Choose where to invest in innovation

Having a well-developed sense of current and future market opportunities, combined with a balanced risk portfolio approach, allows leaders to optimise choice in where to invest in innovation. (De Jong et al., 2013) This requires clarity of the innovation themes to be pursued. (De Jong et al., 2013) Understanding innovation themes requires getting the right people to the table to discuss the pipeline of opportunities and application of a combination of market intelligence and scenario analysis. (De Jong et al., 2013) In the context of social innovation the primary concern is for solving social problems. (Lawrence et al., 2014) Social innovation as it relates to social problems are therefore concerned with solutions that minimise the health, social and economic harms to individuals and communities. Understanding the broader innovation and social themes then assists to identify solutions to the larger problems. There are often common innovation themes that give rise to innovation opportunities, but a combination of market intelligence and scenario analyses will reveal uniqueness in these relevant to a company. Common innovation themes can span across industries and sectors, but those that might be common among health and social services could include some of those below.

Common innovation themes and innovation opportunities

Being clear on the innovation themes can be helpful in thinking about innovation projects, the prioritisation of these and decision making with respect to investment through research and development, capability-building and business development initiatives. Below is a useful road-map for thinking through the key innovation themes, laying out examples of innovation projects and then matching these against the type of innovation planned.

Road-mapping key innovation themes

There are likely examples of innovation occurring already within organisations, by finding out what is occurring in and across the innovation pipeline of an organisation these can then be mapped into an innovation portfolio matrix against the anticipated size of the opportunity, associated risk, and the probability of success within a defined time-frame. (De Jong et al., 2013) An example of an innovation-initiative portfolio is shown below. Such an approach can be applied to current innovation projects as well as new innovation projects.

Innovation-initiative portfolio

By creating an innovation portfolio matrix, the leadership team can ensure that the portfolio of innovation projects are better aligned to the business strategy and objectives ensuring that the projects and investment reflects the organisations articulated risk appetite. A portfolio approach may also identify where the most significant growth opportunities are; while assisting to rebalance the portfolio as required. (De Jong et al., 2013) The innovation portfolio should then be resourced appropriately to ensure initiatives achieve targets. A firms current key innovation projects should then be reviewed in terms of their current research and development (R&D) positioning and the results can be categorised in terms of their investment positioning. Shown below is a firms R&D investment positioning that is perfectly balanced.

R&D Investment Positioning

The total budget allocation to R&D activities can then be calculated as a proportion of total retained earnings (profits) for each financial year. Investment in R&D can also be compared to other firms in the industry and better categorised for the size and scale of the organisation. In regard to choosing where to invest, there must be a management routine for discussion/debate of the portfolio and identification of low-value/low-priority innovation projects so that re balancing can be undertaken. (De Jong et al., 2013)

In our next blog we will discuss the process of business, market, and technology discovery and how that relates to innovation…

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References

De Jong, M., Marston, N., & Roth, E. (2013). The eight essentials of innovation. McKinsey Quarterly, Strategy(2), 36–47. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-eight-essentials-of-innovation

Dodgson, M. (2019c). Introduction and overview (Lecture 1). TIMS7811 Innovation Leadership2, Lecture 1, University of Queensland [UQ].

Lawrence, T. B., Dover, G., & Gallagher, B. (2014). Managing Social Innovation. In The Oxford Handbook of Innovation (Issue April, pp. 1–14). https://doi.org/10.1093/oxfordhb/9780199694945.013.032