Challenges and Execution of Innovation Portfolio Management

Abstract

Due to the globalization of markets high-tech companies are nowadays faced with an environment, which is characterized by an increasing dynamism, unpredictability as well as complexity of technologies. To stay competitive, companies are forced 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 innovation portfolio management (IPM) can support as an appropriate tool to implement any strategy shift into all innovation-project activities throughout the organization in a coordinated manner. Main difficulties arising in this 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 a general approach of how to manage innovation portfolios (Distinction between Strategic Portfolio Management and Operational Portfolio Management). Hereby also a macro view on how to tackle the mentioned main challenges of investment risk, portfolio prioritization and resource allocation will be given along with a proposal and short description of suitable tools. The article is concluded with a short future outlook and future research possibilities.