Managing Risk and Reward in an Innovation Portfolio

This is the 1st in a number of postings based on the Spring 2009 Issue of OnPoint (from the Harvard Business Press) dedicated to Risk Management. Specifically, this particular post is the first of several on my review of the article:

Is it Real? Can We Win? Is it Worth Doing? Managing risk and Reward in an Innovation Portfolio by George S. Day

In a changing economy, it makes sense, even more, to innovate. However most innovation is small, risk averse and largely not impactful. This article notes that from 1990 to 2004 the percentage of major (impactful) innovations in portfolios dropped from 20.4 to 11.5. However, only 14% of new-product innovations are large and substantial, but resulted 61% of all innovation profits in companies studied. In short, most people avoid risk, go for the low-hanging innovation fruit, and deny themselves real impact.