Innovation Portfolio Management

There are several common and effective Product Portfolio Management frameworks. They all have different perspectives on examining organizational product portfolios, so let’s define them individually to understand which framework best fits your business needs.

1. The Ansoff Matrix

Companies use the Ansoff Matrix or the product or market expansion grid to manage and evaluate their growth activities. This framework enables entrepreneurs to:

• Determine the risks associated with organizational growth
• Increase the economic performance of a business
• Consider the hazards associated with every project

The Ansoff Matrix includes four techniques. These include:

Market development

Market development involves introducing a company’s product or service to presently unreached or uncatered audiences to expand the business by marketing a business’s existing product and service offerings to a new market category.

Market penetration

Market penetration entails organizational techniques that build dominance in an already established industry. It also includes an assessment of how much a product sells concerning its whole market, known as the market penetration rate.

Diversification

Diversification means extending the organization’s product and market reach. When used, the corporation diversifies its offerings in its target areas and broadens its commercial opportunities.

Product development

Product development ensures a continual stream of innovative products that outperform competitors by directing the development of new products and other tangible competitive advantages to achieve business goals like increased sales and revenue.

2. BCG Growth-Share Matrix

The BCG (Boston Consulting Group) growth-share matrix is a planning tool that:

• Uses graphical representations of an organization’s products and services to guide the management in determining what to invest, sell, or keep.
• Assesses the current value level of their units and product offerings.

This matrix divides products and services into four quadrants, each with its own set of distinguishing characteristics:

Dogs

Dogs include products with a limited market share and slow growth, implying that they should be reorganized, sold, or dissolved.

Product offerings in this category in the grid’s lower right quadrant indicate that they do not generate much money for the firm due to little to no growth, particularly ideal for disposal.

Cash cows

Products classified as cash cows are in a low-growth zone yet command a sizable market share, warranting that the organization should capitalize on it for as long as feasible.

These products are market leaders in established industries. They produce greater returns than the market growth rate and are sustainable in cash flow. However, after these cash cows have been “milked,” they should be reinvested in the “stars” for high increase and dominance.

Stars

Products categorized as stars are in high-growth industries and account for a substantial proportion of that market. Thus these firms should spend more heavily on them. If they retain their market share, they will become a cash cow when the market slows.

Question marks

Question marks represent products in high-growth markets where the company does not have a significant market share. They frequently grow swiftly while absorbing a large percentage of the organization’s assets.

3. GE/McKinsey’s Portfolio Analysis Matrix

The GE-McKinsey nine-box matrix allows multi-enterprise organizations to:

• Structure their expenditures across company units in an organized manner
• Evaluate business portfolios
• Offer additional implications
• Aid in the prioritization of investments necessary for each business unit

The GE-McKinsey Matrix considers several elements to determine two conditions:

Industry attractiveness

Industry attractiveness refers to a business’s capacity to collect income in the market.

The vertical axis of this facet is divided into three categories: high, medium, and low, denoting the viability, profitability, and desirability of the industry for an organization to create and compete.

Competitive strength

In competitive strength, businesses evaluate a specific unit’s performance compared to its industry competitors. Competitive strength is also classified as high, medium, or low based on the company’s competitiveness with its competitors.

4. Innovation Ambition Matrix

The Innovation Ambition Matrix describes a company’s innovation strategies. It works with the idea that the connection between industries and product portfolio creation is necessary for evaluating a company’s innovation goals.

This matrix categorizes the management of a linked, diverse portfolio of innovation endeavours into three categories:

Core innovations

These are incremental innovation projects focusing on line growth, renewal, or improving the performance of existing products.

Adjacent innovations

Adjacent innovations propel the company into new markets while remaining true to its core competencies by gradually introducing new products and assets.

Transformational innovations

These revolutionary innovations or breakthroughs are not necessarily related to existing markets or technology but are entirely new products or services that are not extensions of the current ones.

5. Stage-Gate

The stage-gate method is a system for:

• Assessing the business value of an innovation project at various stages of the innovation lifecycle
• Maintaining control of projects by regularly re-evaluating them and their worth before moving forward

It’s named stage-gate because there are many gates or phases in the funnel where an evaluation occurs to decide whether or not an idea can progress to the next level. The stage-gate approach leads product development through five phases:

Scoping

Scoping assesses the new concept’s scope, practicality, and market competitiveness to see if it is practical and has a lucrative or valuable market opportunity.

Business case creation

The business case creation transforms the idea into a business scenario designed to establish user or participant demands and standards. To put it another way, the innovation team will create a project strategy and product description.

Development

After the idea has passed the business simulation stage, the team will construct a prototype or a minimal viable product (MVP). Additionally, they will also be developing production and launch strategies.

Testing and validation

At this time, innovation teams perform several tests. First, they test the prototype internally and identify issues and potential solutions. Afterward, they subject the product to customer testing and, subsequently, a validation test to determine its marketability.

Launch Phase

Finally, after receiving comments and applying patches, the company will release the product to the public.

Naturally, the innovation team will monitor the manufacture and quality of the product on an ongoing basis. Furthermore, the marketing staff will be in charge of increasing the product’s market visibility.