Innovation Portfolio Management by Silicon Valley Firms

Synergize Radical and Incremental Innovations

3 Primary Criteria to Assess Your Innovation Portfolio¹

Besides assessing each initiative individually for risk, investment, return, and timing, assess your total portfolio to ensure that you have the right initiatives in it:

1. → Stretch and strategic fit. How much does your portfolio push the industry frontiers, and how well does it fit with your business goals and strategy?  >>>

2. Capabilities and capacity. Do you have the required → capabilities to executive the portfolio and do you have enough of them? No innovation strategy or portfolio is meaningful if don’t possess the capabilities and capacity to execute it. When the demand for resources exceeds their supply, a bottleneck forms and work grinds to a halt. To address this problem, Silicon Valley firms use two basic approaches: (1) they load their innovation system to no more than 85% of the actual capacity, and (2) classify innovation initiatives into broad categories, determined by size and skill requirement, and then create templates that summarize the resource and capability requirements for completing each type.

3. Leverage and risk. Have you leveraged your investments so that you have a productivity advantage, while keeping risk within acceptable bounds? Leverage is what separates winners and losers. You can get leverage, for instance, from a platform product, a core product design that can be tailored with small changes to meet many different customer applications. Internally, by migrating to a common platform, you will be able to concentrate employees’ learning on a single product architecture. The platform approach also reduces the number of suppliers that you rely upon, increasing your cost leverage: the same parts can be used repeatedly. The platform strategy also means that when you undertake a new derivative, the degree of change is sufficiently small that is also confines risk and increases reliability.