Innovation Portfolio Architecture—Part 2: Attribute Selection and Valuation

OVERVIEW:This article presents a “sufficiently simple” valuation philosophy that quickly elicits the most valuable concepts in an innovation portfolio while minimizing analytical time and labor cost. Extending from the initial article, published in the November/December 2010 issue, this article focuses on three areas: 1) accommodating the nonlinear progression of early-stage concepts within an innovation portfolio through the use of phases rather than staged gates, 2) selecting a minimum set of uniform and broadly comparable attributes, and 3) calculating value metrics to assess the relative value of individual concepts in the portfolio. Real option methods provide the overall philosophy for capturing the relationship of concept value, investment, and risk.