In today’s fast-paced business world, innovation is no longer a luxury, but a necessity for survival and growth. However, innovation is inherently risky, and it’s essential to manage that risk effectively. This is where innovation accounting and portfolio management come into play.
Innovation Accounting
Innovation accounting is a methodology that helps organizations measure and manage the progress of their innovation initiatives. It focuses on tracking key metrics that indicate whether an innovation is on the right track. These metrics might include:
- Customer engagement: How many customers are using the new product or service?
- Revenue growth: Is the innovation generating revenue?
- Cost reduction: Is the innovation helping to reduce costs?
Innovation accounting is not about measuring the success of an innovation after it has been launched. Instead, it’s about tracking progress in real-time and making adjustments as needed.
Portfolio Management
Innovation portfolio management is the process of selecting, prioritizing, and managing a collection of innovation initiatives. It’s about ensuring that the organization’s innovation efforts are aligned with its overall business strategy.
Effective innovation portfolio management requires a clear understanding of the organization’s goals and objectives. It also requires a robust process for evaluating and prioritizing innovation ideas.
The Benefits of Integrating Innovation Accounting and Portfolio Management
When innovation accounting and portfolio management are integrated, organizations can:
- Make better decisions about which innovations to pursue.
- Track the progress of their innovation initiatives more effectively.
- Identify and mitigate risks early on.
- Improve the overall success rate of their innovation efforts.
Key Considerations
Here are some key considerations for organizations looking to implement innovation accounting and portfolio management:
- Start small. Don’t try to implement a complex system all at once. Start with a few key metrics and gradually expand your efforts.
- Get buy-in from stakeholders. Innovation accounting and portfolio management require the support of key stakeholders, including senior management.
- Use the right tools. There are a number of software tools available that can help organizations manage their innovation portfolios.
- Be patient. It takes time to build a successful innovation program.
Conclusion
Innovation accounting and portfolio management are essential tools for any organization that wants to stay ahead of the competition. By integrating these two disciplines, organizations can improve their chances of success in the ever-changing business landscape.