Could you please expand on the importance of understanding the product development process and focusing on the right deliverables at every stage?

Developing an innovative product requires having a good idea about how to get effectively and efficiently from the idea at the front end to break-even after a maximum number of years in the market. If we focus here on the early phases of this innovation process, we need to make sure that we, for one, differentiate clearly how long we must focus mainly on effectiveness initially before we start adding efficiency requirements on top. At the beginning we need to make sure that the idea outlines a concept and targets a potential that is well enough aligned with business strategy, the actual capabilities of the organization and its relevant processes, the business model and the company’s cultural set-up. As we progress and move into prototyping and then scaling, we need to look carefully not only at the why and what but also at how we plan to bring a well-defined solution to the market, which helps us differentiate for a relevant number of customers.  In this phase we need to ask the project teams for continued effectiveness but also for increasing attention to efficiency. The latter includes a promising ROI with a limited amount of uncertainty and a sufficiently understood set of implementation risks. Quantified efficiency has to move into focus as the commitment of resources is raised above a certain threshold and thus opportunity costs need to be factored into the repeatedly asked-for decisions of investing more or less into a certain development.

How can companies manage portfolio clusters using project based portfolio KPIs?

In general, I would suggest to use two major set of such clusters. One is a set helping the organization in the early stages of an innovation process to focus on areas identified as fitting and promising according to strategy and capabilities. These clusters should be predominantly defined using qualitative KPIs, which are easy enough to communicate and implement.  An additional set will be needed, running on more quantitative parameters, which must be introduced carefully and just as consequently when the developments move into more relevant domains of budget accountability. As we move towards asking eventually for fully fledged profit and loss forecasts, it is important for everyone not to forget that uncertainty and risk are inherent barriers to creating successful business on innovation. If they weren’t, differentiation based on innovation would not work! And this holds true for both target impact areas: efficiency and effectiveness for one or both sets of supplier(s) and customers. 

Dealing with technical and commercial risk at early and later development stages of innovation projects is very important. Could you please elaborate on this?

Traditionally, tech-savvy companies operating in market niches with rich margins or building business on strong tech-based differentiation, would focus predominantly on technical risks. Just as well, mostly service based businesses would concentrate on commercial risks, mostly because they naturally operated closer to their customers. Today we are seeing many markets evolving into buyers’ markets, even ones which have long been sellers’ markets based for example on high investment specificity on both sides of the market place. Looking at developments such as data driven platform business models thriving on breaking into traditional information arbitrage based market areas using a combination of efficiently scaled service technology and effectively met customer needs, both players cited before need to look increasingly the other way. Service companies will need more tech-based opportunities and, probably more importantly, tangible technology driven companies will need to enhance their pipeline with know-how-to-value-offerings. Both will need to take technical and commercial risks into focus in the early as well as the later phases of any process run to create new solutions for all market participants. 

What is the right strategy in prioritization for updating and upgrading the portfolios?

Simply put, as people still debate whether structure is supposed follow strategy I would here clearly say that innovation must follow purpose driven strategy as closely as possible in today’s markets. So, updating portfolios means updating the requirements derived from strategy regularly first and updating project content, which is anyway regularly challenged for meeting derivative efficiency requirements. This is of course especially relevant in those business areas where longer term innovations are demanded. As strategy work needs to be updated more regularly and differently in faster moving markets, innovation portfolios need to follow as well. 
 
What would you like to achieve by attending the 3rd R&D Controlling and Performance Management?

I would like to share and discuss our view on how to identify and manage risk and uncertainty in innovation pipelines in larger business organizations. I am truly very keen on receiving feedback during and after the event because it’s what I regularly grow on, eventually. Thanks for giving me the opportunity to ask the participants for it! In my experience, discussions at Marcus Evans events have always been extremely productive in this respect.