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Overcrowded innovation portfolios; too many projects, too little return on investment

Portfolio management is challenging. Just a couple of examples I recently ran into, of well-intended innovation activities that stand no chance of success. Unfortunately, overcrowded pipelines are roads to nowhere, because too many projects make that none can thrive.

Examples of overcrowded innovation pipelines and portfolios

  • In a new business development workshop, one of the participants asked, “how to solve the problem that our R&D unit is working on 160 projects, yet none is useful for my clients? How can we make them work on more relevant and fewer projects so that what they actually deliver results? It looks like our researchers are on their journeys for their enjoyment, not to produce useful outcomes for our firm”.
  • In a workshop for medical students, all students were involved in research. Nowadays, participating in research is a necessary CV building activity. Interestingly, these students had at most 1 hour per week to spend on their research projects and were involved in over 2 projects on average. From a CV perspective, this is probably perfectly fine. However, if you take innovating in health care seriously it is not. It means that these projects take about 100x longer than strictly necessary (if one were to work on it full-time).
  • The last example, an organization’s website proudly announces that its 460 professionals are involved in over 300 research projects. Which makes me wonder if any of these projects are actually going to lead to practical results. Turning research ideas into practical solutions take time and resources.

Fun, yet unproductive

I certainly admire the enthusiasm for research and development in these organizations. At the same time, all three examples above illustrate that too many projects in the pipeline are a waste of money and talent. It turns research and development in busy work, that is intellectually challenging and enjoyable. However, most organizations cannot afford to support unproductive development activities.

It is fun to explore beautiful and interesting pathways. However, the journey needs to deliver sufficient yield to be worthwhile exploring for the organization.

Bringing ideas to practice takes time and money. For that reason alone, an organization can only take that many ideas to practice. Hence, organizations need to make sure that the number of development projects is aligned with the number of activities needed to support the future of the business. No more and no less.

Research, especially basic or fundamental research is to discover new things and does not always lead to practical outcomes. Basic research typically concerns less than 10% of all research and development activities. The other 90% are development activities that have a practical purpose. To be sustainable, firms need to create a return on investment from their portfolio of research and development activities. Society also asks for a return on investment from tax dollars, otherwise, research and development is simply not a sustainable endeavor.

High volume versus complex services

Large organizations that deliver high volume goods, such as pharmaceutical companies, only need one or two blockbusters to sustain their research and development activities. Their successes are so substantial, that they pay for their entire portfolio of activities, including those the projects that don’t deliver (immediate) results.

This model of a few projects paying for all research and development endeavors, unfortunately, does not work in the professional services. These firms deliver too few services, for too few clients.

To make research and new service development sustainable in the context of professional services, these companies cannot afford to engage in numerous research or development projects. They need to be ultra-selective in which projects to carry forward.

Meanwhile, project selection and prioritization is often fraud with difficulties. Development projects entail new complex services and are highly dependent on the innovation champion in the professional services. Even more so than when an innovation project involves products (Blindenbach-Driessen & van den Ende 2006, 2010).

Interested to learn more about how to select and prioritize projects?  Contact us, we gladly help you optimize your innovation portfolio.