In an innovation context, a portfolio is the managed collection of projects, ventures, and bets an organization invests in together, deliberately diversified so that the returns from a few successes can outweigh the many that fail. Managing at the portfolio level, rather than only project by project, is how uncertainty is turned into a manageable risk.
Any single innovation project's most likely outcome is often failure, so betting on one is fragile. A portfolio spreads investment across many projects and classes of project so that the winners cover the losers and the aggregate hits its goal. Managing a portfolio means understanding different risk/return classes, setting the mix, the number and cadence of new starts, and the investment guidelines by stage, then monitoring survival and returns as bets progress. It is the level at which growth expectations are set realistically rather than by applying mature-business assumptions to uncertain opportunities. Related Terminology Index entries: Portfolio Strategy; Pipeline; and the Growth Forge® Portfolio Management page.
The idea of managing risk through a diversified collection descends from Harry Markowitz's portfolio theory in finance (1952), adapted for innovation by Robert Cooper, Scott Edgett, and Elko Kleinschmidt in Portfolio Management for New Products (1998), and connected to core-versus-adjacency growth by Chris Zook's Profit from the Core (2001). BRI's refinement is to model the portfolio probabilistically, simulating staged project curves and survival rates to set investment guidelines and portfolio-level targets. Growth Forge® Software delivers this in the Portfolio Modeling and Portfolio Dashboard tools.
