Innosight, a strategy consultancy firm founded in 2000 by the late Clayton Christensen, has recently released a report Reset Your Innovation Priorities to Reflect The New Reality. In the report, the authors discussed the steps businesses must take to reassess their innovation strategies in the wake of the COVID-19 pandemic.

Three questions to ask to evaluate current innovation initiatives

Regardless of whether the world is going through a pandemic, all leaders should consistently ask themselves the following three questions to evaluate their existing innovation portfolio. The answers to those questions will help companies uncover insights that will create value in the near-term and reveal options for the long term.

1. Is the company doing too much, too little, or the right amount of innovation?
2. Is the company doing the right kind of innovation?
3. Has the company optimized how resources are allocated to innovation?

The questions serve as a starting point for the portfolio review, but the actual strategic evaluation consists of three steps:

1. Aligning leaders on the problem and approach
2. Analyzing the portfolio for insights
3. Reviewing the portfolio to make decisions

Step 1: Aligning leaders on the problem and approach

Innovation portfolios are typically evaluated to make sure the company is on track to meet its growth objectives. Most of their growth will be generated from the existing business. The rest comes from innovation. In the time of rapid change, aligning on the problem and approach becomes more urgent. During these times, companies have additional challenges, such as to stay operationally solvent in the present and create a response plan to rebound quickly once the crisis ends.

Step 2: Analyzing the portfolio for insights

When analyzing their portfolios, companies should establish parameters by which the innovation initiatives will be evaluated. Having the parameters in place will help to make decisions and set clear expectations. While high-visibility, high-priority projects are usually the basis of an innovation portfolio, other criteria for inclusion in the portfolio might include:

• Types of innovation (ex. transformational)
• Significance thresholds (ex. revenue potential)
• Types of expenditure (ex. operating expenses, capital expenditures)
• Business units and geographies

Step 3: Reviewing the portfolio to make decisions

In this step, the leaders consider all the insights they have gained from Step 2 in order to make decisions to strengthen the innovation portfolio. They decide which projects to start to fill the strategic gap, which projects to continue, and which projects to stop to free up resources.

When making these decisions, leaders should be mindful of uncertainty and how the portfolio will fare in the continuous time of change. Very often, deciding which projects to pursue is quite clear as the organization goes through portfolio review. However, occasionally, the leadership team uncovers innovation projects of which they were not aware prior to conducting the review.

Conclusion

Strategic portfolio reviews are an essential tool for organizations to overcome a crisis and to grow effectively during calmer times. Companies that strengthen their commitment to innovation and continue to invest in R&D during downturns outperform their competitors over the long term. As the authors of the report explain, “portfolio reviews are a powerful management tool to incorporate into the ongoing cadence of leadership conversations, as they enable leaders to ask better questions, have higher-quality discussions and make better decisions.”