Evaluating Radical Innovation Portfolios

Radical innovation in large firms is a risky endeavor, exacerbated by high levels of uncertainty and long cycle times. Moreover, management lacks evaluation tools that are appropriate for the degree of ambiguity of the information available from these types of projects. Add to this the difficulties...

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Bibliographic Details
Published in:Research technology management 2007-09, Vol.50 (5), p.17-29
Main Authors: Paulson, Albert S., O'Connor, Gina Colarelli, Robeson, Daniel
Format: Article
Language:English
Subjects:
Business growth
Business innovation
Business structures
Commercialization
FEATURES
Financial investments
Financial management
Financial portfolios
Innovations
Investment portfolios
Investment risk
Managers
Paradigms
portfolio evaluation
Portfolio management
radical innovation
real options
Studies
Technological change
Technological innovation
Technology
Valuation
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Summary:Radical innovation in large firms is a risky endeavor, exacerbated by high levels of uncertainty and long cycle times. Moreover, management lacks evaluation tools that are appropriate for the degree of ambiguity of the information available from these types of projects. Add to this the difficulties of managing in the context of the large firm where many processes are tuned toward repetition and continuous improvement, and it becomes clear that commercialization of radical innovation (RI) is a difficult proposition at best. Portfolio managers will almost invariably build a team, learn appropriate processes, clarify their mandate within the company, generate initial projects, and begin to enrich their portfolios, only to have their efforts cancelled out due to an unsatisfactory financial return. The "what have you done for me lately?" question plagues these groups, and ends up costing the company investment of resources in opportunities that are never leveraged. Having an evaluation tool to assess the relative values of projects within the context of the entire radical innovation portfolio, and to track changes in the relative value of the portfolio over time, can help RI portfolio managers articulate their contribution to the company's growth strategy and can aid in innovation strategy development.
ISSN:0895-6308
1930-0166
DOI:10.1080/08956308.2007.11657458