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Digital Innovation and Portfolios

Increasing Value from Investments in Innovation

Just as investors have portfolios of financial investments to address their multiple investment objectives, firms have portfolios of digital and information technology (digital/IT) investments. MIT CISR research has found that firms invest in digital/IT to achieve four different management objectives

  • Strategic: to gain competitive advantage
  • Informational: to provide management information

  • Transactional: to process transactions and cut costs

  • Infrastructural: to provide shared services and integration

Just like any other investment portfolio, the digital/IT portfolio must be balanced to achieve alignment with the business strategy and the desired combination of short and long term pay off. Portfolios must also be reweighted when economic conditions or strategies change. 

To achieve strategic objectives and ensure long-term competitiveness, most large organizations also invest in a portfolio of innovation efforts:

  • Employee experience: Producing digital tools or information aimed at greater employee productivity and retention
  • Business operations: Producing operational processes digitized to increase efficiency
  • Customer facing: Producing new or improved services or solutions and enriched customer experiences aimed at increasing revenue per product/service and per customer

  • New business models: Producing new sources of revenue from new customer segments

The analysis of survey data reveals that innovation portfolio allocation, rather than total spend, is what differentiates most competitive firms.

 

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