is key for technology companies to stay ahead of the competition because new innovative ideas are being introduce into the market everyday.
ReplyDeleteYes, Patrick. I think Google is another good example to excel in stimulating innovation in the competitive market. Innovation environment is one of the most important elements for the incentive of innovation. I agree with your idea that innovation is especially vital for the competition advantage of today’s technology companies.
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