Encyclopedia of Technology and Innovation Management

Chapter 36. Evaluating Innovation Projects

Mark P. Rice

Babson College

All enterprises face a common challenge: creating the future (the domain of innovation and entrepreneurship) while simultaneously exploiting the past (the domain of ongoing operations). Given the differences along multiple dimensions between projects that exploit the past versus those that create the future, particularly with respect to the extent and magnitude of uncertainties that must be resolved, it is necessary to deploy different evaluation processes. Delineating these differences is the primary focus of this chapter.

Project evaluation can and should be viewed as an opportunity to compare and contrast all projects across the firm—those that are part of ongoing operations and those that are part of the portfolio of innovation projects. It is possible—even likely—that some of the projects supporting ongoing operations are less important to the short and long-term health of the firm than innovation projects that result in a future that is different from the past. Hence, evaluation that leads to reductions in the portfolio of projects supporting ongoing operations is a form of innovation, as it results in a reshaping of the firm. Decisions made at the conclusion of an evaluation process determine which projects will be pursued and which will be killed or shelved. Performance of the portfolio is determined as much by evaluation outcomes leading to the cancellation of poor performers early in the project life cycle ...