‘All of you have solved the problem, so give yourselves some credit!’
On Thursday Feb 23, nearly 40 MBA postgraduates from the Stockholm School of Economics gathered to participate in a highly visual hands-on workshop called the iPM Challenge. Having delved into diverse aspects of business in their studies, and coming from across many industries, the participants brought fresh perspectives on the iPM Challenge to the Googol team.
By the end of the evening, everyone gained new insights into the field of Innovation Portfolio Management. On top of that, everyone had loads of fun!
The iPM Challenge
The iPM Challenge is a strategy game designed to impart certain guiding principles and best practices on portfolio management at large. Using a visual, hands-on approach, participants decide on a project portfolio that aligns with company strategy and complies with resource constraints.
This simulates a common real-world situation in companies, where complex corporate decisions have to be made by managers. The truth of the matter is: decisions that are made rarely reinforce the strategy of a company – studies indicate that fewer than 10 percent of effectively formulated strategies are successfully implemented by companies.
Set in the framework of a fictitious company, the iPM Challenge aims to introduce a way of managing innovation portfolios that is transparent, visual and holistic.
3 key insights
The iPM Challenge opened the minds of participants to realize the importance of some factors when managing a company’s portfolio:
‘Apparently there are more than 2 dimensions!’
The iPM Challenge’s visual and collaborative approach greatly increased the transparency of the portfolio management process, which is sorely lacking in most of today’s portfolio management approaches. The iPM Challenge proved to be effective in involving many key stakeholders and gaining their buy-in, instead of the typical Excel-based, mathematical approach where one or two managers churned out the portfolio and disseminated the results for other departments to adhere to.
At a very basic level, it made everyone grasp the degree of complexity involved when deciding on projects to keep or reject. As one participant remarked, it resembled high-level management decisions in real companies where several dimensions (cash flow, risk level and the time perspective, for instance) are taken into account. Another participant approved of how the iPM Challenge made it transparent to everyone how much resource was invested in the projects in total, and how much was not invested.
Moreover, since all key stakeholders were involved in debating on high-level strategies as well as individual projects, this allowed them to come to terms with why each project was accepted or rejected. This meant that the individual managers would have a rational, consensus-driven justification for all their subsequent actions.
Consideration of important decision criteria
‘It was very short-term and incremental.’
When the canvases were being filled up, alarm bells went off in the heads of one group as they observed some ‘white spaces’ on their Googol Matrix Canvas; they realized their project pipelines were being populated with very short-term and incremental projects and nearly no disruptive or long-term ones. What they then proceeded to do was to balance out their portfolio with more from the latter category, having decided that disruptive innovations were definitely valuable for their company.
Again, the visual approach of the iPM Challenge enabled stakeholders to consider several decision criteria at the same time. It showed clearly where the organization stood in terms of disruptive versus incremental projects, in terms of their different stages of development, the different levels of risk and reward, the different times to market. Any imbalance in the portfolio was almost immediately apparent and remedied.
Taking a step back
‘You guys went off to some fancy strategy resort!’
One of the most powerful advantages of the iPM Challenge was that it connected high-level strategy to practical, tangible project decisions in a special way. It allowed participants, whenever they felt a need, to take a step back and discuss if their decisions were in line with corporate strategy, then continue their work on project decisions. This could be done with several iterations within a short span of time; eventually leading to what they collectively agreed was an optimized portfolio.
Googol and iPM
Several interesting pointers were brought up by astute participants:
- What about the inter-relationships between projects?
- What about a better method to visualize the trade-offs between high-NPV, high-risk projects and low-NPV, low-risk projects?
Googol will continue to develop Innovation Portfolio Management to address these and other key issues, helping other companies to bring opportunities to life.
/Joachim Cronquist, Partner, co-autor: Brandon Leong, Analyst