After decades of leading innovation programs and advising Fortune 500 companies on innovation strategy, I’ve observed some common patterns in how organizations approach innovation portfolios. Companies often have some of the right pieces but are missing critical ones, or they have the right terminology but not quite the right implementation. The executive presentations are compelling, the strategic frameworks appear robust, and the leadership commitment seems genuine.
Yet, despite these well-intentioned efforts, many innovation initiatives fail to deliver significant or sustained growth. Upon closer examination, what many organizations call “innovation portfolios” often lack the fundamental characteristics that make portfolio approaches effective in the first place.
This disconnect between intention and execution creates a challenging dynamic that strategy and innovation consultants often observe but presents a challenge to address directly: Many corporate innovation “portfolios” aren’t true portfolios at all. They’re either concentrated investments presented as diversified strategies or innovation pipelines missing the strategic discipline required for success.
Let me share what I’ve learned about what is really going on, over the course of more than 20 years watching innovation efforts succeed and fail.
Betting the Farm on a Vision (Without Testing the Terrain)
The first portfolio mistake happens when companies confuse a compelling vision with a validated strategy. The leadership team becomes enamored with a bold direction and places massive bets before testing critical assumptions.
I’ve watched companies invest tens of millions in developing capabilities for markets they’ve never validated, building platforms for users whose problems they don’t truly understand, or creating products that solve yesterday’s problems rather than tomorrow’s opportunities.
Your CEO’s vision isn’t a strategy, and your two big bets aren’t a portfolio.
True portfolio thinking isn’t about making fewer, bigger bets based on executive intuition. It’s about creating a deliberate spread of investments across different risk categories and opportunity horizons, scaling investment in lockstep with evidence.
What we can’t always say: “Your CEO’s vision isn’t a strategy, and your two big bets aren’t a portfolio.”
Conflating Pipelines and Portfolios
The second portfolio mistake happens when companies build what they call a “portfolio,” but is actually just a continuous pipeline of options. There’s nothing wrong with a well-managed innovation pipeline — in fact, it’s essential — but it’s not the same as a portfolio strategy.
A pipeline is about the process: how you source ideas, develop concepts, test assumptions, and (hopefully) scale winners. A portfolio strategy is about intention and risk management, and it answers fundamentally different questions: How should we distribute limited resources across different categories of risk and return? What’s our target allocation between core, adjacent, and transformational opportunities? What’s our risk tolerance as an organization?
Companies with strong pipelines but weak portfolio strategies end up with process without purpose. They have a well-oiled machine for moving ideas through development but no strategic guidance for balancing the overall mix of investments.
What we can’t always say: “Your stage-gate process is elegant, but it doesn’t tell you where to place your bets.”
The Project-Killing Problem
Perhaps the most uncomfortable truth about innovation portfolios is that they only work when you can kill projects — and most organizations can’t.
Innovation requires options, and options require the ability to say “no” to mediocre opportunities so you can say “yes” to potentially exceptional ones. However, corporate politics, sunk-cost fallacies, and the absence of alternatives make project termination extraordinarily difficult.
I’ve watched leadership teams cling to failing initiatives simply because they were the CEO’s pet project, or because they’d already invested so much that walking away seemed unthinkable. I’ve seen middle managers protect underwhelming projects because their compensation was tied to project continuity rather than outcome quality.
What we can’t always say: “Your portfolio can’t work, because your culture punishes project termination instead of celebrating it as learning.”
Building a Real Portfolio Strategy
So, what does a true innovation portfolio strategy look like? It starts with explicit decisions about resource allocation across different risk categories:
- Define your risk vectors. Articulate what makes opportunities more or less risky in your specific business context and use those to drive allocation targets. In our experience, adjacency to the company’s core business is by far the most significant. (Learn more about why, here: https://www.bri-associates.com/supporting/rpp)
- Set intentional allocation targets. Allocations should reflect your strategic ambitions and organizational risk tolerance, but allocation across multiple dimensions is challenging, especially with smaller portfolios. At a minimum, allocation targets should cover diversification based on relative risk. What percentage of your innovation resources should go to lower-risk, incremental improvements versus higher-risk, potentially transformational opportunities?
- Establish evidence requirements and investment limits. For each level of investment, define the evidence standards required and guidelines for maximum investment levels. Early-stage, high-risk opportunities might receive small investments based on limited evidence, while larger investments require progressively stronger validation.
- Create termination protocols. Develop explicit criteria for when projects should be terminated, regardless of who sponsored them or how much has already been invested.
- Balance the portfolio regularly. Review your portfolio allocation quarterly to ensure you maintain your target balance of risk and return across your innovation investments.
The hard truth is that most innovation portfolios fail not because the framework is wrong, but because the organizational discipline is lacking. Creating true portfolio diversity requires the courage to spread investments across risk categories rather than concentrating resources on a favored few. It demands the discipline to increase investment only when evidence warrants it. It also requires cultural fortitude to terminate projects that don’t meet evidence thresholds regardless of the sunk costs.
These aren’t just tactical challenges, they’re cultural ones. And that’s perhaps the thing we most struggle to tell our clients: Your portfolio strategy isn’t failing because you lack a framework. It’s failing because your organization isn’t ready for the discipline it requires.
So, the next time someone proudly walks you through their innovation portfolio, ask yourself: Is this truly a portfolio strategy with deliberate risk allocation? Or is it just a collection of the CEO’s favorite projects? Is there a mechanism and incentives for appropriately killing under-performing initiatives? Are investments scaled in proportion to evidence?
The answers to these questions will tell you whether you’re looking at a real portfolio strategy or just a group of projects. Making that distinction might be the difference between innovation success and another round of disappointments.
Jim Bodio is Managing Partner at BRI Associates.
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