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Strike & Maintain the Right Innovation Balance

IT and the business knows: The year-to-year viability of a company depends on its ability to innovate.

We have learned over the years that innovation comes from three sources.

  • Top Down – Driven by management imperatives (i.e. we have to be in the cloud)
  • Bottom Up – Can originate anywhere in the organization, everyone participates and offers new ideas (i.e. start with a blank piece of paper)
  • Middle – This core innovation represents efforts to make incremental changes to existing applications and incremental inroads into new markets.  Such innovations draw on assets the company already has in place.

We typically find businesses are getting about 75% of their innovation from bottom up with the remaining 25% from top down.  Although there is no golden rule and the allocation varies by industry and the company position, we’re finding consistently that when the majority of the innovation comes from top down and bottom up, the result is generally not as strong as those companies that are focused on the middle or core sources.

In a recent UMT360 webinar, I asked attendees about their main source of innovation.  More than half of the attendees indicated it is top down with  the remaining 44% split between bottom up and middle.  Together, these findings underscore the importance of managing sources of innovation deliberately and closely.  Most companies fail to focus on middle/core innovation but they should given the risk involved in top down and bottom up initiatives.

Managing total innovation is going to require a significant shift for most organizations which are generally not accustomed to an orderly approach to innovation.  The first step is to develop a shared sense of the role each source of innovation plays in driving IT portfolio yields.  Next, survey the company’s current innovation sources and their respective success rates. This will reveal how much is allocated to top down, bottom up and core initiatives and how that allocation differs from an ideal ratio.  With the differences exposed, managers can then identify ways to achieve the desired balance, usually by reducing top down and bottom up while increasing the middle.

We should not ignore that sources of projects are attached to individuals who feel a sense of ownership.  By determining how to manage the sources of innovation and strike a better balance, companies can allocate their attention and resources to achieving growth.

Click here to view the webinar on how CIOs are taking control of IT investments with integrated portfolio management.

Mike Gruia, Co-founder

Mike is a visionary leader in Portfolio Management, known for his deep knowledge and unique thinking. He grounds his approach in five fundamental pillars: economics principles, applied mathematics, business architecture concepts, system dynamics, and behavioral aspects. Recognized by industry experts, including Gartner, Mike is considered a pioneer in Portfolio Management. He has co-founded three companies specializing in Portfolio Management solutions, including UMT Consulting, a leader in the field before being sold to EY in 2015, and UMT360, sold to Teleo Capital in 2019. With degrees in Industrial & Systems Engineering and Operations Research from Columbia University and the Technion Israeli Institute of Technology, Mike has played an active role in shaping the evolution of Portfolio Management, challenging current practices, and anticipating future trends.