Consideration of risk and reward in balancing technology portfolios

When managing technology portfolios like the Small Business Innovative Research (SBIR) Program, NASA makes a considerable effort to gauge the risk and cost as guidance factors for balancing a program. Metrics like the Technology Readiness Level (TRL) are used to determine the maturity of a given technology and thereby provide an assessment of the required steps and funding needed to infuse the technology. Analysis of funded SBIR projects indicates that a newly developed metric described in this paper that can be a proxy for “benefit to NASA” shows strong correlation to receiving Phase II awards. We examine this correlation to determine which additional metrics might better assess the potential programmatic reward for investing in a given technology. By examining a pool of proposals with high technical merit that are initially recommended for funding, we have developed a metric known as the “Technology Impact” that seems to have a good correlation with proposals selected for award. This reward potential or impact of investing in a new technology is divided into two factors. The first is the value of the missions or programs impacted. For NASA the value of all funds associated with the creation of or the contribution to the program is the “market”. Depending on the specific technology the size of the market could be a component, an instrument, a service or even an entire flight mission. The second factor is the leverage a new technology will have on the value of the impacted missions. As TRL acts as a proxy for risk, we propose an analogous proxy for reward called the Technology Leverage Factor (TLF) as a measure of the potential leverage a technology can have for creating the market. TLF is a measure that relates to the market contribution of the new technology. This can range from a 1% contribution for a component, a 10% contribution for an instrument, to a 100% contribution for a mission enabling technology. We use the market size estimate and TLF to demonstrate how these can be used to create risk reward metrics to be used in conjunction with TRL for technology portfolio management.