Innovative companies that base their competitive advantages on the development of new products, services and business models understand that it is not enough to be Lean Six Sigma in the development process. Equally important to act fast and efficient, is to choose what to fill the production pipe with. Therefore, the challenge is not only to do things right but also to do the right things.
Innovating through projects
The most common and widespread form to organize innovation activities today is via the project. That is, a temporary organization that aims to take an idea via concept and pilot to a specific product, service or business model that fulfills a market need in an economical and manufacture able form. Over the past decades, significant expertise has developed within the area of project management, however, focusing primarily on doing the projects right.
Therefore, as more and more projects are developed within a company, the challenge is no longer just how to manage a single project, but how to manage the right (and often complex) set of interdependent projects. The literature defines those development entities and their activities as project-based or multi-project organizations.
A consequence of the multi-project approach of innovation is that the realization of strategic objectives relies on the results from groups of projects, where each project makes a particular contribution to the firm´s competitiveness. While some projects contributes to providing profitable new products other projects prepare the company for the future by exploring new markets, technologies and skills. In other words, the set and mix of development projects that are running today decide tomorrow market position.
Therefore, given the resource and risk constrains as well as the level of innovation and calculated value creation, a central task for companies is to select what projects to develop; all to achieve strategic objectives.
Innovation Portfolio Management – ‘what to innovate?’
For this reason, the discipline of Innovation Portfolio Management has received increased attention among corporate innovation managers and researchers in the academic world. Its processes and tools help managers create a relevant portfolio approach to business projects and products, to more effectively respond to business strategy and goals.
In order to position Innovation Portfolio Management, we describe this service as, if strategy answers the question, ‘Why should we innovate?‘, then Innovation Portfolio Management responds to the question ‘What should we innovate on?’.
A call for action
- In what way does your company select what projects to develop?
/Joachim Cronquist, Senior Partner, in collaboration with Ernesto Gutierrez Marchesano, PhD