Innovation Portfolio Strategy: Learning from Shermans & Tigers.
Incremental gains or moonshots? Here is a structured analysis of the main innovation portfolio strategies in light of history’s wartime innovation strategies.
The technology strategies of World War II foes vividly illustrate the clash between a large number of safe bets and a small number of risky ones. The United States, for instance, mass-produced thousands of Sherman tanks, Jeeps, and Liberty Ships, favoring easily manufactured and maintainable designs that could be rolled out en masse. At the same time, the U.S. made one high-uncertainty, high-reward bet on the Manhattan Project, ultimately delivering the atomic bomb. By contrast, Germany concentrated on fewer, highly advanced systems, like Tiger tanks, V-2 rockets, and early jet aircraft, which were radically superior or disruptive yet complex and resource-intensive. Germany’s focus on high-risk-high-reward programs often ignored basic battlefield needs such as a decent semi-automatic rifle.
Given this vivid illustration from history, which innovation portfolio strategy should you adopt? Before generalizing in the final thoughts section, let’s dive into three potential approaches to innovation: Strategy A, Strategy B, and Strategy C.
Strategy A: Large Number of Small, Safe Bets
Organizations often choose to place a large number of small initiatives with minimal uncertainty. Think of this approach as mass-producing innovation—almost like an assembly line that churns out new products, features, and process improvements.
Core Advantages
Reduced Risk Per Bet: Since each project is relatively small-scale and focuses on low-risk opportunities, the risk of failure is minimized.
Scalability: If you find a winning idea, you can quickly replicate and scale it across different business units or markets.
Faster Evolution: Multiple small bets offer more real-time feedback loops, enabling faster iteration and improvement.
Compounding: Achieving small improvements via serially aggregated levers will compound to significantly big improvements.
Tradeoff: Choosing Low Risk Over High Return: Because each bet is small, your short-term returns on any single idea may be modest. You’re playing the odds by pursuing many potential wins, but it might be harder to spark a massive leap in performance or market share unless the aggregate velocity (number of bets in a given time frame) is high enough.
Key Considerations
Operational Excellence: To handle many small projects efficiently, you need robust processes and optimized organizational structures.
Culture of Experimentation: Fostering a mindset that embraces continuous testing, failing, and pivoting quickly is crucial.
Segmentation: Segmenting small bets in terms of their execution requirements will help design optimized organizational structures.
Strategy B: Small Number of Big, Risky Bets
Sometimes, incremental innovation just won’t cut it. Placing a small number of large, high-stakes bets can be a game-changer. This approach is about resource concentration—doubling down on one or two moonshots that could catapult you ahead of the competition. It can also ward off rivals who aren’t willing to take on such big, uncertain projects.
Core Advantages
Potential for High Returns: If your big bet pays off, it can secure a dominant market position, increase brand equity, or redefine an entire industry.
Competitive Differentiation: Committing significant resources to a bold initiative sends a strong signal about your company’s vision and capabilities.
Barrier to Entry: Eliminates competitors who may not want to take on similar risks or may lack the resources to do so.
Tradeoff
Choosing High Returns for Higher Risk: For each breakthrough idea, the likelihood of failure can be substantial. If a big bet fails, the financial and reputational impact could be significant.
Key Considerations
Leadership Buy-In: Successful big bets often require top-level commitment and the willingness to weather initial pushbacks or even interim failures.
Risk Management: Adequate planning, scenario analysis, and a strong fallback strategy are essential to mitigate catastrophic loss.
Super Teams: Big leaps require the combination of great talent, team, and leadership. Not possible with mediocre resources.
First Mover Disadvantage: Being the first mover does not necessarily create a competitive advantage. Be intelligent.
Strategy C: Hybrid Approach
Instead of sticking to just one approach, why not blend the two? In Strategy C, you commit to a foundation of smaller projects that improve current performance and productivity—your “incremental engine”—while also placing a bet or two on transformative, disruptive ideas. This way, you nurture near-term results while also preparing for the next era of your industry.
Core Advantages
Balanced Portfolio: With both small incremental wins and one or two audacious moonshots, you can ride out short-term ups and downs while still preserving the chance for transformative success.
Adaptive Learning: Insights from smaller bets can feed into riskier projects, and breakthroughs in the high-risk bets can inspire new small-scale initiatives.
Long-Term Vision + Short-Term Gains: You maintain the focus on capital performance while actively seeking the next wave of industry disruption.
Tradeoff
Choosing the Best of Both Worlds with Complexity: Managing a split innovation strategy can be more complicated. Different project types may require distinct processes, teams, success metrics, and compensations which might be hard to maintain and explain. Eventually, you might fail at both due to increased complexity and internal struggles.
Key Considerations
Organizational Alignment: Ensure every level of the organization understands why you have both incremental projects and highly disruptive bets.
Resource Allocation: Be clear about how resources, talent, and attention will be divided between stable, accretive projects and more radical experiments.
How to Decide?
Assess the economic regime of the next 5 to 10 years: Before committing to any innovation strategy, consider the broader economic climate you anticipate. Are you expecting stagflation, a recession, or another round of the roaring ’20s? Evaluate whether you see revolutionary opportunities with a limited window for first-mover advantage, or if the risks currently outweigh growth prospects. This analysis will help you determine whether you’re better served by smaller, incremental bets or by bold, transformative initiatives.
Assess Your Risk Tolerance: Reflect on how comfortable your organization and your stakeholders are with potential high-stakes failures. If you can weather the ups and downs of a moonshot (Strategy B), you may reap outsized rewards. If your priority is minimizing the downside, a fast-fail approach with many small, safe experiments (Strategy A) may be more suitable. If you want both near-term stability and long-term disruption, a balanced portfolio (Strategy C) could provide the best of both worlds.
Evaluate Your Capabilities: Be honest about your internal infrastructure and culture. Do you have the processes and talent in place to manage many parallel initiatives efficiently (Strategy A)? Or is your organization designed for a deeper focus on fewer but more ambitious bets (Strategy B)? A mixed approach (Strategy C) requires enough agility to handle incremental improvements while still nurturing one or two disruptive projects.
Understand Your Market: Some sectors experience rapid, disruptive shifts, rewarding companies that place big bets. Others evolve more gradually, favoring consistent, incremental improvements. If your market is uncertain or subject to sudden swings, a combination of small, steady bets and a few larger bets can help hedge against volatility and position you for the upside.
Competitor Signalling: The bets you choose to make—and the resources you commit—send strong signals to competitors. Also, read competitors’ signals to avoid unnecessary escalation of competition.
Leadership and Culture: The organizational mindset needed for Strategy A (many small bets) emphasizes a culture of experimentation and continuous improvement. Strategy B (a few big bets) demands visionary leadership, high risk tolerance, and buy-in at the top levels. Strategy C (a blended approach) requires leaders who can navigate complexity, balance different funding models, and maintain focus on both incremental gains and disruptive moonshots.
Final Thoughts
The optimal strategy ultimately depends on your organization’s broader context. However, if we generalize, Strategy A is the most reliable in stable environments and may only fall short during major industrial or market revolutions. Meanwhile, Strategy C, due to its inherent complexity, is more prone to end up combining the worst of Strategy A and Strategy B than bring the best of them.
© Saip Eren Yilmaz, 2025
