Like a VC: Managing Your Innovation Portfolio

While the corporate world goes startup sightseeing in Silicon Valley, on the hunt for new processes and ideas, Tendayi Viki believes that large organizations should start their inquiry at home.

Problems with innovation tend to arise when companies think of themselves as monolithic institutes, defending and protecting that model regardless of whether it’s working or not. Tendayi sat down with curator Andy Cars to share his insights on organizational change, innovation ecosystems and strategically managing a product portfolio just as a VC would manage investments.

Open up the ecosystem

An innovation ecosystem is a collaborative, repeatable process that takes ideas from ideation to scale. So to craft that process, says Tendayi, organizations need to make their innovation goals explicit and clear to every employee and management level. Let’s face it: if no one is there to hear the idea tree fall in the innovation forest, it’s unlikely to generate much impact.

Everyone needs to know:

• What kind of problems the company is trying to solve
• Who can pitch an idea and to whom
• Where to go to get funding
• How to test a hypothesis
• How genuine all levels of management are about innovation
• Whether there’s a penalty for a so-called failed experiment
• What happens next

Rebalance the portfolio

While the 70/20/10 ratio for innovation recommends that 70% of company time should be spent on core business, 20% on core-related projects and 10% on entirely unrelated ventures, Tendayi advises that those numbers be taken with a grain of salt. Each company must choose a ratio that works for them.

Furthermore, organizations often measure the ratio in relation to their total number of products or customers, rather than in relation to the allocation of overall resources – be it labor, money or time.

Since balance and diversification is an iterative process, there's no point in throwing money into a haphazard transformative innovation project simply to meet accounting quotas. Before developing a strategic innovation portfolio, organizations need to implement deep, structural changes and get comfortable with a new set of metrics, target and expectations.

The two most common mistakes Tendayi sees when guiding teams through the innovation process:

1. Succumbing to the constant pull of the core business: Allowing every unexpected change or minor threat to the core business to become a valid reason to pull funding back from innovation projects.
2. Trying to manage and innovation portfolio the same way you would a traditional one: Relying on inadequate metrics, asking unrealistic questions across unrealistic timelines and fostering a fear of risk.

Start at square one

Tendayi lays out a lean startup methodology as a guide to crafting a step-by-step process to introduce large corporations to innovation structures.

Discovery: Evaluate existing resources, short-, medium- and long-term objectives and surrounding ecosystems.
Start small: Select a few early adopter business units and create a safe, minimum viable ecosystem.
Aim for an early win: It could be cutting a product or service that wasn't generating income or significantly improving the process.
Celebrate: Create momentum around small victories and incentives for engagement.

Through it all, perhaps most of all, be patient. The process is likely to take three to five years of nitty-gritty work, often taking three steps forward and one step back, but those who put in the elbow grease see great results.

“Theoretically, pretty much everyone is starting to get [the need to innovate]. But companies have embedded systems that will not let them do it. The question becomes: will they transform that system.”

Innovation crash course

Include these three main innovation goals and categories in your product portfolio.
1. Core innovation: Incremental changes and improvements to your existing product.
2. Adjacent innovation: Leveraging an existing skill in a new market space.
3. Transformative innovation: Creating new offerings for new markets.

See if you’re truly future-facing by answering the following question:
What percentage of your current projects or resources are allocated to something that isn’t serving your current customer or current market?