A lot has happened in Open Innovation since Henry Chesbrough coined the term in his 2003 book. The term appears to be well understood, many companies have implemented it and a lot has been published. And yet…….
This is the second of two articles, co-written with Ralph-Christian Ohr from Integrative Innovation.
In our previous post, we discussed how Strategic Portfolio Management (SPM) ensures that the content of the portfolio is driven by innovation strategy and associated targets. We would now like to move on to Operational Portfolio Management (OPM), where the portfolio directs resource allocation, metrics and reporting on an operational and tactical level.
This is a two-part article, co-written by Innovation Fixer’s Kevin McFarthing and Ralph-Christian Ohr from Integrative Innovation.
Facing increasingly dynamic and unpredictable environments, firms are required to develop convenient innovation strategies, constantly adapt them to changing conditions and properly implement strategically-aligned initiatives throughout their organizations. Innovation portfolio management (IPM) can act as the pivotal tool to translate strategic objectives and priorities into project-based innovation activities. Furthermore, it provides a framework to convert raw ideas into real investment opportunities, based on their risk profile.
As I’ve written before, the portfolio is the pivotal tool for innovation. It provides the link to corporate strategy; ensures the desired balance across different innovation horizons; enables and communicates priorities; and with the appropriate communication it reports progress towards innovation goals. It is this final point that I would now like to explore.
A question often asked when considering the fit of innovation within corporate strategy is whether you want to be a leader or a follower. Some examples are fairly clear. Most research-driven pharmaceutical companies want to launch the first medicine in its class and to maintain leadership with ongoing clinical support. At the other end of the spectrum it would be highly unusual for a retailer to introduce the first entrant to a new category as a private label.
Tate & Lyle is a large B2B company focused on speciality food ingredients. They have placed a large emphasis on innovation as a key source of future growth, with a pivotal role for open innovation (OI) and complementary roles for OI partnerships and venture capital initiatives. I had the chance recently to interview Dr John Stewart, Director of Open Innovation, to learn more about their integrated program.
Tell me more about Tate & Lyle
Many words and expressions are clearly relative, such as “larger” or “smaller”. These are easy adjectives as they often invite the word “than” after them. Other words are more subtly relative, like innovation; not grammatically but inherently.
A journey of a thousand miles starts with a single step, as the saying goes. The same is true for innovation. Yet much of the writing on innovation is about leaps, major technological breakthroughs that transform or disrupt markets. Isn’t it all about Apple and Edison? I would argue it isn’t. The bulk of progress and associated hard work on innovation is focused on incremental innovation, the small steps that over time take products and services to new levels. No Nobel prizes, but it’s not all about the glory.
In a previous corporate life, I was on the board of trustees of a very large pension fund. Our role was to ensure income in retirement for thousands of current and former company employees. The key lesson I learned was that the most important decision we had to make was on the mix of investments in the portfolio. The return had to link to the objectives and requirements of the fund, now and in the future. Portfolio management was the pivotal tool for success.