Priorities, priorities. It’s a simple concept, focus on the most important things and put those first. Yet so many of us humans get lost in the weeds of to-dos and forget about working big to small. What are the things that will move the needle most? Now focus on those.
But in the chaos of work and life, we tend to get sidetracked, chase shiny objects, and in the end, get lost in the woods unable to see the forest through the trees. Innovation management is complicated, so you have to have prioritization processes in place in order to not let those complications consume you.
A gaps-first prioritization model can set you up for success and keep the focus on big ticket game changers that will transform tomorrow. This blog will help you bridge those prioritization gaps and fuel growth innovation.
If you want a growth innovation strategy that delivers for your organization, you’ll need a framework for prioritizing the projects in your portfolio. Without a prioritization plan, resources get misallocated, the pipeline falls prey to the tyranny of urgency, and the entire portfolio falls short of revenue targets. But with a vigorous prioritization model in place, you ensure that the right projects rise to the top, and their success helps ensure positive outcomes for the next projects in line.
At Wellspring, we recommend a gaps-first approach to prioritizing innovation initiatives. This approach leverages innovation to build a bridge between the organization's current state and its ideal state. By focusing on these gaps, innovation efforts can be prioritized based on a project’s ability to fill those spaces.
The case for gaps-first prioritization
Innovation’s fundamental purpose isn’t just to develop products to sell. It exists to help move an organization toward a projected future state. And it isn’t an easy journey down a single, unbroken path. It’s a travail across a landscape marked by “gaps.” These metaphorical gaps represent chasms between where the enterprise is and where it aims to be. And the best innovation managers will recognize these gaps and prioritize their portfolio to address them.
Managing these gaps requires insight because they are rarely static and uniform. Enterprise growth is the result of various revenue streams, and each stream has a current state and a corresponding target state. Attention to these segments allows managers to be more strategic in their innovation targets.
Prioritizing by gaps isn’t without its challenges. Each gap has a unique set of constraints, which include things like:
- Budgetary restrictions
- Technology limitations
- Regulatory hurdles
- Competitive pressure
- Organizational culture
These constraints influence the feasibility of bridging various gaps.
The gaps-first approach begins by identifying and evaluating revenue gaps. They’re then ordered based on potential impact, likelihood of closing the gap, alignment with growth objectives, unique constraints, and risk/reward tradeoffs.
Once these gaps have been prioritized, the focus shifts to the innovation initiatives. The goal is to choose and prioritize initiatives based on their potential to close those prioritized gaps. The gaps dictate the direction and focus of your innovation efforts. This ensures that time, energy, and resources are intentionally directed toward projects with the most significant potential to move the organization toward its ideal state.
But everything about the gaps-first approach is contingent upon accurately identifying and prioritizing these gaps.
Four steps for conducting gaps-first prioritization
Innovation projects are prioritized for a number of reasons. They can find their way into the pipeline as the result of a race to market with a competitor, a passion project for someone in the enterprise, the reprioritization of a project that’s been idle too long, or hundreds of other rationales. For innovation to serve the organization best, preference should be given to projects with the best chance of moving the ball down the field.
So where do you start? What are the first steps to ensure that your innovation portfolio is prioritized to close those gaps? The following steps will help you get your imperatives in line.
1. Identify the revenue gaps
The first order of business is to clarify the enterprise’s financial targets and current trajectory. This begins by identifying the organization’s revenue ambitions for a minimum of three years. Innovation timelines can be long, and to intentionally use projects to close revenue gaps will require visibility into a horizon of at least three years—preferably five.
Your targets should be measurable and realistic. You’ll want to consider market trends and the competitive landscape. You’ll also need to keep in mind any strategic constraints, such as market segments, risk/reward bias, brand positioning, or anything else that may impact those gaps.
With a better understanding of your organization’s targets and constraints, you can define the scope of known and planned revenue streams. This requires an inventory of all the current revenue-generating activities and planned initiatives. You don’t just want a list of these projects; you’ll also need an understanding of their scope. What customer segments are targeted? What are the planned pricing models? What is the anticipated growth trajectory?
Once you have clarity around the enterprise’s objectives and the current and planned income streams, you can zero in on the heart of the gaps-first approach. By comparing these two areas, you can determine the gaps between current revenue streams and the enterprise’s revenue targets.
2. Build business cases for closing each gap
Building a plan to address each gap requires a deeper examination of existing and potential revenue streams and the initiatives that might fill those gaps. This starts with a SWOT analysis of planned and existing revenue streams. Identifying the strengths, weaknesses, opportunities, and threats associated with them will help inform you about the current state and potential of upcoming revenue streams. This information is critical to forming an airtight business case.
You’ll also need to determine the trajectory of your revenue streams. Are they growing, shrinking, or holding steady? This requires some analysis of historical data and market trends.
The revenue gaps you identified are not all equal, requiring that you calculate the value of each gap and the investments necessary to close it. This means identifying the potential gains and opportunity costs associated with them. You’re not only considering the value of closing each gap, but the potential impact of prioritizing one option over another. Then you’ll need to estimate the costs associated with closing each gap.
3. Prioritize the gaps based on value
The first step was to identify your revenue gaps and strategic constraints. In the second step, you built a business case for each revenue gap. Now you’ll assemble your gap cases to form a plan to satisfy overall revenue targets and strategic constraints.
You’re not going to close every revenue gap, so that’s why it was important to clarify the value of closing each one. This allows you to allocate resources toward closing the largest gaps. Gap-based prioritization is about concentrating your efforts where they will have the most significant impact on overall enterprise objectives.
Once you’ve ranked the gaps you intend to focus on, it’s time to go back and adjust the planned revenue sources based on your new priorities.
4. Create growth innovation portfolios
The last order of business is to commission the projects you’ve selected for closing these gaps. These projects can be organized into three specific types of innovation portfolios.
- Research portfolios (Front-End Innovation):
Some of your prioritized new projects will be obvious, but there will also be some unknowns. This research portfolio will deal with the uncertainties by conducting feasibility studies and examining emerging opportunities and technologies. If you need proof-of-concept development, experimentation, or market research in order for an initiative to get to the development stage, this is where it will start.
- New product development portfolio:
This portfolio exists to facilitate the creation of new products or services necessary to bridge the gaps you’ve identified. This portfolio covers everything in the development phase from concept development to product testing.
- Production/manufacturing innovation portfolio:
You might have the perfect concept to bridge a huge revenue gap, but the enterprise doesn’t have the means to produce it. This portfolio exists to facilitate development through things like enhanced production or new manufacturing processes, so you can deliver in your NPD portfolio.
Align innovation with enterprise growth objectives
A growth innovation strategy hinges on finding a foolproof plan for prioritizing projects. Without it, time and energy can get wasted on projects that don’t provide the bottom-line impact your organization relies on. Gap-focused prioritization ensures that projects in the pipeline are going to help the business hit its targets.
This is all part of a growth innovation strategy, a management philosophy that prioritizes growth as innovation’s most critical outcome. If you’re interested in learning more about how to do this, check out “How to Craft a Growth Innovation Strategy.”
And for a tool that will help you manage innovation at scale, check out Accolade. It will give managers the data visibility necessary to monitor each project against its target, and ensure that your entire portfolio is filling the gaps you’ve prioritized. Get a demo today!