Framework library · Innovation and product
Innovation ambition matrix
The matrix sorts innovation initiatives on two questions: how far the markets served are from today's customers, and how far the products and assets used are from today's. Initiatives close to the current business are core, those that stretch further are adjacent, and those that are new on both counts are transformational. Adding up the investment in each band shows whether the portfolio matches the ambition the strategy claims.
Use it when
- You fund several innovation initiatives and want to see whether the mix matches the growth ambition in the strategy.
- The strategy promises new businesses but most of the money seems to go on improving existing products.
- You are setting next year's innovation budget and want a target mix to argue about before allocating.
Avoid it when
- You need to choose between individual initiatives. The matrix shows the mix, not which bet is best. Score them with RICE or a weighted decision matrix.
- You have only two or three initiatives. A mix of so few is not a portfolio, and the shares will swing on one decision.
- You want a timeline for growth. Use the three horizons of growth, which sorts initiatives by when they pay off rather than how far they stretch.
How to run it
List every funded initiative
Include the unglamorous ones that improve existing products; they usually hold most of the money. Give each its investment over the same period.
Agree what counts as new
For markets: a customer type, region or need you do not serve today. For products and assets: capabilities you would have to build or buy.
Place each initiative
Core uses existing products and assets for existing customers. Adjacent stretches one way, or modestly both. Transformational is new on both.
Compare the mix with the benchmark
Nagji and Tuff found that outperformers split their innovation resources about 70, 20 and 10 across core, adjacent and transformational. Your right mix depends on the industry and the strategy, so set a target and say why it differs.
Decide what to move
Name the initiatives to stop, slow or fund more to close the gap, and who decides.
Work through it
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Mistakes to avoid
- Placing initiatives where they make the portfolio look balanced rather than where they belong.
- Counting ideas instead of money. Shares should be of investment, or the picture flatters the transformational end.
- Running transformational initiatives with core-business metrics and approval cycles, which kills them before they can show anything.
- Treating 70, 20 and 10 as a rule. It is an observation from a study, not a target that fits every company.
Where it comes from
Bansi Nagji and Geoff Tuff, "Managing Your Innovation Portfolio", Harvard Business Review, May 2012. In the companies they studied, outperforming firms put about 70% of innovation resources into core initiatives, 20% into adjacent and 10% into transformational, while returns ran roughly the other way, with about 70% coming from the transformational initiatives. Source.
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