Protecting Innovation’s Portfolio While Fielding Business Requests

April 29, 2021

Despite grand plans for disruptive innovation and headline-grabbing announcements, plenty of organizations manage to get in their own way when it comes to innovation. Many believe they have an impressive range of innovation activities, covering the gamut from incremental (H1) to adjacent (H2) to transformative (H3) - but the reality may suggest otherwise. It’s common for R&D and innovation teams to get shoved repeatedly back into the H1 box at the expense of everything else. The company continues paying lip service to its “big-picture” strategic plans, partaking in a bit of Innovation Theater, even though very little high-impact innovation is actually happening.

Left unchecked, blame circulates. Teams and managers seek to pad their stats, looking for loopholes to count projects as “breakthrough.” When the desired results fail to materialize, leadership cancels programs and cuts budgets. Organizational attention shifts to buying startups or playing fast-follower. It’s a self-perpetuating cycle of inadequacy.

Why does this happen? There are persistent patterns at work. Let’s take a closer look at what’s going on - and what can be done to stay ahead of the problem.

Multiplying requests: when conflicting innovation priorities spin out of control

In most companies, innovation and R&D leaders must navigate an implicit tension between top-down strategy and bottom-up priorities. On the one hand, it can be difficult to say “no” when a business unit or product group comes with a request. On the other hand, the innovation team can’t pursue strategic goals if it is overloaded with projects designed to sustain the business.

It may be tempting to pick a lane and stick to it. But the reality is that it’s usually not palatable to abandon either one. Both the incremental and breakthrough ends of the spectrum are important – not just to secure the company’s future, but also for the innovation team’s ongoing success. Being responsive to business needs is an important consideration, even if the innovation team’s primary mission is long-term and strategic. To varying degrees, this is true for nearly every innovation function in any industry, with the specifics depending on the maturity and tenure of the program: new innovation programs will need quick wins to gain trust; more established teams will want to build and maintain working relationships with the business; and ultimately, innovation programs function best when they have a hand in the whole portfolio, from H1 through H3.

With that said, there’s a fine line between being collaborative and always saying yes. Innovation teams working solely in a shared-service model almost always run into problems. Usually, it turns the innovation team into a dumping ground for other business units’ work. And once R&D / innovation has become an on-demand “custom projects” shop, they’ve lost the ability to pursue any coherent agenda of their own. Plus, when the team receives a semi-random influx of tactical project requests, the pipeline is unlikely to align with any consistent skill set or base of expertise. Managing the innovation team’s headcount and workflow becomes untenable.

Trouble on the horizon: why innovation struggles to balance projects

The road to dysfunction is paved with good intentions. In theory, there is a lot of potential upside in operating primarily under a “shared services” model, like improved transparency, refined internal coordination, and resource allocation optimized to business needs. This approach can also help break down silos and streamline information into an enterprise-wide knowledge supply chain. But at the end of the day, business groups are accountable for their own goals, which often have different time horizons and motivations from those of the innovation team. There may be some useful overlap or shared performance metrics, but ultimately every business unit needs to act in their own best interests. And while the root of the problem is straightforward, it’s not always obvious - until it’s unavoidable and can’t be ignored.

There are three sources of breakdown, often operating in tandem with compounding effects:

  1. Uneven power dynamics - When the innovation function does not have the agency or political capital to turn away requests or define the scope of accepted projects, their influence/control over the overall innovation strategy diminishes. Overwhelmed and unable to organize ideas into H1/H2/H3 initiatives, innovation is forced to pursue quick wins and low-hanging fruit, with little to no time to work on long-term, strategic bets.
  2. Inadequate coverage - This occurs when there is insufficient executive oversight of the innovation portfolio. Without help from “above” (many times in the form of a steering committee or representation at the executive level), the rank and file of innovation and R&D are left without a means to rationalize competing priorities across the business.
  3. Disjointed initiatives- Without a well-defined mission, innovation cannot function optimally - or at all. If innovation is unclear on how they define innovation or cannot determine what type(s) of innovation to pursue, they will have trouble setting and meeting goals. It does not matter how brilliant the team is or how amazing the ideas are if their purpose is unclear.

Pressure from one or all of the aforementioned sources can have devastating effects on the innovation team, with a rippling impact on the wider organization’s ability to innovate. New teams are particularly vulnerable, although under the right circumstances these destabilizing forces can hamper even long-tenured programs. Inevitably the function becomes a dumping ground for unwanted projects, complex challenges, and undesirable tasks.

A field guide for escaping portfolio purgatory: how innovation can right the ship with process and discipline

Avoiding these issues is harder than it might seem. Many companies don’t realize they lack a true innovation strategy and thus proceed with false confidence straight over a cliff. In some cases, although senior leadership understands the long-term innovation plans are still a bit fuzzy, they resolve to consider strategic questions iteratively over time. This can suffice for stretches of time, but the wheels come off as soon as executives get distracted by the next crisis or pivot. When innovation is a perpetual “work in progress,” it’s liable to derailment by everything from activist shareholders to a global pandemic.

Ultimately, the solution involves the development of an explicit portfolio strategy for the company’s innovation ambitions. From there, the company can establish clear guidelines that govern how the innovation team is designed to liaise with the rest of the organization. These “rules of the road” should provide a stable structure for an ongoing ability to optimize innovation resources and priorities.

That’s easier said than done. If the stars align and the innovation team is able to set top-down strategy and flex their authority from the start, great. But only occasionally does the idealized scenario materialize. More often, teams have to work their way there one step at a time.

Here are some ideas that may help reinforce strategy, establish structure, and optimize project handoffs:

  • Create an innovation strategy for a business unit as a proof-of-concept, then share it proactively with executive leadership to see if it can gain traction / feedback. Even if they don’t engage, use this strategy to help the innovation team pick-and-choose which requests to accept, and why.
  • Build processes and guidelines for “innovation project proposals” and circulate this with the most frequent internal stakeholders in the business. Develop a culture of pitching for the innovation team’s time, rather than them assuming the answer is always going to be yes.
  • Start tracking projects and activities in a software system with strong data and reporting capabilities. This enables the innovation function to show business stakeholders what the team is already taking on - which in turn makes it easier to demonstrate instances when they are over-burdened, under-resourced, or over-concentrated.
  • Develop a set of leading indicators to project likelihood of innovation impact across the portfolio, then use these models to discuss progress and resource allocation. Working in tandem with more traditional innovation metrics like NPV and Product Vitality, these measurements will act as a common language for assessment and will help demonstrate value early on.

When implementing these ideas, there is no silver bullet. Depending on factors such as reporting structures, team incentives, and leadership attention, various organizations may respond to certain tactics in different ways. Most of all, it’s important to take proactive steps to avoid falling into a hole. In our experience, once the innovation team has become a dumping ground, the situation becomes difficult to escape.



Let's Talk