The article “Developing innovation portfolios for the public sector: Portfolios for public good’ by Holden A., Cassidy J., Hallberg K. and Marsh W. published on Deloitte Insights examines how can a public sector organization reap the rewards of investing in truly transformational innovation efforts while mitigating the accompanying risks. In the article is argued that the answer could lie in managing innovation as a portfolio of investments that balances risk and reward.
To view the innovation as a portfolio of investments there should be a shift in the mindset of public sector organizations. The innovation efforts from isolated initiatives to pieces of a bigger puzzle. Based upon the investment firm Charles Schwab concept that, “The goal of diversification is not to boost performance, rather it is to help compensate for poorly performing assets by holding others that are performing well’”or at least holding up better.’ in the article different aspects of investment portfolio management are analyzed. Examples of how taking a portfolio-driven approach to innovation can help public sector organizations more effectively are also presented.
According the authors there are multiple tools that can be used to assess a public sector organization’ s innovation portfolio and achieve a healthy balance of risk and return. In the article several models of innovation portfolio management and their application in public sector organizations are presented as: The Ambition Matrix; The Options portfolio model; The impact-feasibility portfolio model and the innovation life cycle portfolio model.
The article in the last section includes a number of steps that provide a tactical starting point for the adoption of a portfolio-driven approach to innovation. The steps are the following:
- Perform an inventory of the existing innovation efforts.
- Assessment of the innovation efforts based on selected model criteria.
- Mapping and assessing current portfolio.
- Setting budgets for each type of innovation.
- Scoping innovation channels to support the desired portfolio mix.
The article concludes that by adopting a portfolio approach can help achieve a balance between the risk and return of different innovation efforts performed by public sector organizations.
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