Managing a Process Innovation Portfolio

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Process improvement efforts have historically aimed at improving the quality, increasing the throughput, reducing the cost, or improving the predictability of a major process. Today though a considerable number of process thought leaders are pushing process improvement theories and practices into new areas – most prominently strategic planning. Processes represent the unique way an enterprise creates value for consumers. It follows that by adjusting an enterprise’s processes, products can be adjusted to deliver enhanced value for a consumer. By leveraging this direct relationship, an enterprise can define its strategic intentions in terms of its plans to adjust processes. This approach forges a solid link between strategic intentions and the eventual outputs.

If we can use process improvement tools to define and execute change across both operational and strategic realms, have we exhausted the application of a process perspective to innovation efforts or are there other ways we can utilize a process approach? Working with clients over the last several years, our team has utilized processes to not only frame change efforts, but to develop and manage an enterprise’s innovation portfolio. Process theories and tools deliver clarity and benefits in this arena as well as the more traditional areas.

In most contemporary enterprises, significant planned improvements (often called projects) across the entire enterprise are lumped together into a portfolio of sorts. Although there are variances to the manner by which this portfolio is managed, there are commonalities across enterprises. Generally, the portfolio is overseen by a leadership team at regular intervals. This same leadership group approves projects for execution, allocates resources to the chosen projects, and monitors ongoing projects to ensure they are staying on task and on budget. From my perspective, this portfolio management approach leaves a lot to chance. For example, individual projects are rarely reevaluated to determine if the value they are forecasted to deliver has eroded or increased. Should the project be expedited? Should it be curtailed? Likewise, the prioritization of the projects is often more of a first come, first served approach than a deliberate decision as to how best to allocate scarce organizational resources at any point in time. Enterprises rarely can focus and execute more than a handful of major projects. Why not focus resources on the projects with the greatest potential. The question is how to do this.

An Enterprise Innovation Portfolio

In contrast to the traditional model described above, I am an advocate of a more comprehensive approach to managing an enterprise’s innovation portfolio. To explain further, consider your retirement portfolio. Most financial planners aim to invest your funds in assets when they are at a low price, and then sell them after they have appreciated. Can we apply this same theory (with some tweaks) to an enterprise innovation portfolio? Here’s how it works.

As opportunities come to light, they are evaluated to understand their expected benefit, the costs of implementation, and the resources needed to bring the project to fruition. The project is then ranked against other projects in the portfolio based upon predetermined prioritization factors. The prioritization factors are selected by the leadership team based upon enterprise priorities. Different factors may take precedence depending on the enterprise’s competitive and financial situation. For example, a company with a cash shortage may focus on initiatives with low investment requirements. Generally, however, the primary factor should be value creation. Often measured by net present value, using value creation as the primary prioritization factor ensures the enterprise is maximizing the value of its innovation portfolio. After all, enterprises operate to deliver value to a group of stakeholders.

Once projects are prioritized, additional considerations should be incorporated into the process so that it is not based solely on theory, but also embedded in reality. These considerations include the coordination of dependencies between initiatives, identifying ways to take advantage of collaboration opportunities, and ensuring scarce resources are readily available for the prioritized initiatives. Once these considerations are factored into the portfolio, it becomes a viable and realistic plan.

But with the passage of time, many of the assumptions upon which the values of the initiatives are predicated change. To ensure the portfolio remains optimized to the enterprise’s priorities, a periodic review of each initiative is necessary. This is not to suggest that project teams should stop one initiative and jump to another with each review cycle. An initiative should be shuttered only in extreme circumstances when its value has plummeted due to extenuating circumstances. But the intent is to focus resources and energies on those initiatives predicated to deliver the greatest bang for the buck. At the end of the day, an initiative’s outcomes must justify why it is being executed. If there are vastly superior investment options, it may be time to switch the focus.

Introducing Process Clarity into the Management of an Innovation Portfolio

Similar to their common usage in operational efficiency or strategic endeavors, processes provide a level of clarity and specificity in the management of an innovation portfolio. In my experience, process thinking benefits innovation management in several ways.

  • Defining and Managing Planning Processes – Although the primary value chain of an enterprise receives the lion’s share of the attention, documenting and actively managing the processes that take an opportunity from ideation through to implementation is an extremely beneficial activity. Many innovation teams reinvent the wheel with each successive planning cycle. Why not identify an owner for these support processes who can actively manage the execution and continual improvement of these processes. In this way, the lessons learned from prior iterations can be used to deliver a better, more effective process in the future.
  • Scoping Initiatives – Significant improvement efforts usually span one or more departments/areas of an enterprise. In order to identify the scope of an endeavor accurately, I have found it useful to identify the processes impacted by an initiative and the manner in which the process is impacted. For example, a new product requires the launch of a supporting marketing plan. To define this effort, the marketing processes could be identified along with the corresponding impact. It might look something like this…
  1. Marketing Strategy – Analyze the market for the new product and  determine the appropriate population to target as customers
  2. Packaging – Develop packaging for Product X that speaks to the benefits  the target audience are interested in
  3. Pricing – Conduct a market assessment to understand a good price for  the new product 
  4. Promotion – Develop and launch marketing events/items to generate awareness o f the product to the target audience


Once the component parts of an initiative are defined as in the example above, it becomes significantly easier to identify the costs to deliver the initiative (process  by process) and the key individuals (process owners) who need to be engaged  in bringing the project to fruition. This clarity jumpstarts the collective  understanding of the organization about the project.

  • Identifying Innovation Overlaps – Every enterprise is limited in its ability to introduce and absorb change. All too often, a specific area in an enterprise becomes saturated as it is the focus of a large number of improvement efforts. The change becomes excessive and few if any of the changes are fully adopted. Through the identification of processes impacted by the innovation portfolio’s individual initiatives, it becomes immediately visible when a process or area is overburdened by change efforts. It is then the responsibility of the leadership team to alleviate the workload or to find additional resources to support the change efforts.

To conclude, many enterprises suffer from poorly developed innovation approaches. By using processes as the foundational construct to define the enterprise’s innovation process, an enterprise eliminates or at least reduces the confusion and ambiguity around the plan to meet new challenges and capture new opportunities. Beyond simply managing the planning process, innovation efforts can be defined based upon their impact on the underlying processes and the planned outcomes. In doing so, innovation teams introduce clarity and detail into these efforts. By capitalizing on the potential of a process based approach, enterprises elevate their ability to innovate, connect more deeply to their customer base and do so with an efficiency exceeding the competition.

Comments

Grace Duffy
,
posted 1 year 33 weeks ago

Well said. I particularly

Well said. I particularly want to reinforce the comments about strategic oversight of the interaction of processes and projects based on priorities on a cyclical basis. Innovation is all about the interfaces. How does one process impact another? When one customer market opportunity arises, what impact will that opportunity have on the resources available to the portfolio as a whole? The thought process described in this discussion recognizes the dynamics of the modern economic landscape. Agility in resource balancing and flexibility, within the limits of the country financial and legal system, is critical, yet challenging, to match the pace of economic change at the global level.

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