The Portfolio Strategy Every Leader Needs
Treating Innovation like financial investment can maximize your organization’s impact
Innovation often gets treated like a game of chance. Companies launch projects, chase ideas, and hope that something will eventually stick. But hope isn’t a strategy, and in today’s fast-paced business world, you can’t afford to leave innovation to chance. If you want to make a real impact, you must manage your innovation efforts with the same rigor you would apply to a financial portfolio.
Why treat innovation like a financial portfolio?
Think about how you manage financial investments. You don’t put all your money into one stock and cross your fingers, right? Instead, you diversify, assess risks, and align your investments with your financial goals. This same disciplined approach should apply to innovation.
Innovation portfolios allow you to strategically allocate resources across different types of projects, each with its own risk profile and potential for reward. By organizing your efforts into portfolios, you can ensure that you’re not just spreading your resources thin but investing them where they’ll deliver the most value.
The four essential innovation portfolios
To get started, consider categorizing your innovation efforts into four key portfolios:
Optimize: These projects focus on enhancing existing products, services, or processes. The goal is to improve what’s already working and make it even better.
Grow: These initiatives aim to expand your market reach or introduce new offerings. The focus here is on growth, whether by entering new markets or developing new products.
Renew: This portfolio is all about reinvention. It’s where you explore new business models, rethink your approach, or disrupt your own industry before someone else does.
Maximize: These projects involve phasing out outdated products or services while capturing as much value as possible. It’s about exiting gracefully and liberating resources for future opportunities.
Managing risk and maximizing impact
In finance, you manage risk by diversifying your investments. In innovation, you manage risk by balancing your portfolios. Some projects will be high-risk but have the potential for high rewards (like those in the Grow and Renew portfolios), while others will be safer bets with steady returns (like those in the Optimize portfolio).
By regularly reviewing your portfolios, you can ensure that your innovation efforts are aligned with your overall business strategy. This approach allows you to make informed decisions about where to allocate resources, ensuring that every dollar you spend on innovation is driving toward a meaningful goal.
Where to start
Ready to bring some order to your innovation efforts? Start by taking inventory of your current projects. Categorize them into the four portfolios: Optimize, Grow, Renew, and Maximize. Once you’ve done that, assess how well these portfolios align with your strategic goals. Are you investing enough in the areas that will drive future growth? Are you still pouring resources into projects that no longer serve your organization’s vision?
This exercise will give you a clear picture of where your innovation efforts stand and where they need to go. It’s a practical first step toward treating innovation like the strategic investment it should be.
Check out our podcast episode, where we dive deeper into this concept.
Remember, innovation isn’t about doing more; it’s about doing the right things. By applying a portfolio management approach, you can ensure that your innovation efforts are not just busy work but are driving real, impactful results for your organization. Start small, think big, and invest wisely.