Introducing the Innovation-Alignment-Portfolio to Balance Exploitation and Exploration of Innovations

Abstract

Research in the field of innovation is very important, because innovations are necessary prerequisites for the success of companies. Innovation management has to be executed in consideration of external influences (environment) and internal influences (company). The research topic is about optimizing the budget allocation for innovation management. The main research question is how to decide between the two basic options: exploitation and exploration. A promising way is to balance these two antipodes. One extent is to do research and development to explore new knowledge and create basic innovations as well as to use new technologies to invent new products (exploration). The other extent is to fully utilize and exploit existing possibilities, potential, and technologies (exploitation). It is a crucial management task to find the right balance between these two proceedings. To answer the research question is how to balance exploration and exploitation in an adequate way. The applied method is literature research and analytical development of a tool, which should help to find the right management decision about innovation strategy and budget allocation. This article is a conceptual paper with a deductive approach, in which the framework of variables influencing the decision about exploration and exploitation is introduced and in which the Innovation-Alignment-Portfolio (IAP) as a tool to substantiate the decision between the two antipodes is presented. As a result, the specific contribution to academic discussion, based on critical literature review, is twofold: firstly, deployment of a systematic framework of antecendents and tradeoffs influencing the management decision. Secondly, the development and introduction of the Innovation-Alignment-Portfolio. The structure of the paper consists of three main parts. The first part is about the introduction and problem formulation. In the second part, a critical literature review is done and leads to the research results, which are summarized in the framework of innovation management. Factors of influence are analyzed and discussed. In the third part, the Innovation-Alignment-Portfolio is introduced as a tool to balance exploration and exploitation. The conclusion of this paper is that decisions about innovation strategies can be made in a more differentiated way by using the Innovation-Alignment-Portfolio.