Governance of innovation in portfolios, programs, and projects

img WHITE PAPER

2019

Michael Knapp, PhD
Catherine P. Killen, PhD
Chris Stevens, PhD
Shankar Sankaran, PhD, PMP

School of the Built Environment
University of Technology Sydney
Faculty of Design Architecture and Building

Submitted: 31 January 2019

Acknowledgments

This research project has been supported by the PMI-sponsored research program and by the University of Technology Sydney. The principal investigators would like to acknowledge the support of PMI and the guidance of Professor Terry Williams, our academic liaison for this project.

Table of Contents

Executive Summary

Brief Introduction to the Research

Research Questions/Objectives

Research Frame: Concepts and Brief Literature Review

Methods

Primary Results and Discussion of Findings

(1) Findings on Dynamism: Evolution and Change in Governance in Response to Dynamic Environments

(2) Findings on Innovation Governance Processes, Maturity, and Metrics

(3) Findings on Governing Innovation Through Ambidexterity

Practical Application(s) of Findings

1. Design governance to respond to changing environments

1.1 Embed a mechanism for review, reflection, and ongoing improvement and adjustment

2. Embed innovation metrics and incentives to improve innovation reporting and decision making

2.1 Create a common understanding of innovation

2.2 Develop and embed innovation metrics in portfolio, program, and project governance

2.3 Ensure decision makers understand the innovation challenges facing the organization

2.4 Implement formal methods and processes to source innovation ideas

2.5 Establish systems to recognize and reward those who are demonstrably innovative

3. Include governance mechanisms to support cross-organization integration

3.1 Employ project portfolio governance to oversee balance

3.2 Create integration mechanisms

Conclusions

References

Appendix A—List of Outputs

(1) Governance of innovation in portfolios, programs, and projects

(2) Governance of innovation through projects: Ambidexterity and integration mechanisms

(3) Governance of innovation in organizations

(4) Final report

Appendix B—Comparison of Planned Deliverables in Research Agreement to Actual Project Deliverables

Appendix C—Biographies of the Principal Investigators

Executive Summary

Brief Introduction to the Research

The importance of governance in portfolios, programs, and projects is reflected in part by the development of standards for governance (PMI, 2016) as well as by the increasing attention being paid to governance in management/academic literature and in practice. At the same time, organizations increasingly aim to improve their innovation capabilities, enabling them to survive in today's dynamic, competitive environment. However, there is little guidance in research literature on whether and how portfolio, program, and project governance can be designed to support and promote innovation. The escalating importance of project delivery in organizations, especially for innovation, further highlights the need for better understanding of the relationship among governance, innovation, and success in portfolios, programs, and projects.

Governance is of increasing importance for portfolio, program, and project success from an organizational perspective, and multiple studies have highlighted the need for it to be appropriate for the environment. Large-scale studies show that effective oversight by executive management promotes and nurtures innovation. However, some studies also suggest that this could also cause negative tension, as innovation requires flexible and adaptable approaches. To better understand innovation as applied to portfolios, programs, and projects, and how governance approaches can be tailored for best outcomes, we conducted an in-depth, exploratory, multiple-case study.

This report outlines the background, our research questions, our methodology, and our main findings. We also identify the outputs of this research that are designed to disseminate the findings to both academic and practitioner audiences. We emphasize our implications for practice, providing guidance to industry for the development of governance approaches to best support innovation in portfolios, programs, and projects.

Research Questions/Objectives

The proposed research aims to develop principles and guidelines for tailoring governance to the environment when innovation outcomes are imperative. The overarching research question is:

What governance mechanisms drive innovation in organizational portfolios, programs, and projects?

Associated questions explored whether and how formality, flexibility, and decision-maker engagement affect and impact the innovation process, and how the need to innovate is reflected in changes to governance practices and behaviors in portfolios, programs, and projects.

Research Frame: Concepts and Brief Literature Review

Innovation has shifted from being the prerogative of the inventive and entrepreneurial individual to being part of a core competency for sustainable organizational success. It is no longer sufficient to rely on stable, repeatable operations and management, as the rapid rate of change requires the ability to (1) adjust and anticipate (Crossan & Apaydin, 2010; Esterhuizen, Schutte, & Du Toit, 2012) and (2) incorporate an appropriate model of governance, likely one that draws on the growing body of knowledge and experience in the project portfolio governance field (Pitsis, Sankaran, Gudergan, & Clegg, 2014). A repeated theme in the literature on innovation highlights ongoing technological, market, and social changes, and the resultant escalating impetus for improving innovation capabilities (Picciotto, 2017). The emphasis on innovation is widening, and innovation is now more likely to occur in the market instead of the institutional realms of science and R&D (Potts & Kastelle, 2017). Driven by the need to survive in an era of disruption, organizations are attempting to enhance innovative capability, challenging entrenched practices and cultural norms at all levels.

While organizations and governments actively look to innovate, there is scant guidance within the literature on how to approach and govern the inclusion of what may be an increased risk to their portfolio of change, project investment, management of knowledge, and even their operations. This brief review underscores why innovation capability is critical and explores the current literature relevant to innovation and portfolio, program, and project governance. Most of the literature focuses on either the project/program level (particularly processes for project and program delivery) or the portfolio level (which tends to emphasize the strategic and balancing aspects of managing multiple projects).

Innovation is the main driver of economic growth in the developed world (OECD, 2015). Growth and prosperity are strongly intertwined with innovation, the importance of which is acknowledged across most jurisdictions and sectors worldwide (OECD, 2015; Picciotto, 2017). To embrace and support innovation, leaders from all sectors are called to help raise the standards of governance and strengthen collaboration between business, government, and academia (AICD, 2017).

Innovation takes many forms, creating challenges for governing innovation, as governance needs to align with project type (Müller, Martinsuo, & Blomquist, 2008; Too & Weaver, 2014). Innovation may occur in gradual increments, or it may be a radical and high-risk endeavor, representing significant leaps in technology or entry into entirely new markets (Griffin, Price, Vojak, & Hoffman, 2014). In recent years, the OECD (2015) has broadened its definition of innovation to embrace aspects such as social, enterprise, and business model innovation in addition to the outputs of R&D or technology. This expanded definition of innovation also mirrors the one adopted by Crossan and Apaydin (2010) in their multidimensional analysis of the literature.

This study adopts a broad perspective of innovation and defines it as novelty that creates value. We refer to exploration when referring to the more radical initiatives that extend capabilities, and exploitation when referring to more incremental activities that exploit existing capabilities and generally deliver incremental improvements (March, 1991). However, exploration and exploitation projects require different, potentially conflicting, management approaches (Benner & Tushman, 2003). To innovate successfully, organizations must develop specific capabilities for ambidexterity that support both approaches (Andriopoulos & Lewis, 2009; Jansen, Van Den Bosch, & Volberda, 2006; Tushman & O'Reilly, 1996).

Insight into the factors that either hinder or enable innovation helps us understand whether a governance model is supportive or counterproductive to innovation. Research on the factors that support innovation repeatedly highlights enablers of innovation such as leadership, a supportive environment, and the sharing of knowledge (Esterhuizen et al., 2012; Svetlik, Stavrou-Costea, & Lin, 2007; van der Panne, van der Beers, & Kleinknecht, 2003).

Governance is defined as “the set of rules, (stakeholder) relationships, systems, and processes by which authority is exercised and controlled in organizations. Corporate governance influences how organizational objectives are set and achieved” (Biesenthal & Wilden, 2014, p. 1292). The Project Management Institute (PMI) differentiates portfolio, program, and project management functions from their governance functions by defining the governance layer as the what and the management layer as the how (PMI, 2016). At the portfolio level, governance is defined as “the framework, functions, and processes that guide portfolio management activities in order to optimize investments and meet organizational strategic and operational goals” (PMI, 2016, p. 42). At the program level, governance focuses on guidelines to deliver program benefits, and “project governance focuses on the guidance and oversight for project management activities in order to deliver a product, service, or result” (PMI, 2016, p. 67). From an organizational project management view, project governance sits within the corporate governance framework, and “provides the value systems, structure, processes, and policies that foster transparency, accountability, responsibility, and fairness to allow projects to achieve organizational objectives and foster implementation that is in the best interest of all internal and external stakeholders and the corporation itself” (Müller, 2017, p. 14). While the highest governing body of the organization is responsible for the governance practice, there is a cascading delegation of oversight. Each organization takes a unique and tailored approach for governing projects from ideation through to the delivery and the eventual realization of value (PMI, 2016).

Research on the relationship between governance, portfolio, program, and project management, and organizational success has escalated in recent years (Crawford et al., 2008; Joslin & Müller, 2016; Pitsis et al., 2014). Project governance comprises the value systems, responsibilities, processes, and policies that enable projects to achieve organizational objectives. These include aspects ranging from methods for reporting, project selection, and definition of project processes. As highlighted in the recent PMI publication Governance of Portfolios, Programs, and Projects: A Practice Guide (2016), governance is critical to project outcomes and there is a need for more research to help inform the development of relevant standards.

Research on portfolio and program governance and control, emphasizes the importance of alignment between governance type and project context for success (Müller et al., 2008; Too & Weaver, 2014). A two-way influence between governance and project approaches highlights the complexity of the situation. Governance choices are shown to affect culture and team performance in project environments (Toivonen & Toivonen, 2014) and the choice of project management approach (Joslin & Müller, 2016). The type and context of the projects and their environment provide the foundation for determining the appropriate governance approach to promote success (Müller & Lecoeuvre, 2014; Too & Weaver, 2014). Recent research illustrates the governance challenges created by the complexity in project environments and outlines the need for further research (Ahola, Ruuska, Artto, & Kujala, 2014).

From a portfolio management point of view, governance is a central factor in portfolio management success. Governance has a strong role to play in ensuring the appropriate level of flexibility and to ensure portfolio processes are suited to the context (Koh & Crawford, 2012). Indeed, portfolio-level activities and structures can overlap with governance frameworks, leading some authors to refer to project portfolio governance (Urhahn & Spieth, 2014) instead of the more common phrase, project portfolio management, especially when emphasizing the strategic and organizational impact of portfolio-level functions. A study of portfolio steering committee roles proposes a link between portfolio governance design factors (such as the frequency and duration of portfolio meetings and the performance of the committee) and the level of emphasis on the three functions of decision making, communication and consolidation, and negotiation (Mosavi, 2014). However, the role of negotiating and bargaining in portfolio management processes is not always acknowledged or well understood (Martinsuo, 2013).

Much of the literature on governance in project environments tends to adopt either a portfolio perspective or a project and program perspective. However, governance is a multilevel function acting at the intersection of these areas, leading to a call for a multilevel perspective on governance in project-based organizations (Biesenthal & Wilden, 2014).

Research on the management and governance of innovation in portfolios, programs, and projects emphasizes the role of tailored structures and processes. Project processes are seen as an important component of innovation success in multiple studies (van der Panne et al., 2003), and the project structures themselves often need to be innovative to suit (for example, see the April–May 2016 Special Issue of the Project Management Journal® devoted to innovation in project management). A large-scale study of project processes for innovation reveals patterns of how uncertainty and flexibility are handled across different types of innovation projects, and emphasizes that flexibility does not mean that structure and oversight are unnecessary; rather, that different structures are required for different types of innovation (Salerno, de Vasconcelos Gomes, da Silva, Bagno, & Freitas, 2015). Portfolio governance is more than the oversight and monitoring of active projects. It is the end-to-end process from ideation, selection, development, and ultimate delivery, deployment, or commercialization (Datta, Reed, & Jessup, 2012). However, research on the governance of innovation in a project environment is surprisingly scant at any level. One such study (Urhahn & Spieth, 2014) presents survey-based findings, suggesting that formality and explicitness in portfolio governance correlate positively with product innovation and subsequently, with organizational performance. There is tension between formality and flexibility in portfolio and project processes (Andriopoulos & Lewis, 2009). While formality is aligned with better innovation outcomes in Urhahn and Spieth's (2014) study, other studies at the portfolio and project levels emphasize the importance of flexibility for innovation (Kock & Gemünden, 2016; Sethi & Iqbal, 2008).

In summary, the literature highlights the importance of innovation and the role of governance for successful outcomes in project-based organizations—in particular, the importance of tailoring the governance approach to suit the context. Much of the literature focuses at either the portfolio, program, or project level; however, governance operates at all levels and at the intersections between them. The literature also emphasizes the special challenges created by the innovation imperative facing today's organizations. There is acknowledged tension between formality and flexibility in the governance of innovation that must be managed. However, there is little research at the intersection of governance; innovation; and portfolio, program, and project management. This report summarizes a research project conducted to provide guidance for organizations by exploring the governance mechanisms that drive innovation in portfolios, programs, and projects.

Methods

We explored governance as it relates to innovation at the portfolio, program, and project levels with six large organizations in Australia. These organizations were selected to represent diverse industry sectors in order to provide robust and varied perspectives on the ways that innovation is governed through portfolios, programs, and projects (Eisenhardt, 1989). We selected large organizations that had extensive project-based operations, strategies that emphasized innovation, and diverse professionals who we could meet for face-to-face interviews. All of the case organizations had a turnover of at least A$1 billion (approximately US$750 million). Details of the six case organizations are presented in Table 1.

Each case was based on documents such as company websites, annual reports, and items from the media, plus in-depth interviews with four to six executives and managers. To maintain interviewees’ and organizations’ anonymity, we coded their roles according to the two dimensions in Table 2. Number codes represent the interviewees’ level, and letter codes denote their functional area. Some interviewees were assigned multiple codes joined by ‘+’ if their role spanned levels or function categories. The majority of the interviewees were senior executives and managers (levels 2 and 3). On average the interviewees had worked at the case organization for 7.5 years, and some had been there for more than 20 years. In total, we conducted 28 interviews (with a total interview time of more than 26 hours).

Table 1. Case Organizations and Data Collected

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Table 2. Generic Role Descriptions for Interviewees

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The method for conducting the research followed this process:

img  Initial research using public sources to identify suitable candidate organizations;

img  Contact with targeted organizations; gaining agreement to participate in the study;

img  Conduct of four to six interviews at each case along with analysis of other information and documents to gain further context;

img  Analysis of the data (transcribed interviews and other documents), both within each case and across cases; identification of themes and patterns; and

img  Identification of relevant findings based on the themed analysis; preparation of publications, presentations, and reports to document our findings.

Interviews were conducted using a semistructured interview guide. We included open questions and used prompts when needed to explore the intersection of governance; innovation; and portfolios, programs, and projects in the case organizations (De Massis & Kotlar, 2014). Our study was designed to reveal connections, develop understanding, and support theory building. The use of multiple interviewees across the six cases enabled us to gain diverse perspectives and look for patterns and connections and to consider theoretical explanations (Herriott & Firestone, 1983; Yin, 2014). As this was an exploratory study, we used early findings to enable us to refine the protocol and to probe emerging themes.

The questioning in the interviews focused on the governance of innovation at the portfolio, program, and project levels as appropriate for each organization's management approach. The interviewer first introduced the topic and clarified our approach for ethical conduct of research, and the interviewee signed approved consent forms. We collected information on the interviewees, and then started the main questioning, exploring how innovation is viewed in the wider organization before focusing on innovation governance for portfolios, programs, and projects. Questioning probed how innovation was measured and the processes, structures, and policies that govern innovation through portfolios, programs, and projects. We also asked about related aspects such as the drivers for innovation, and interviewees’ impressions on the effectiveness of the governance approaches.

We recorded all interviews, and used anonymized versions of the transcripts to code and analyze the data with qualitative data analysis software. Themes for coding were initially derived from the literature, and then augmented as new themes emerged (Miles, Huberman, & Saldana, 2014). To ensure consistency in coding and to avoid bias, a research assistant who was not involved in the interviews did the main coding of the interviews, with oversight and validation by other members of the research team.

Primary Results and Discussion of Findings

We explored the governance of innovation at the portfolio, program, and project levels. Our findings have reflected the emphasis in the literature, in that most findings focus on the project level or at the strategic project governance/portfolio governance level. Where applicable, program governance and practices were generally discussed alongside project approaches. Integration between the levels was felt to be handled well for overall governance, with a range of approaches including cascading levels of authority, clear escalation paths to higher-level decision-making boards, and pivotal individuals who have oversight across multiple levels. However, governance of innovation, as discussed in theme 2, was not as well defined, resulting in weaker levels of integration and corporate-level oversight and consistency for managing innovation through projects. For example, enterprise-level PMOs existed in some organizations, but did not track innovation explicitly. Visibility of organizational innovation activity was improved when innovation was recognized as a value attribute in business cases or project scoping.

Our main findings emphasize how increasing rates of change are prompting organizations to adjust their approaches to portfolio, program, and project governance, and reveal areas of both strength and weakness. These findings are significant as they underpin the much-needed guidance for the governance of innovation through portfolios, programs, and projects presented in the following section. We present three themes of findings in the following three subsections. We start with our findings on the dynamic situation many organizations face, both in the external drivers for innovation, and in ongoing change and evolution to governance. Our second theme explores how governance supports the understanding, measurement, and reward of innovation; and the final theme focuses on specific governance approaches for integrating exploration and exploitation to get the most out of ambidexterity.

(1) Findings on Dynamism: Evolution and Change in Governance in Response to Dynamic Environments

An unprecedented level of external change was reported to be the main driver of innovation at the case organizations. External forces driving innovation included intense and increasing competition, high levels of technological innovation, shorter technology and market cycles, changes in regulations and policies, changes in the skills and experience needed in staff, and growing customer expectations. The combinations of driving forces and their intensity varied at each organization; however, the common theme was the increasing levels of change. The rate of change was reported to be high and increasing at each of the organizations through comments such as “It's the highest rate of change of anything that I've been involved in.” and “The pace certainly . . . has gone up exponentially.” Shortening cycle times were highlighted: “the world is moving . . . faster and faster in its innovation cycles” and “life cycles are measured in months, not years these days. The need to get products to market is a matter of days and weeks as opposed to weeks and months.” In addition, our findings emphasized the need for cultural change to support changes to governance approaches that are needed in dynamic environments. For example, one interviewee mentioned the need to cope with “a whole new world of ways of doing things that simply didn't exist a couple of years ago . . . but that requires a huge shift . . . a mind shift change.”

In addition to the consensus on the unprecedented level of change, there was no indication that the rate of change would be slowing in the future. Our findings showed that each organization had made changes in governance in response to the challenges in the dynamic environment. Whereas all organizations consider innovation critical for their success (if not survival!), each one conducted their governance using widely different processes and practices.

At times, by responding to external forces in choosing where to innovate, organizations found themselves in ‘catch-up mode while acting in a risk-averse manner. To better support innovation imperatives, five of the six case organizations had implemented widespread cultural and behavioral change initiatives. Hiring practices were one avenue to shift the culture by bringing in people with an innovation mindset, along with needed skills and experience. Other changes to portfolio, program, and project governance involved adjusting designated authority levels and other processes to reduce bottlenecks and remove unnecessary bureaucracy. Many of the responses involve developing or enhancing ambidexterity abilities as outlined in theme (3) below.

In at least three of the case organizations, changes to project execution frameworks were accompanied by changes to governance processes and practices, the take-up of which tended to lag the take-up of new and often innovative execution frameworks, such as scaled agile. This shift from more traditional project execution frameworks (such as generic waterfall and PRINCE2) has presented particular challenges for those in a governance role transitioning to new governance processes and procedures.

Our findings affirm that the ability to respond to change in the environment is an essential organizational capability—one that is often enabled through a dynamic capability. Dynamic capabilities are organizational capabilities that enable organizations to effectively respond to changes in competitive dynamic environments (Teece, Pisano, & Shuen, 1997). Project portfolio management has been shown to be a dynamic capability through its ability to integrate, build, and reconfigure project resources and also to evolve and adapt to stay relevant in changing circumstances (Killen & Drouin, 2017). Our findings suggest that portfolio governance can be a dynamic capability when the approach includes embedded processes to review, reflect, and adjust governance to meet evolving demands.

In summary, the case organizations emphasize the importance of innovation, driven by external changes in areas such as customers, markets, technology, and policy. However, as shown in the next theme, there are weaknesses in portfolio, program, and project governance processes, particularly for measuring and reporting on innovation.

(2) Findings on Innovation Governance Processes, Maturity, and Metrics

Despite the strong emphasis on the importance of innovation to meet changing circumstances, innovation was generally not well defined, understood, or measured at the case organizations. The understanding of innovation varied among organizations and even among interviewees at each organization. Interviewees acknowledged that measuring innovation was problematic for many reasons. In some cases, innovation was felt to be part of “everything”; in others innovation was done “over there.” Either way, few metrics were employed to measure the return on innovation investment and how innovation creates value. Business cases varied in their approach to innovation. Many did not explicitly define innovation as an attribute to justify the level of investment in programs and projects, and interviewees in organizations that did include an innovation attribute reported that financial measures still dominated.

Without consistent understanding and metrics for innovation, organizations were generally not able to report explicitly on innovation. Those in a governance role often operated in an information vacuum when it came to innovation. This was exacerbated when senior managers were seen as too remote from the action to fully appreciate innovation delivery intricacies and risks. However, where senior managers were actively engaged in product innovation, interviewees reported greater satisfaction in obtaining the necessary buy-in and that decision making was more effective in supporting innovation success. However, innovation decisions often sit outside the decision makers’ knowledge comfort zone, which can lead to decision delays and negative impacts on performance, throughput, schedules, scopes, and budgets.

From a project perspective, we found a wide range of governance processes that specifically addressed the innovation life cycle, from identification and ideation, through design, prototyping, development, and delivery. Agile practices were making an impact at all organizations. Agile approaches were often cited as an innovative way to conduct management projects, and this was usually associated with projects that aimed for innovative outcomes. However, several of the interviewees were careful to note that agile practices were not required for innovation, and that it was important to distinguish from innovative management and innovative outputs. In addition, interviewees also emphasized that a truly agile project environment required a shift in mindset; agile is much more than a set of processes.

Overall, the maturity of innovation governance processes lagged behind overall governance maturity for portfolios, programs, and projects. While many project practices were well defined and consistently applied, innovation governance processes were often not codified, and when they were codified, there was inconsistency and generally low compliance. We found that innovation was rarely explicitly defined when considering program or project scope, and that scope change requests involving innovation (particularly product innovation) were therefore difficult to manage. Schedule and budget pressures dominated because it was not possible to demonstrate the value in being innovative. In some cases there were no formal methods or processes to source innovation ideas, resulting in a reliance on serendipity and ad-hoc approaches. In others, especially for formal R&D operations, innovation pipelines were well defined and managed.

Risk and reward are central to innovation—from an investment perspective and also from the perspective of those who are tasked with delivering innovation outcomes. We found that, with several exceptions, there were few explicit rewards for being innovative beyond exploitative continual improvement efforts in the portfolio, program, and project space. Fear of failure affected decision making, including avoidance of terminating projects even when circumstances had changed, and other initiatives may have provided better value. Acceptance of failure was generally found only in specific environments, such as exploration initiatives. These exploration initiatives and their role in the wider organization are discussed in the following theme.

(3) Findings on Governing Innovation Through Ambidexterity

Ambidexterity, or the ability to manage both exploration and exploitation projects, has long been recognized as a strategy for innovation, especially in product development environments. We found that each of our case organizations had strengthened ambidexterity capabilities in response to the impetus to innovate. Interviewees reported the need to find the right level of governance to support innovation, acknowledging the tension between providing enough formality to provide rigor and oversight, while allowing enough flexibility to cater for the uncertainties associated with explorative innovation.

The struggle that the case organizations reported in finding the “sweet spot” in innovation governance signals a nuanced and complex situation that is suited to analysis from the paradox perspective. The paradox perspective acknowledges the need to embrace both sides, as well as the advantages in managing between and across the two sides (Smith & Lewis, 2011). The right innovation approach was recognized to be context dependent, and a number of new innovation units (called labs, hubs, garages, digital studios, etc.) were created in each organization during the past two to three years. Some interviewees expressed concern that such initiatives were conducted as innovation silos, with little or no cross-organization communication and collaboration. However, there were a number of examples where this exploration/exploitation nexus was brought together, by bringing many, often disparate, individuals and groups together to explore innovation both in the exploitative business-as-usual environment as well as in explorative programs and projects.

Table 3. Mechanisms for Integration between Exploitation and Exploration

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Guided by the paradox perspective, we identified four integration mechanisms that the organizations use to cross-fertilize knowledge and experience between exploitative and explorative endeavors, as summarized in Table 3. Our findings address the call for research into the mechanisms underpinning achievement in ambidexterity at the project level (Turner, Maylor, & Swart, 2015), and reveal how these integration mechanisms enhance the overall impact of exploration initiatives.

These integration mechanisms are particularly important for enabling the transition from explorative innovation to exploitative innovation that is essential for business value creation and for ensuring cross-organization learning and capability development. For the large organizations we studied, integration mechanisms are particularly important for harnessing the paradoxical tensions inherent in innovation endeavors and facilitating the creation of ambidextrous innovation capabilities to address the imperative to innovate.

Practical Application(s) of Findings

Our research has highlighted the need to tailor the governance of innovation to each unique environment, and suggests that organizations will benefit from governance that is codified, understood, and consistently applied. We deliver three broad sets of recommendations for designing portfolio, program, and project governance that supports innovation:

1. Design governance to respond to changing environments

2. Embed innovation metrics and incentives to improve innovation reporting and decision making

3. Include governance mechanisms to support cross-organization integration

1. Design governance to respond to changing environments.

In an era of unprecedented change, with increasing levels of change on the horizon, governance must be designed to enhance innovation capabilities. It is not enough to design governance to cope with today's challenges—in a changing environment, the governance must evolve to stay relevant. Therefore, our first specific recommendation is:

1.1 Embed a mechanism for review, reflection, and ongoing improvement and adjustment.

Embedding such mechanisms will enable portfolio, program, and project governance for innovation to act as a dynamic capability. Governance that evolves in response to change will remain relevant and able to deliver ongoing advantages in changing environments.

2. Embed innovation metrics and incentives to improve innovation reporting and decision making.

2.1 Create a common understanding of innovation.

Ensure that innovation is defined to adequately capture all aspects of innovation in the organization. Where appropriate, broaden the definition of innovation beyond the technical aspects that sometimes dominate innovation discussions to include all aspects of product, process, and people innovation. Ensure that innovation strategies are understood across the organization to enhance innovation governance maturity and effectiveness.

2.2 Develop and embed innovation metrics in portfolio, program, and project governance.

Develop and implement a few key metrics for determining the value expected or delivered through innovation initiatives. Qualitative indicators of the degree or type of innovation are useful for balancing innovation investments across portfolio frameworks. Where possible, quantify innovation as a value attribute to support strategic and portfolio decision making and prioritization processes, and ensure that the highest value programs and projects are prioritized for appropriate funding. Ensure that business cases include an assessment of the value derived from innovation to allow comparison of the relative merits of competing business cases, in particular those with substantial innovation components. Include innovation metrics in reporting processes to provide visibility of innovation investment and return.

2.3 Ensure decision makers understand the innovation challenges facing the organization.

Enable or encourage those with innovation governance responsibilities to get involved and extend their knowledge to improve the organization's ability to make timely decisions that support innovation success.

2.4 Implement formal methods and processes to source innovation ideas.

Create well-defined innovation pipeline processes that include formal ideation activities. Ideation (for technologies, processes, new markets, or other ideas) can be promoted by targeted idea generation, crowdsourcing, innovation challenges, or other activities.

2.5 Establish systems to recognize and reward those who are demonstrably innovative.

By explicitly rewarding innovative initiatives, organizations help to promote an innovation culture that will support innovation success. Individual rewards are appropriate in some circumstances; however, it is important to note that team-based rewards are best for promoting teamwork and collaboration.

3. Include governance mechanisms to support cross-organization integration.

Integration mechanisms will ensure organizations get the most out of ambidexterity. Embrace the paradoxical nature of innovation to ensure that exploration and exploitation are both addressed, while looking for ways to harness synergies.

3.1 Employ project portfolio governance to oversee balance.

Contemporary project portfolio management frameworks go a long way toward managing ambidexterity (Petro, 2017), and implementing effective portfolio governance is one step toward ensuring the right balance between exploration versus exploitation.

3.2 Create integration mechanisms.

Adopting a paradox perspective, use a portfolio approach to ensure that explorative and exploitative innovation processes work together, rather than being viewed as isolated choices. Create learning opportunities and bridges between exploitation and exploration by adopting one or more of the four integration mechanisms identified in Table 3. These examples support organizations in developing governance frameworks that provide clear guidance for managing transitions from explorative to exploitative innovation and that enhance employee capabilities for explorative innovation through activities such as forums for learning from experts, cross-fertilization through movement of people, and wider awareness-building activities

Conclusions

We conducted a multiple-case study to explore the governance mechanisms that drive innovation in organizations. Building on our findings, we offer principles and guidelines for tailoring portfolio, program, and project governance to support innovation. Our findings support and extend previous research on governance, innovation, and projects. Governance for innovation must not only enable portfolios, programs, and projects to adapt to external change, but the governance approach itself must evolve to remain effective. We expose weaknesses in understanding and measuring innovation that affect innovation governance and propose adjustments to governance. Our findings reveal the paradoxical nature of governing innovation and highlight the tensions between formality and flexibility and between exploitation and exploration. We identify four integration governance mechanisms that organizations can adopt to boost innovation ability by enhancing capabilities across and between exploration and exploitation.

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Appendix A—List of Outputs

(1) Governance of innovation in portfolios, programs, and projects

Practice deliverable: Presentation delivered at the PMI EMEA Congress 2019: PMI Europe, Middle East and Africa Congress, Dublin, Ireland, 13–15 May.

This paper presented findings from the research project, with an emphasis on practical implications and applications, recognizing the large practitioner make-up of the audience.

(2) Governance of innovation through projects: Ambidexterity and integration mechanisms

Academic deliverables: Conference and Journal publication

(2a) Paper presented and published in the conference proceedings for the 2019 EURAM: European Academy of Management, Lisbon, Portugal, 26–28 June.

(2b) PMJ® Paper—An updated version of the EURAM conference paper is under review.

This paper focuses on findings related to the paradoxical tensions in governing innovation and the development of ambidexterity in the case organizations. We introduce four types of governance mechanisms for integrating exploitative and explorative learning and capability development.

(3) Governance of innovation in organizations

Practice deliverable: Webinar delivered on 3 April 2019

The webinar presented findings from a study of six Australian organizations that manage multiple projects to achieve their innovation strategies. These large organizations represent a variety of industries, and each consider innovation necessary to stay in front of competitors and maintain industry leadership. The webinar highlighted areas of weakness and strengths in governing innovation through portfolios, programs, and projects and provided guidance for organizations to improve innovation governance.

(4) Final report

Academic deliverable: This document provides an executive summary of the full research project, including an overview of the main findings and the practical implications.

Appendix B—Comparison of Planned Deliverables in Research Agreement to Actual Project Deliverables

A comparison of the planned deliverables in the research agreement to the actual project deliverables is provided in Table B1.

Table B1. Comparison of Planned Deliverables vs Actual Project Deliverables

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Appendix C—Biographies of the Principal Investigators

MICHAEL KNAPP, PhD, has over 40 years’ experience as a portfolio, program, and project governance consultant, IT professional, project and program manager, trainer, presenter, and educator. Michael specializes in implementing excellent practices in portfolio, program, and project governance and management and advising senior management on the right governance arrangements to deliver optimal portfolio outcomes. He runs workshops in portfolio, program, and project management and leadership, implementing effective governance practices, and building organizational project management capability. Throughout his career, Michael has developed and implemented portfolio, program, and project execution frameworks for organizations within Australia and overseas. He has run more than 60 IT and organization change projects ranging in size from US$5 million to US$500 million. His client list includes federal and state governments, universities in Australia and the United States (Princeton), and many large and highly successful organizations (including Westpac, BTFG, NAB, ING Direct, QBE, Macquarie Bank, Telstra, AAPT, and HCF).

CATHERINE P. KILLEN, BSc (Hons), MEng, PhD, is an Associate Professor and the Director of the postgraduate project management program in the School of Built Environment at the University of Technology Sydney (UTS), Australia. Catherine conducts research in the areas of innovation and project portfolio management and has published more than 60 journal articles, book chapters, and conference papers in these areas. Her current research themes include the relationship between strategy and the project portfolio, the multidimensional nature of strategic value, and organizational capabilities for survival in dynamic environments. Catherine is regularly invited to speak at conferences, seminars, and industry events and convenes a project portfolio management special interest group with more than 100 industry-based members. She was an editor of the Project Management Journal from 2013 to 2017. Before joining UTS, Catherine worked in the private sector for ten years (with Hewlett Packard and Caltex).

CHRIS STEVENS, BSc (Hons), PhD, is experienced in portfolio and program delivery management, governance and general management, including establishing and running PMOs incorporating principle-based focused processes. He has utilized investment and strategic portfolio practices to manage the pipeline of discretionary and demand projects that make up a typical portfolio. He has an extensive background in commercial management in outsourcing environments, at both strategic operational levels, developing transformational change programs to improve profitability and customers’ and providers’ experience. He has held senior management positions at the National Broadband Network and Transfield. Chris was a member of PMI's Standards Members Advisory Group, providing guidance for the development of portfolio, program, project delivery, and practice standards. He was the architect who completely redesigned, rebuilt, and managed academic programs as director of the (PMI award winning) project management graduate program at the University of Sydney.

SHANKAR SANKARAN, BSc, MEng, PhD, is a Professor of organizational project management at the School of the Built Environment at the University of Technology Sydney, where he has taught courses on project governance and portfolio and program management over the last ten years. Prior to joining academia he worked as a senior project manager in industry for over 15 years in South East Asia and Australia. He has successfully completed an Australian Research Council research grant on project governance (where he was the lead chief investigator) and an international collaborative research grant with researchers from Europe and Asia on governance and ethics in projects. He is a chief investigator in the UTS Helmsman Megaproject Research Centre being established at UTS. Shankar is on the international editorial board of the International Journal of Project Management and Systems and an editor of Project Management Research & Practice.

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