Managing Your Innovation Portfolio
Management knows it and so does Wall Street: The year-to-year viability of a company depends on its ability to innovate. Given today’s market expectations, global competitive pressures, and the extent and pace of structural change, this is truer than ever. But chief executives struggle to make the case to the Street that their managerial actions can be relied on to yield a stream of successful new offerings. Many admit to being unsure and frustrated. Typically they are aware of a tremendous amount of innovation going on inside their enterprises but don’t feel they have a grasp on all the dispersed initiatives. The pursuit of the new feels haphazard and episodic, and they suspect that the returns on the company’s total innovation investment are too low.
Making matters worse, executives tend to respond with dramatic interventions and vacillating strategies. Take the example of a consumer goods company we know. Attuned to the need to keep its brands fresh in retailers’ and consumers’ minds, it introduced frequent improvements and variations on its core offerings. Most of those earned their keep with respectable uptake by the market and decent margins. Over time, however, it became clear that all this product proliferation, while splitting the revenue pie into ever-smaller slices, wasn’t actually growing the pie. Eager to achieve a much higher return, management lurched toward a new strategy aimed at breakthrough product development—at transformational rather than incremental innovations.