Innovation Governance and Portfolio Management: Why Tight Budgets Help
Kill your darlings, double down on winners, and stop funding sticky notes.
By Tristan Kromer · · 4 min read Quick Answer: Tighter budgets in 2023 are actually a forcing function for better innovation governance. As product managers, we should welcome the discipline: kill underperforming projects, double down on what’s working, and adopt innovation accounting to make evidence-based portfolio decisions. The shift from growth to productivity means resource allocation across Growth Horizons becomes critical — every innovation dollar must justify itself through rigorous evaluation, not just enthusiasm or sticky notes.
A video chat with Tristan Kromer, Dan Toma, and Noel Sobelman
Tristan, Dan, and Noel recently held a roundtable discussion on what governance and portfolio management will look like in the coming year, and what that means for the innovation game. Enjoy the video for the whole conversation, or you can read the opening conversation below. https://www.youtube.com/watch?v=uSwq4Xoh7HQ
Sandra
I’m Sandra Nešić, I’m the head of innovation consultancy at ICT Hub and I will moderate this session. It is my pleasure to welcome our three guests and panelists for this topic. They’re going to introduce themselves by answering a first round of questions regarding governance and portfolio management. Looking to 2023, what excites you the most?
Noel
Hi everybody! By way of introduction, I’ve been working in the innovation product development space for my whole career as an engineer, and do a lot of work helping mostly established large companies build Innovation capabilities, portfolio management, just looking for new sources of growth. The thing that I, I think where I’m excited about heading into 2023 is it’s going to be even more challenging, and I think a lot of large companies, their focus is shifting from growth to productivity. That is really right in the center of the topic today, governance and portfolio management – how you allocate resources in that environment is very critical. So innovation’s not going away, but I think we need to rethink how we prioritize across those different Growth Horizons.
Tristan
For my introduction today I’ll say that I’m a terrible engineer, so Noel is definitely a better engineer than I am. I’m much more of a product manager and business manager. I like to figure out viable product models, so I guess what I’m super excited about – which may seem unfortunate to some of you – I’m actually really glad that budgets are being slashed. I think there’s just been a glut of money thrown at innovation over the last five-ten years, and it has encouraged some really bad habits. Like, “Oh I like your 10 sticky notes, looks wonderful, here’s 10 million dollars, go to town.” That’s not really the sort of discipline and practice we want to have in innovation, so while it is unfortunate that budgets are being squeezed, it is an opportunity to bring back some discipline and encourage people to kill projects that are not working and reinvest that money, doubling down on the stuff that is working. So it is kind of the time of governance.
Dan
Yeah, I’m rounding the engineer circle off here. I have a diploma in engineering, but I haven’t worked one single hour as an engineer, so this is how bad I am, Tristan. You’re probably exponentially better than I am, and Noel is like light years away. Product development / startup entrepreneur was my first job, my own company, and I’ve been on the entrepreneurial path ever since to be honest with you. What excites me about this coming year in terms of innovation – I really hope it’s going to be the year of innovation accounting. With budgets being slashed and innovation being put now under a microscope, I hope that more people will turn to innovation accounting as a field that can tell us – are we investing in the right things? Are we investing too much? Too little? What should we be investing in and how much? To see the full discussion, please watch the video above. If you think your company could use a more disciplined approach to innovation, check out our Innovation and Portfolio Management workshop, or our full Innovation Accounting program, a six-week, online course that will show you how to make better decisions about your innovation projects.
Further Reading
Innovation Project Governance Do’s & Don’ts by Noel Sobelman Evidence-Based Innovation Portfolio Management by Noel Sobelman The Big Hairy Challenge with Separating Innovation from the Core Business by Noel Sobelman Innovation Portfolio Management – Principles Before Tools by Martin Kupp and Tristan Kromer Adaptive Strategy by Tristan Kromer and Susie Braam Managing Your Innovation Portfolio by Bansi Nagji and Geoff Tuff Special thanks to Dan Toma and Noel Sobelman and Sandra Nešić for their participation in this discussion.
Frequently Asked Questions
Why is budget cutting actually good for innovation?
As Tristan Kromer argues, years of easy money encouraged bad habits — like funding ideas with millions of dollars based on little more than sticky notes. Tighter budgets create an opportunity to bring back discipline, kill projects that aren’t working, and double down on those that are. It’s a forcing function for better governance and smarter resource allocation.
What is innovation accounting and why does it matter in 2023?
Innovation accounting is a framework for measuring whether we’re investing in the right innovation projects, how much we should invest, and whether those investments are paying off. As Dan Toma explains, with budgets under a microscope, innovation accounting helps us make evidence-based decisions rather than relying on gut instinct or political influence when managing our innovation portfolios.
How should large companies approach portfolio management when shifting from growth to productivity?
As Noel Sobelman highlights, when companies shift focus from growth to productivity, how we allocate resources across different Growth Horizons becomes critical. Innovation doesn’t go away, but we need to rethink how we prioritize across those horizons — balancing core business improvements with longer-term bets in a more disciplined, resource-constrained environment.
What does good innovation governance look like in a tighter economic environment?
Good governance means being willing to kill underperforming projects and reinvest that money into what’s actually working. Rather than spreading resources thinly across too many initiatives, we should use evidence-based approaches — like innovation accounting — to evaluate projects rigorously and make portfolio decisions based on data, not just enthusiasm or sunk costs.
How do governance and portfolio management work together for innovation?
Governance provides the decision-making framework — the rules for how we fund, evaluate, and kill projects — while portfolio management ensures we’re balancing investments across different risk levels and time horizons. Together, they help us allocate scarce resources strategically, which becomes especially important when budgets tighten and every innovation dollar needs to justify itself.
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