Managing Risk and Reward in an Innovation Portfolio

Question 1

Main premise

Answer 1

Firms should follow a systematic disciplined approach that allocates innovations equally over the risk spectrum

Question 2

Risk matrix

Answer 2

Uses scoring system and calibration of risk to estimate the probability of success and failure based on how a big stretch is for the firm

• often too many projects at the end
• too many left bottom, not enough top right

Question 3

Screening with R-R-W

Answer 3

Series of questions about the innovation, its potential market and company’s competitors and capabilities

Question 4

6 questions R-R-W

Answer 4

1. Market real?
2. Product real?
3. Product be competitive?
4. Company be competitive?
5. Product be profitable at an acceptable risk?
6. Launch product make strategic sense?

Question 5

Market is real when 4 conditions met:

Answer 5

1. Product will meet a need or solve problem better than other alternatives
2. Customers are able to buy it
3. Potential market is big enough
4. Customers willing to buy product