The State Of Innovation Portfolio Management 2023 Annual Report

Building new ventures inside existing companies is one of the hardest tasks a leader faces.

There are countless obstacles internally. Successful businesses do not want to disturb the winning formula by introducing complexity. Struggling businesses have a hard time justifying investment in uncertain ventures. Capital markets reward short-term results, and shareholders tie leadership incentives to delivering on those expectations.

Externally, it is even harder. Emerging markets are immature and rife with uncertainty. That is what makes them attractive, because there are chances to shape a market and establish new growth. They are also a source of enormous risk, which high-profile stories of failure reinforce.

However, investment in exploratory innovation is still happening and generating tremendous results. Companies like AGC have executed a balanced investment strategy to create new sources of growth that now represent 25% of the company’s profits. Tech firm Nvidia has seen its share price increase 7000% in 10 years as evidence that its move from the PC market into artificial intelligence has paid off. Best Buy has successfully added a new healthcare business alongside its traditional electronics retailing.

At some point, these firms all decided to rebalance investment away from the core business toward adjacent and exploratory growth. They had to find Corporate Explorers capable of ideating, incubating, and scaling new ventures to deliver the growth, but it was all enabled by a decision to commit resources. This report is about that choice.

2023 Annual Report Findings

Our study of 50 corporations exposed several strategic and operational challenges to innovation portfolio management. The two most significant challenges – lack of clear strategy and incentive systems focused on the short-term – remained consistent with our 2021 report findings. Additional challenges this year included uncertainty around leadership commitment, a lack of leaders’ courage to follow through when uncertainty is high, and a reliance on subjective vs. objective decision criteria.

Download the full report to learn more about how firms with more established innovation portfolio practices tend to outperform the rest of the companies and the five key factors that separate Leaders from Laggards.