Blog post

Mastering the Art of Managing Your Innovation Portfolio

Innovation is a complex term that can be tricky to define.

Defining innovation can be challenging as it varies across organizations, encompassing different understandings and perspectives. However, its significance cannot be overstated. In late 2022, the market witnessed the advent of a game-changing innovation that garnered significant media attention. ChatGPT rapidly transformed organizational operations, sealing the fate of certain products and professions to be obsolete in the near future. This serves as an illustration of the need to prioritize innovation to help them maintain a competitive edge.

But as we said so boldly, innovation is hard to define. Innovation managers often find themselves tirelessly advocating for investment in innovation to senior executives with little success. So why do organizational leaders struggle to embrace the concept? The answer is both simple and multifaceted: Innovation initiatives frequently encounter failures. In the innovation realm, failure is not necessarily negative but rather an integral part of the job, even though it carries certain implications. Predictively convincing managers that failure is good is not an easy task. 

In response to these upheavals in the innovation process, senior leaders often resort to changing strategies. The pursuit of new innovations can sometimes feel disorganized and sporadic, resulting in meagre returns on innovation investments.

So, how do innovation managers develop robust innovation strategies that can withstand the fluctuating tides of the innovation landscape? 

The solution lies in creating not just any innovation portfolios, but portfolios that are both robust and well-structured. While many organizations are actively managing innovation portfolios, they often grapple with the challenge of effectively overseeing and optimizing them.

Diversify your innovation portfolio 

Diversifying your portfolio is a turn of phrase most often used to underpin the importance of ensuring that you engage in a risk management strategy to help you mitigate any potential losses, while maximizing gain in your investments. This principle holds true not only for financial investments but also for innovation managers seeking to optimize the return on their innovation initiatives.

Most well-seasoned innovation managers understand that to gain maximum yield from their innovation investments they need to diversify their innovation portfolios. This involves ensuring that their innovation strategy contains a healthy mix of projects -  from projects focused on incremental improvements to existing products or services to more radical innovations that involve new technologies, business models, or markets. Striking a strategic balance between short-term and long-term projects within the portfolio ensures both immediate impact and sustained growth.

But, what of resource allocation? If maximizing gains is the name of the game, how can innovation managers ensure they are allocating resources effectively when they are busy juggling so many diverse projects?

Defining Innovation 

Bansi Nagji and Geoff Tuff, highly regarded business strategy consultants, provide a framework for understanding innovation portfolio management under the three distinct categories of innovation: 

  • Core innovations: Innovations that involve making incremental changes to existing products and allow for gradual entry into new markets. Core innovations build upon an organization's existing foundations and capabilities helping to ensure that a business is progressing at a steady incremental pace. 
  • Adjacent innovations: These innovations leverage an organization's existing capabilities, but allow companies to enter new spaces. They require acquiring new understandings of market dynamics while leveraging existing strengths.
  • Transformational innovations: Transformational innovations encompass the creation of entirely novel products or ventures targeting previously unexplored markets. They necessitate the acquisition of unfamiliar assets and capabilities to venture into uncharted territories.

The Innovation Portfolio Matrix Golden Ratio

Under these 3 innovation categories, the consultants propose an Innovation Ambition Matrix Golden Ratio for resource allocation: 

  • 70% to core innovation initiatives.
  • 20% to adjacent innovation initiatives.
  • 10% to transformational innovation initiatives.

Analysis indicates a substantial correlation between these resource allocations and significantly improved share price performance. 

Among high performers who invest in all three levels of innovation, they discovered that the distribution of total returns is as follows: 

  • 10% from core innovation
  • 20% from adjacent innovation
  • 70% from transformational innovation. 

Interestingly, the observed ratio happens to be the inverse of the resource allocation ratio found in highly successful companies. Transformational innovation, undoubtedly a game changer for many organizations, is not surprisingly capable of generating substantial returns.

Managing your innovation portfolio

Once you have grasped the resource allocation for different types of innovation in your portfolio, it is crucial to shift your focus towards effective portfolio management. The following strategies are key to achieving this:

Manage all your innovation in one place:

Streamlining innovation management involves consolidating all initiatives in one centralized location. By bringing together all innovation projects and ideas in a single place, organizations can achieve greater efficiency and effectiveness in managing their innovation portfolios.

Consolidation offers numerous advantages, it provides a holistic view of the organization's innovation landscape. Instead of scattered information and disjointed processes, having a centralized repository allows for a comprehensive understanding of ongoing and potential initiatives. This visibility enables better coordination, alignment, and decision-making across different projects.

Build your innovation workflow 

Establishing a well-defined innovation workflow is vital for effectively managing the influx of ideas within an organization. When there is a clear and structured process in place, it becomes easier to handle and nurture a pipeline of projects, ensuring that the most promising ideas and projects are identified, developed, and implemented.

A customized innovation workflow tailored to the organization's specific requirements offers several benefits. It brings clarity and consistency to the innovation process. By clearly defining the stages, steps, and decision points involved in moving ideas through the pipeline, ideas and projects progress seamlessly through the innovation journey.

Facilitate stakeholder involvement

Extend invitations to both internal and external stakeholders, including suppliers, partners, customers, or the public, allowing them to contribute to and participate in your innovation portfolios. This collaborative approach fosters a diverse range of perspectives and contributions, fueling the innovation process and maximizing its potential for success.

Involving internal staff can help organizations tap into a wealth of knowledge and unleash the creative potential of their workforce. While involving external stakeholders can help organizations gain access to a wealth of market intelligence and customer feedback, which can drive the development of customer-centric solutions and increase the chances of successful innovation outcomes.

Effectively measure success

Organizations can help empower their programs by allocating and monitoring key performance indicators (KPIs) or budgets for each innovation or project in their portfolio. This systematic approach enables you to stay informed about the progress of your innovation initiatives and proactively identify areas that require attention or improvement. By tracking relevant KPIs, innovation managers can measure the success of their projects, make data-driven decisions, and continuously optimize their innovation portfolio for maximum impact. 


Without a doubt, innovation is imperative for today's organizations. The role of an innovation manager is inherently complex as they are responsible for effectively managing a series of innovation projects to ensure the organization maximizes its return on investment.

To do this, innovation managers need to build robust and resilient innovation portfolios. This process begins with understanding the appropriate allocation of resources for different types of innovation and ensuring that these resources are effectively managed throughout the project lifecycle.

By embracing the critical strategies outlined above and adapting to the ever-changing innovation landscape, organizations can position themselves at the forefront of innovation, drive growth, and stay ahead of the competition.

Enhance your innovation portfolio management by downloading our Innovation Portfolio worksheet. This valuable resource will guide you in effectively planning and optimizing your innovation portfolio, ensuring alignment with your strategic goals.

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