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Fall Conference 2010: Creating and Managing Innovation Portfolios: Improving the Allocation of Scarce Innovation Resources

November 12, 2010

Friday, November 12 | 12:00 AM - 11:59 PM EST
The Wharton School

Mack Institute Conference
Organized by Professors Paul J. H. Schoemaker and Harbir Singh

Innovation portfolios are widely used to allocate scarce resources to innovation projects, just as investors diversify their financial portfolios across classes of assets with different risk profiles. The logic of a portfolio approach is appealing because it promises to obtain the best long-run returns on innovation spending while containing risk. Unhappily the promise is seldom realized and most managers are frustrated by having too many projects that don’t satisfy strategic goals. In the aggregate they may far exceed available resources, so delays are endemic and opportunities for advantage are missed.

The first objective of our conference was to share the latest thinking and next practices from leading companies in how to create and manage innovation portfolios. How should projects be prioritized when little is known yet? How should innovation portfolios be launched and adjusted over time? What is the value of real options techniques as a way of dealing with uncertainty? Should innovation portfolios be tailored according to industry? How do pharmaceuticals versus aerospace compare in this regard, or packaged food, and why? How can uncertainty be reduced faster by using innovation tournaments? What are the benefits and pitfalls of applying the basic tenets of financial portfolio theory, such as diversification, covariance, optimal weighing and efficient frontiers, to a world of embryonic investments shrouded by deep uncertainty?

The second objective of the 2010 Fall Conference conference was to better understand resource allocation in innovation portfolios: (1) Projects may be hard to compare because they are at different stages of development and vary widely in risk level and time horizon, (2) Portfolios can span multiple organizational units and decisions to add or drop projects are often subjective or unduly political, (3) Interdependencies across projects may be overlooked or hard to estimate, (4) Input data for financial evaluations are usually incomplete and biased, (5) Aggregating projects to arrive at portfolio level metrics may distort risk or fail to reflect embedded options values, and (6) Firms are often overly risk-averse, favoring incremental innovations, even if they are large enough to undertake much bigger risk that can be absorbed through judicious diversification.
The themes and insights from this conference were of immediate value to senior managers seeking to capture the greatest economic value from their limited innovation investments.


8:00 – 8:30 am BREAKFAST

8:30 – 8:35 am – WELCOME & INTRODUCTION

Harbir Singh
Co-Director, Mack Center for Technological Innovation, The Wharton School


“The Power and Limitations of Portfolio Thinking”
Paul J. H. Schoemaker

Research Director, Mack Center for Technological Innovation, The Wharton School

“The Myths of Diversification and Long-term Investment in Innovation”
Karl Ulrich

CIBC Professor of Entrepreneurship and eCommerce, Operations and Information Management Department; Vice Dean for Innovation, The Wharton School

10:00 – 10:30 am – BREAK


“Innovation Portfolios in the Pharma and Oil/Gas Industries”
Daniel Zweidler

Senior Vice President, Global Scientific Strategy-Portfolio Management, Merck & Co.

“The Missing Link: Connecting Innovation Portfolios to Future Scenarios”
Scott Snyder

Senior Fellow, Mack Center for Technological Innovation, The Wharton School

Bernardo S. Sichel
Partner, Decision Strategies International

12:00 – 1:00 pm – LUNCH


“Portfolio Architecture Design for Managing Technology Options ”
Scott Mathews

Technical Fellow, Business Engineering, The Boeing Company

“Innovation Tournaments”
Christian Terwiesch

Professor of Operations and Information Management, The Wharton School

2:30 – 2:45 pm – BREAK


“Profiting from Others’ Innovation Portfolios”
Brian S. Silverman

J.R.S. Prichard and Ann Wilson Chair in Management, Rotman School of Management

“The Limits of Portfolio Strategies in Venture Capital Investments”
Jesse I. Treu

Partner, Domain Associates, LLC, Princeton and San Diego

4:00 pm – ADJOURN



  • Date: Friday, November 12
  • EST

Event Organizers

  • Harbir Singh
  • Paul Schoemaker