Innovation portfolio planning — using stage gates to manage risk

Innovation portfolio planning — from a Gary Hamel and Lowell Bryan interview (here) on The McKinsey Quarterly site (registration required) — starts with a plan to build capabilities (earlier post here).   Of course, building these capabilities require projects and programs.

Once you’ve designed your master plan, you can launch a series of initiatives aimed at achieving your goals…. The thing that really stops innovation is risk. CEOs can be terrified of organizational disruption because it can put at risk a company’s ability to meet quarterly earnings, which in turn is often what causes CEOs to lose their jobs. So part of what you need is a bridge so that they can be innovative but also keep their jobs.

The addition of program and project portfolio standards to the PMI standards inventory has been welcome.  The PM community needs to master these disciplines in order to drive good practices like the stage gate approach Bryan outlines below:

[S]tage-gate your investments in organizational innovation, [so] you can first learn what works and then scale it, without taking excessive risk.  None of us are smart enough to see in advance the ultimate answer, because the real answer lies in discovering the operating detail to make new ideas work in practice.  You can see the broad directions, but you… can’t even understand the secondary and third-level consequences of the design decisions you make. Those have to be discovered through trial and error.

Innovation Portfolio Planning — Building Capabilities

I’m going back to a Gary Hamel and Lowell Bryan interview (here) on The McKinsey Quarterly site (registration required).  Bryan here focuses on innovation portfolio planning, a topic which PMs should focus on as they look to expand their career horizons:

I like the notion of designing a managing concept or master plan—a master architecture, if you will—for every company. Such a master plan should lay out the big foundational elements to get your organization to work differently…

We use this approach a lot at SAP, though we talk about building capabilities.  These capabilities are the foundation for enabling us to work differently, but aren’t focused too narrowly on a specific outcome.  Rather, these capabilities are focused on supporting a strategic direction — e.g., improve project management maturity vs. improve scope management practices.