Increasing the return on innovative effort requires both—a way to nurture and guide the ideation process as well as a way to systematically and fairly valuate both new ideas and new projects. To ensure best possible returns on projects, innovation-driven businesses could apply the portfolio concept also to the early ideation stage and combine this with a comprehensive valuation of innovation projects using the real options concept.

Innovation involves risk and uncertainty and turning tacit knowledge into leading innovation which is a significant challenge. Most organizations recognize the value of creativity and the benefit of good ideas. At the same time many organizations still have few, if any, organized ways of managing ideas or securing returns on creative effort. This is particularly obvious when comparing with the often well developed systems for managing technologies and projects, once an idea is being pursued for development.

Obviously, ideas that can convert into projects that result in higher revenues and profits would normally be preferred over ideas with less business potential or ideas that would be particularly difficult or costly to implement.

There could be many reasons why a firm may need to increase its innovation effort. Example: The firm's growth targets require new products, services or markets. The portion of the firm's business from new products or services is too small. The return on new product or service development is insufficient. The firm is not sufficiently competitive in existing markets and technologies. The firm is not proactively engaging emerging technologies and markets. Future scenarios indicate significant threats to the firm's position in the market. There may also be additional conditions indicating or predicting weak performance: The firm is losing reputation as a leading innovator. The firm is losing critical or cutting edge knowledge. The firm is not attracting new top talent in research & development. If left unaddressed, conditions like the ones above inevitably translate into an innovation gap that can be expressed as a future loss of revenue or putting additional revenues at risk.

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