7.8 Innovation Portfolio Management
Balance near-term and breakthrough investments across three horizons. Launch on platform.
What is it?
Dragonfly's Innovation Portfolio Management Lens applies systematic portfolio theory to innovation investments, balancing resources across three time horizons to optimise both short-term performance and long-term growth. Using the Three Horizons framework, it prevents over-investment in incremental improvements while ensuring breakthrough innovations create future competitive advantage.
Why is it useful?
Balance innovation investments systematically across three time horizons to optimise both immediate returns and future growth potential
Prevent short-term pressure from crowding out transformational innovation that creates long-term competitive advantage
Apply portfolio diversification principles to innovation risk management, reducing overall uncertainty while maintaining breakthrough potential
Optimise innovation pipeline flow from ideation through commercialisation across different risk and time profiles
Design governance frameworks that enable systematic innovation resource allocation and performance measurement
Align innovation portfolio strategy with overall business strategy to ensure investments support competitive positioning and growth objectives
How does it work?
The Innovation Portfolio Management Lens applies systematic portfolio optimisation to balance innovation investments across time horizons, risk levels, and strategic priorities for sustainable competitive advantage.
Three Horizons Analysis and Resource Allocation Optimisation
Focus: Analyse current innovation investments across Horizon 1 (core enhancement), Horizon 2 (emerging opportunities), and Horizon 3 (transformational) categories
Example: Discovering that technology company allocates 95% to Horizon 1 incremental improvements with only 3% for breakthrough innovation, then designing balanced 70-20-10 allocation that maintains current performance while building future competitive positions
Innovation Pipeline Health Assessment and Flow Optimisation
Focus: Map innovation pipeline from ideation through commercialisation, identifying bottlenecks and conversion rate improvement opportunities
Example: Revealing that pharmaceutical company has strong early-stage research but weak development capabilities, creating 3-year delays and 40% project abandonment rates, then designing development capacity expansion and stage-gate optimisation processes
Strategic Alignment Analysis and Portfolio Coherence Design
Focus: Ensure innovation investments support overall business strategy and competitive positioning rather than pursuing disconnected projects
Example: Aligning manufacturing company's innovation portfolio with sustainability strategy by redirecting 30% of Horizon 2 investments from efficiency projects to circular economy innovations that create new revenue streams
Risk-Return Analysis and Portfolio Diversification Strategy
Focus: Apply portfolio theory principles to optimise innovation risk across different uncertainty levels and return timeframes
Example: Creating innovation portfolio for financial services firm that balances low-risk digital process improvements (60%), medium-risk fintech partnerships (25%), and high-risk blockchain applications (15%) to achieve steady returns while maintaining disruptive potential
Innovation Governance System Design and Decision-Making Framework
Focus: Create systematic governance mechanisms for innovation investment decisions, performance tracking, and resource reallocation
Example: Designing quarterly innovation review process with stage-gate criteria, portfolio rebalancing triggers, and clear escalation paths for strategic decisions, reducing innovation cycle time by 25% while improving success rates
Performance Measurement and Continuous Portfolio Optimisation
Focus: Establish metrics and feedback mechanisms that enable ongoing innovation portfolio refinement and learning
Example: Implementing innovation scorecard that tracks leading indicators (pipeline health, resource utilisation) and lagging indicators (ROI, market impact) across three horizons, enabling data-driven portfolio adjustments and improved decision-making
Turning Innovation Portfolio Management into Action
Implement systematic innovation portfolio balancing rather than ad hoc project selection based on immediate opportunities or executive preferences
Create governance mechanisms that protect long-term innovation investments from short-term performance pressures while maintaining accountability for results
Design performance measurement systems that optimise innovation portfolio returns across different time horizons and risk profiles rather than focusing solely on immediate commercial success
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