Continuous reconfiguration : Managing innovation project portfolio uncertainty

Abstract

Innovation project portfolios are typically risky by nature, as these portfolios are influenced by various uncertainties arising from single projects, organizational complexity and external environment. Due to this dynamic context, actors involved in innovation project portfolio uncertainty management need to develop adequate uncertainty responses in order to maximize opportunities and minimize potential threats. This calls for continuous portfolio reconfiguration, where the portfolio content is frequently modified for example by adding and terminating portfolio components or reallocating resources among them. As portfolio uncertainty management is characterized by high complexity due to the various uncertainties and numerous portfolio stakeholders, the key actors and their typical reconfiguration practices need to be studied further. Therefore, the objective of this study is to identify the key actors involved in innovation project portfolio uncertainty management and reveal their typical practices in terms of portfolio reconfiguration. The two main research questions are: “What actors participate in innovation project portfolio uncertainty management?” and “How do these actors reconfigure innovation project portfolios to respond to different uncertainties?”.

This research was conducted as a qualitative multiple-case study and focused on two innovative and medium-sized companies from different industries. Company A operates in software industry characterized by relatively short project cycles and high portfolio dynamics, whereas Company B operates in a more conservative heavy machinery industry with typically longer project cycles. Both companies manage two innovation project portfolios with slightly different objectives, where all four portfolios typically contain dozens of on-going innovation projects. The data was collected primarily through semi-structured interviews, where the interviewees represented middle and top managers actively involved in innovation activities at the specific case company. This empirical data was then utilized in producing company specific results, where the innovation environment, portfolio structure and stakeholders, key actors and their typical reconfiguration practices as well as some challenges and development ideas were described. In addition, a brief cross-case analysis was provided in order to compare the differences and similarities of the two case companies.

The results of this study revealed a high number of actors involved in innovation project portfolio uncertainty management, including project and portfolio managers and their corresponding team members as well as various steering boards and company specific teams. Both companies also reported similar reconfiguration practices, including adding, delaying and terminating projects, reprioritizing the portfolio content, reallocating resources and refocusing the portfolio. However, portfolio reconfiguration frequency was different between the two companies mainly due to industry specific characteristics: Company A reconfigured the portfolio on monthly basis, whereas Company B practiced portfolio reconfiguration primarily once a year. Both companies also practiced ad-hoc portfolio reconfiguration when necessary. Based on these results, this study proposes a tight linkage between portfolio uncertainty management and portfolio reconfiguration, as reconfiguring the portfolio content was viewed as an important way to respond to uncertainties arising from the dynamic context. In addition, this study advocates the complex nature of portfolio uncertainty management by extending the list of previously identified key actors. However, future research is still needed in order to expand the knowledge on these key actors and their practices in different sized companies operating in different industries.