An abundance of project indicators…
Together with the Eindhoven University of Technology’s Master Program for Innovation Management, we have set up a research project to build a repository of innovation project and portfolio key performance indicators (KPI-s). My colleague Ivo Schaminee has completed a literature survey revealing over one hundred KPIs for innovation projects across a wide range of publications and case examples.
Most of these KPIs come from well documented descriptions of the gate criteria in a staged process for innovation projects. Each of these KPIs can help to identify innovation project health in terms of absolute or relative value creation, strategic contributions, feasibility, efficiency etc.
But what about the portfolio?
A bit to our surprise, the same literature review revealed very few useful KPIs at the innovation portfolio level. In order to strengthen our understanding and added value in portfolio management, we are now developing a set of KPIs and embed them in the FLIGHTMAP portfolio management solution.
Portfolio health can be defined in four criteria areas, where the KPIs out there tend to focus on just the first:
- Value Maximization
For this criterion, KPIs such as Portfolio Net Present Value (NPV, for absolute value creation) or Return On Investment (ROI for relative value creation) and variations of them are well covered in literature.
- Strategic Coverage
KPIs for this criterion should help to answer the question: Is our portfolio good enough to meet our strategic goals? Whereas contribution to various strategic goals is mentioned, we found no good examples of how to combine individual project contribution or alignment KPIs into one for the portfolio.
Again, using visualizations such as pie, bubble and bar charts, a portfolio’s balance can be depicted. This will reveal short and long-term balance, balance across markets, balance across risk levels etcetera. However, capturing balance in a single KPI seems innovative.
The fourth criterion of a portfolio’s health is its compliance with practical limitations, such as budget and resource constraints. It is a reality check on the portfolio, since it is unlikely that a portfolio will ever deliver if it requires more resources than can be made available. Whether for fundamental reasons such as the long lead times to develop new competences of process plants, or for more practical reasons such as limitations in the budget allocation process flexibility.
Do you have suggestions?
With the next step in our research, we expect to build a repository of portfolio KPIs covering the above aspects of portfolio health. If you have any suggestions in terms of KPIs to add or sources to look into, please let me know.