Your innovation portfolio will be successful when your team is consistently bringing to market the right new products and services. That means you need to be better than your competitors at selecting the best innovation projects—whether it’s new products to develop, new business models to test, or early-stage technologies to explore.
Many innovation leaders aren’t happy with their current approaches to innovation project selection and review. For example, Gartner1 found that less than 25% of R&D and innovation leaders have a “high” level of satisfaction with their portfolio management processes.
It can be frustrating and worrying if you’re not confident your firm is selecting the right innovation projects. You might worry your portfolio’s budget will be cut due to lack of impact. Or you might be concerned your teams will be less motivated as they too become frustrated with the projects they’re working on.
It’s worth investing your time and effort in enhancing your innovation project selection practices. Several studies have shown a statistically significant correlation between strong project selection competencies and innovation success.
For example, in their 2018 study, PWC2 found that “high-leverage innovators”3 tended to be the firms who rated their project selection competencies the highest. In a separate 2020 survey of best practices, Change Logic4 found that industry leaders (those in their industry’s top ten percent) were more likely to treat portfolio management as a “…key business capability that must be executed consistently and continuously improved.”
Based on our experience with clients, interviews with leading innovators (like DARPA and The Medicines Company) and surveys of industry best practice, we’ve identified 4 key mechanisms that you can use to help you select better innovation projects.
For each mechanism we describe the problems they can help address—see if you recognize symptoms at your organization. We then outline practical solutions, based on best practices we’ve seen work in industry.
1 – Gartner Research & Development Leadership Council (2019). Six Most Common Errors in the R&D Portfolio Key Findings. (link)
2 – Jaruzelski, B., Chwalik, R. & Goehle, B. (2018). What the top innovators get right. Strategy+Business (93). (link)
3 – Which they define as “…companies that outperformed their industry groups on seven key measures of financial success for the previous five years, while at the same time spending less on R&D as a percentage of sales”
4 – Change Logic (2021). The state of innovation portfolio management. Change Logic. (link)