Five Big Mistakes to Avoid When Managing an Innovation Portfolio
Over the last decade, I have worked with dozens of innovation leaders in large corporations. One simple, persistent question has challenged almost all of them:
“How do we manage a corporate innovation portfolio?”
Here are the five big mistakes that emerged from those engagements that anyone who is a leader of an innovation portfolio should avoid.
Mistake 1: Not Making a Mindset Shift
Too often, leaders choose to treat managing a portfolio of innovation initiatives exactly the same way they treat managing their core revenue-generating product initiatives. Leaders assume that the path to the potential commercialization of innovation initiatives is driven by more resources or faster execution.
Instead, leaders managing a portfolio of innovation initiatives should focus on prioritizing learning ahead of revenue.
The mindset shift that ends up making the biggest difference? Establishing an environment where teams are encouraged to demonstrate strategic speed by learning quickly about their key uncertainties, rather than demonstrating operational speed by simply executing quickly on something that might not be the right solution.
Mistake 2: Preferencing Opinions Over Evidence
A bad innovation leader uses their legacy experience with the market or a specific customer segment, to direct a team to solve a customer problem in a way that they, the leader, is already familiar with.
A good innovation leader can demonstrate the discipline of withholding their own opinion about what a solution to the customer problem might be.
But a legendary innovation leader trusts their team to be closest to the current customer dynamics and gives them sufficient runway to develop a compelling body of evidence to support their approach.
Mistake 3: Having the Wrong People in the Room
Managing a portfolio at the wrong level of the organization is a key driver of innovation dysfunction. A decision-making body that is made up of leaders who are too senior can be a huge blocker to building an innovation portfolio.
- It’s expensive and slow to get a senior leadership group together to make the small investment decisions necessary to manage the front end of the portfolio.
- Senior leaders are often too wedded to the expected short-term returns they have declared publicly to tolerate the strategic speed and required patience, associated with building an innovation portfolio.
- Many teams are reluctant to declare in a meeting with the most senior leadership the three words necessary to drive a culture of learning: “we don’t know.”
Mistake 4: Conflating Business Strategy with Innovation Strategy
Having a business strategy that informs the work of the broad enterprise is absolutely necessary. But without also developing a specific and focused innovation strategy, the likelihood of managing an effective innovation portfolio is massively diminished.
- Teams lack clarity on what is inside or outside the guardrails of their leaders vision of the innovation opportunity. As teams experience challenges and potentially need to move away from their original approach, the absence of an innovation strategy means they get bogged down by not knowing if a pivot being suggested by the market will be supported by their leadership.
- Leadership lacks clarity on what combination of initiatives adds up to a successful innovation portfolio and so are unable to guide effective investment decisions. If an initiative creates an overload of opportunities in a particular customer segment, or geography or product category should the team be given runway to move ahead? Absent an innovation strategy this just becomes guesswork.
A clear and actionable innovation strategy is a crucial ingredient in managing an effective innovation portfolio.
Mistake 5: Allowing Entitlement Funding to Persist
It’s easy to think that an organization can stop an initiative that has gone down the wrong path.
Until we can’t. The train has left the station. The team is emotionally committed to pursuing their vision. Leadership has expended meaningful political and financial capital in supporting an initiative.
Building an effective innovation portfolio demands regularly and ruthlessly saying no to initiatives that have failed to demonstrate traction. Innovation leaders can build in their flexibility to do that by matching their funding levels to the level of evidence-based traction presented by teams. By releasing funds only in a metered flow, they avoid being stuck with a portfolio made up of initiatives that are going nowhere but have already been bankrolled by an annual budget.
Key learnings to take away from being aware of these common mistakes:
- Drive a mindset shift that preferences learning over execution
- Build the discipline of balancing leadership opinions with customer data
- Ensure innovation decision meetings are staffed at the right level of the organization
- Create an innovation strategy that is clear and actionable by innovation teams
- Release funding to teams based on traction not simply for turning up.