During the first half of 2009, the Research & Technology Executive Council of the Corporate Executive Board interviewed and surveyed R&D executives (1) from over 100 global companies (2) about the biggest challenges facing them today, particularly related to managing R&D portfolios during a period of heightened uncertainty. One thing became clear from these conversations: R&D project valuation continues to vex even the most progressive organizations. To address this ongoing challenge, leading organizations are revisiting the way in which they measure and select R&D projects-namely, they are tweaking, if not redesigning, their innovation scorecards. The Top Ten List below summarizes what we learned from these conversations and provides some quick tips for R&D and strategy executives who wish to improve the quality of R&D project selection and portfolio balancing in their organizations. 1. Get agreement across your organization on what constitutes and incremental projects. When balancing your R&D portfolio, you probably look at the percentage of incremental versus projects, among several other parameters. But if everyone in your organization is defining breakthrough differently, how do you know how much you are truly innovating? Before you begin selecting criteria for your scorecard, clearly define your project classifications by a few critical business outcomes. We spoke with one progressive chemicals company that defines its classifications according to three critical metrics: IP protection, Peak Year Sales, and Marginal Income. Every company needs to decide which metrics are most important for its organization, and once you come to a consensus on what constitutes a breakthrough project, it is much easier to design an innovation scorecard that will help spot these projects early and facilitate more accurate portfolio balancing. 2. Ground your scorecard in the business perspective. Central R&D groups often become so focused on creating standards that they end up with scorecards or processes that ultimately have a generic fit across multiple diverse businesses. But the goal of creating a standard innovation scorecard isn't to find the lowest common denominator but to help companies make better R&D prioritization and funding decisions. This always needs to be fundamental to scorecard design. Companies should work closely with their business partners to ensure that they can meaningfully assess project value and help drive better decisions. 3. Don't ignore project interdependencies. Project scorecards usually assess the attractiveness of individual projects as independent workstreams. When designing scorecards and decision-making processes using scorecards, companies must account for project interrelationships and interdependencies. For example, while certain projects may not appear profitable at the surface level, they may be crucial in forming the foundational technology for other large-scale projects. We spoke with one company whose innovation questionnaire explicitly asks each project manager to rate the interdependency risk and opportunity associated with each project. 4. Keep the list of criteria short. There's only so much information that people can process to help inform meaningful decisions. We've seen some scorecards that examine over 20 different criteria and some with as few as three. Typically, companies include 5-7 criteria, and the most progressive companies try to limit the number to no more than 12. Companies should keep it short and look for opportunities to continually refine and cut down on the amount of information required to make decisions. 5. Secure early support from Finance, Marketing and Operations. It is absolutely critical that R&D involve other functions at the earliest stages of technology and product development. When developing standard project evaluation criteria, R&D should solicit input from other stakeholder functions to ensure that everyone can agree on how to prioritize innovation projects. …