Over the past several weeks I have been writing about innovation measures and metrics. Some of these have been output measures, either real results or proxies for business results, others have been predictive or process health measures. Each has a place on an executive dashboard designed to provide a view of innovation engine performance.
Today, I am writing about an entire category of measures that should be monitored regularly to determine if the innovation portfolio is healthy and aligned with the businesses strategy. These portfolio mix and balance measures can take many forms and the specific ways a company decides to evaluate its portfolio depends a lot on their environment, industry and growth goals.
Classic analyses include the following:
· Investment by innovation type or strategic bucket – this is used to evaluate whether there is enough big, breakthrough stuff in the pipeline to meet growth goals.
· Risk vs. Reward – used to ensure the appropriate allocation of investment in projects based on their risk profile (and to identify high risk – low reward projects for additional scrutiny.)
· Investment by product line or geography – used to ensure that parts of the business with high growth potential are receiving the proper allocation of investment in innovation.
· Horizons of growth – this analysis looks at investment in the portfolio based on the expected timing of returns to ensure that we maintain a balance over longer time horizons.
There are many, many other mix and balance tests that are relevant in different industries and environments. There should be a couple of different ones in your innovation measurement system. The proper allocation of investment is one of the most strategic levers available to the Chief Innovation Officer. These measures will keep the questions front and center for the executive team.