TVP – Metric 1 Strategic Alignment

Resource Type
Tool
Authors
Alan Fusfeld, Innovation Research Interchange
Topics
Innovation Metrics, Stage-Gate, Tools and Techniques
Associated Event
Publication

Background | User Guide | Program Contents | Stakeholders | List of Metrics

1. Definition

The degree of alignment of an R&D project or an R&D portfolio with the strategic intents of the company or a division of the company. The strategic intents are often the corporate goals embodied in its business plan.

2. Why it is used

This metric is used to gauge the degree of relevance of the R&D program to the corporate goals. The strategic intents of a company may change more rapidly than the R&D program can respond to those changes creating various degrees of misalignment. The misalignment can be with regard to work area, long term vs. short term needs, or degree of risk.

3. How to use metric

There are a number of ways this metric can be applied, including both prospective and retrospective views. It can be applied by R&D management, general management, or by both working in partnership.  An alignment index would be assigned to each project; a linear scale of one to five would work well. These scores may also have value when considering relative merit of individual projects in the portfolio. A composite score for the entire portfolio would then be determined. This could be a weighted average reflecting sizes of projects with regard to technical head count, project budget or some other appropriate weighting factor. Once a baseline for alignment has been established, R&D management can then decide if and how this index should migrate to greater or lesser degrees of alignment through modifications of the portfolio. Applied to individual projects, there could be a cut-off point for the alignment parameter below which projects are not supported.

Consideration must be given to the degree of alignment desired. Although the desired state in many cases is toward greater degrees of alignment, situations may vary. A research organization charged with taking the company in new directions may not want its project portfolio highly aligned with the current business plan. A more visionary business plan may capture new directions as well as current businesses, but many organizations find that some degree of decoupling is desirable. 

4. Options

Both retrospective and prospective views are options of this metric. The retrospective view entails applying the metric to an existing portfolio of R&D projects to determine the degree of the portfolio with corporate goals.

The prospective view is to apply the metric to a proposed project or slate of projects. If the R&D organization is trying to increase its alignment index, then the management will be less likely to initiate projects that move the composite score in the wrong direction. Similarly, an alignment index cut-off may be instituted. Projects falling below some minimum value of alignment would not be supported.  In addition, R&D investments that are needed to broaden or refocus the company’s product portfolio may need to be specially accounted for. 

5. Champions and Contacts

6. References

Roussel, P. A., Saad, K. N., and Erickson, T. J. 1991. Third Generation R&D, Harvard Business School Press, ISBN 0-87584-252-6.
Winning in High Tech Markets, Joseph G. Morone, Harvard Business School Press, Boston, MA (1993), ISBN 0-87584-325-5
Say, T. E., Fusfeld, A. R., Parish, T. D., 2003, Is Your Firm’s Tech Portfolio Aligned with Its Business Strategy?, Research -Technology Management, Jan-Feb, pp.32-38