We are pleased to welcome Eugene Yamnitsky, Senior Product Manager at Citrix Systems as a guest blogger. He highlights take-aways from a SmartOrg-led session at Frost & Sullivan’s 10th Anniversary New Product Innovation & Development 2016 Executive Mind Exchange.
Getting Innovation Strategy Right!
Eugene Yamnitsky, Citrix Inc.
What does it mean to “get innovation strategy right?” This question has troubled me for quite some time. The answer became clear during my participation in a SmartOrg Portfolio Management workshop at a recent Frost & Sullivan Executive MindXchange event. Innovation strategy needs to be “baked in” to corporate objectives.
When executive commitment is there and the culture and climate are favorable for innovation, here are thoughts about what it takes to get the strategy right.
Assess your product portfolio
First, you need to assess the structure of your current product portfolio and identify areas that need attention. Three tools help you assess portfolio health: the “Portfolio Innovation Screen,” “Project Upside Assessment,” and the “McKinsey’s 3 Horizons” model. At the workshop we participated in a “post-it note” exercise to get the feel for how these works. (SmartOrg portfolio management software supports these tools.)
Portfolio Innovation Screen
This four-quadrant diagram provides a snapshot of the risk vs. return of each project in the portfolio. The projects are plotted based on their probability of development success and, if successful, their expected economic value.
- Bread & Butter: low-risk projects and low value
- White Elephants: high-risk projects and low value
- Pearls: low-risk projects and high value
- Oysters: high-risk project and high value
A Portfolio Innovation Screen may reveal a lack of “oysters” and an abundance of “white elephants.” This should help make decisions about better resource allocation, which could free up resources for investment in better innovation initiatives (i.e. to create more “oysters”).
Project Upside Assessment
This diagram looks at the variance in the projected outcome at maturity “the swing” (Y axis) vs. the median probability return (X axis). After mapping the projects, draw a straight line from (0,0) at 25° angle. Projects falling below the line characterized by low swing and require a more traditional project management approach, while the ones above the line call for a different management style – suited for innovation projects.
Three Horizons model
Horizons model helps identify which projects are focused on improving the core offerings (Horizon 1), new adjacent offerings focus on existing markets (Horizon 2), and disruptive, market defining products (Horizon 3).
First step is to classify your projects according to the 3 horizons. Then, map these projects on the two axes: Revenue projections (Y-axis) and Time to maturity (X-Axis). At this point your projects should be mapped relative to each other and across the horizons.
Looking at the three horizons model, you may identify lack of ideas or projects cultivated for disruptive innovation. Similar to the abovementioned Project Upside Assessment, you will need to realize that projects in Horizon 3 call for a different management style than projects in Horizon 1. Horizon 3 projects will typically call for the Lean Startup framework, where a lot of exploration and experimentation takes place, while Horizon 1 projects will call for an execution oriented approach.
Define the innovation strategy
The next step is to figure out what type of innovation and what resources are needed to optimize the portfolio.
If your company doesn’t have innovation resource allocation balance defined, that should be done first. For example, many companies follow the 70-20-10 rule, where 70% of the innovation time and effort goes to the core business and offerings (Horizon 1), 20% goes to Horizon 2 and 10% to Horizon 3.
What does your product portfolio analysis reveal? Are you heavy on incremental innovation (Horizon 1) or do you have too many blue-sky projects (Horizon 3)? Identify these gaps, and make addressing these gaps be part of your innovation strategy.
Bake the strategy into objectives
This is a critical step. Now that the portfolio has been described, and the gaps identified, the executive leadership needs to address these gaps by allocating the appropriate resources. Only when this is done, will there be a clear balance between innovation and execution.
How to bake innovation into organization’s objectives highly depends on the process for annual and quarterly objective-setting within your organization. Armed with executive buy in and the strategy, it’s time to translate the strategy to concrete initiatives for new idea generation, incubation and acceleration.