Challenges and Execution of Innovation Portfolio Management

Abstract

Innovation Portfolio Management (IPM) can be described as a system to manage an array of projects that deliver innovation/innovative products to the market. Due to the globalization of markets, high-tech companies are nowadays faced with a business environment which is characterized by an increasing dynamism, unpredictability as well as complexity of technologies. In order to stay competitive it is crucial to develop a suitable and flexible innovation strategy by means of possessing a broad setup of innovation-projects (innovation portfolio) and permanently adjusting this portfolio to the changing environment. Hereby IPM can deliver support as an appropriate tool to implement strategy shifts into all innovation-project activities throughout the organization in a coordinated manner. Main difficulties arising in the IPM process are related to the risk profile of basic innovation ideas, the continued innovation portfolio prioritization as well as to the dynamic resource allocation.

This article focuses on describing the general structure of an IPM system integrated as a connecting element between qualitative strategy definition and the project-based implementation. The IPM is seperated into a strategic and operational element (Strategic and Operational Portfolio Management). Hereby there are also given tools enabling to tackle the mentioned main challenges of investment risk (staging investment), portfolio prioritization (BCG matrix / McKinsey Matrix / R&D Project Portfolio Matrix) and resource allocation (RCCP and RCPSP scheduling / RCMPSP scheduling / Agile / Critical Chain). The article is concluded with a short future outlook and open research questions.