Innovation Tools for Managing Risk and Rewards in an Innovation Portfolio
by George S. Day
Minor innovations typically make up most of a company’s development portfolio. Instead, to close the gap between revenue forecasts and growth goals, companies should undertake a systematic, disciplined review of their innovation portfolios and increase the proportion of major innovations while carefully managing the risk. On average, minor innovations make up 85% to 90% of companies’ development portfolios, but they rarely generate the growth companies seek. The result is internal traffic jams of safe, incremental innovations that delay all projects, stress organizations, and fail to achieve revenue goals. The solution is to pursue a disciplined, systematic process that will distribute your innovations more evenly across the spectrum of risk. Two innovation tools, used in tandem, can help companies do this: the risk matrix and the R-W-W (“real, win, worth it”) screen.