Lean into change to future-proof your innovation portfolio
On the heels of a year-long global pandemic, 2021 brings an ever-greater need for accelerated change to corporate innovation agendas. From the types of innovation, to the speed and volume of the portfolio, to governance and resourcing for uncertain environments and opportunities, there are many opportunities for advancement of the organization’s agenda and capabilities.
Healthcare is a prime example of an industry undergoing significant disruption, both prior to COVID-19 and accelerating since then. Increasing consumerism in healthcare and “self-care,” enabled by disruptive technologies and retail delivery model changes, paired with unsustainable cost trends that were already in motion, all revealed a need to bring big changes to the healthcare industry. Then, as established healthcare leaders shifted their priorities to combat the virus, startups and emerging technologies challenged the status quo to deliver new, faster solutions. Argenti is a great example of ingenuity at work. The service provides connected devices that monitor elderly and at-risk users, detecting unsafe conditions within the home as well as individual health changes through wearable technology, and providing round-the-clock automated support.
During the COVID-19 pandemic, Argenti provided necessary support while lessening the strain on health systems. Hospitals were able to discharge non-COVID-19 patients sooner thanks to their safer at-home environments. The system also helped combat some of the loneliness felt by isolated populations by keeping them connected to family members—at a distance.
The consumer goods and retail sector are also undergoing considerable change as demand for personalized services continues to rise. Eighty percent of consumers say they’re more likely to make a purchase from brands that offer personalized services. In the food and beverage sector alone, the global personalized nutrition market is expected to grow from $8.2 billion in 2020 to $16.4 billion by 2025. From products designed around each individual’s needs and circumstances to on-demand services, manufacturers and retailers have been working quickly to meet elevated expectations.
Large organizations must maintain pace and agility to keep up with the demands of the market. Smaller competitors may not have the same resources, but they’re more agile at meeting customer and consumer needs. They’ll feast upon market share that larger competitors are used to owning. Scale and incumbency are not the advantages they used to be.
Leaning Into Disruption to Innovate
Organizations are constantly working to develop and balance their new portfolios. Over the course of the pandemic, many businesses retreated to an inherent “Horizon 1” focus, playing it safe by focusing on core objectives. This might keep things steady during regular times of business, but that logic does not hold during an era of global disruption.
While many pull in their horns, leaders are using this opportunity to lean into their innovation agendas. As investment costs come down and new needs emerge and accelerate in acuity, it’s an opportune time to invest rather than retreat.
Portfolio Management Best Practices
Good portfolio management starts with good portfolio creation. During challenging times especially, it’s imperative to do more with less. That doesn’t mean that growth and investment should slow down, however. In times such as these, smart portfolio development is an imperative. Here are a few principles to follow for smart (and effective) portfolio creation:
- Find and evaluate the deep consumer pain first. No customer pain—no opportunity!
- Create and evaluate the whole business model concept or hypothesis—right away! Flesh out the who, what, how, go-to-market, differentiation, economic engine, risks, and risk mitigations, etc. Then you can evaluate the big picture, including gaps to be closed.
- Evaluate the biggest knowledge gaps first. If these things aren’t true, nothing else matters.
- Manage in agile mode. Test, learn, apply, refine or pivot, rinse, and repeat.
Creating individual and portfolio opportunities in this way allows you to understand your knowledge gaps and blind spots, and then fill them in. Want to create a successful innovation system? Learn to create options and a learning organization and system that can manage those options. The key to a high batting average in portfolio development and management is in the way you develop it. Don’t take others’ pipeline and success ratios as a fate accompli.
Asking the Right Questions
When building an innovation portfolio, too many organizations think in terms of “organic” vs. acquisitions. Instead, focus on “What?” What do you want to get done, build, or include? What opportunities should be pursued?
Then you can move to “How?” You can build, buy, or partner. But it is a separate, related (and secondary) question when it comes to building and managing the pipeline.
What is the Volume of Activity and Resourcing?
To determine how much resourcing and activity is right for the investment, conventional wisdom says to consider it (and calculate it) from the future-back. What end-of-pipeline results will need to be realized? Run the math from that future-back view to estimate how much you need to feed into the top of the funnel, and what resources it will take to generate that volume of input.
But this is not how it often works in the real world. Most innovation systems are more resource-constrained than they are opportunity-constrained. So the answer to the question of how much resource is needed in reality is: as much as can practically be applied. This is more of a supply-side answer than a demand-side calculation, because demand is typically outrunning supply in most (if not all) scenarios.
Leading Development and Management of an Innovation Pipeline
Managing an established business may not always translate into solid innovation pipeline management. In fact, often it does not. Creating and managing a portfolio differs from managing an established, scaled business. It can be an acquired capability, but you need to be prepared to develop those capabilities over time. Incumbents that are used to different management habits and attributes should steady themselves for a new and parallel learning path.
Future-Proofing Your Business
To build a resilient innovation portfolio that will withstand the test of time, the key points apply, pandemic or not. Given the pace of change driven by technology and business model disruption, incumbents and large organizations need to lean in on change, rather than away from it.
Allocate resources toward innovation to make the most of market dips. It’s a good time to experiment and “go long” on innovation investment. The more you can do so, the greater your return, as most organizations are supply-constrained (i.e., resource inputs) on innovation rather than demand-constrained (i.e., innovation opportunities to pursue).
Lastly, don’t underestimate the need to develop different leadership skills using proven approaches to effectively drive the innovation agenda. Creating and managing options, learning and pivoting, creative architecting of new business models—these and more are critical skills that may not be inherent in managers who’ve learned to be good stewards of the (already scaled) core business.
How to drive value from your innovation engine. Download our playbook to building an innovation operating model.