How to Set Your Innovation Budget
When it comes to allocating funds for innovation, every company is different. However, the general rule of thumb for divvying up those funds is to follow the 70:20:10 ratio.
Figure out how much time, funding, and human resources you can put toward innovation; out of those resources, 70 percent should be dedicated to incremental innovation for existing items, 20 percent should be earmarked for the extension of products and services into new markets, and the last 10 percent should be applied to game-changing breakthroughs.
After evaluating your resources, you need to examine specific ways to use them. Here are some tips for making your resources stretch as far as possible:
1. Hire Professional Starters. These are people who can create new opportunities within the existing framework and resources of the enterprise. They are not functionally bound and can be expected to work across the enterprise, rather than within a functional silo.
2. Deploy the Human-Centered Design Process. Commonly known as “design thinking," this process places user, stakeholder, or customer needs at the heart of the innovation process and seeks to drive an empathetic understanding of those needs into strategic and operational innovation responses.
3. Create and Leverage Workspaces. Build in ways for functional teams to create cross-fertilization of ideas. Use spaces to support and grow project-driven innovation activities in ways that are meaningful and visible to the whole organization.
4. Exploit Existing Assets. Supplement existing resources so they can be repurposed and help you innovate more effectively and rapidly. Step back and look at what you already have that could be improved with small changes. Seeing yourself with fresh eyes can promote surprising outcomes.
5. Extend Relationships. Seek ways to expand the social network within the enterprise. Consider Malcolm Gladwell’s model of mavens, connectors, and salespeople to take advantage of employees’ hidden talents. Think about expanding that social network into networks like InnoCentive or Quirky that encompass resources outside the enterprise.
6. Look at Big Problems. Unless the greatest problems that users, stakeholders, or customers face are elevated and become a source of focused attention, opportunities for breakthrough innovation will be lost. These can be your greatest resources to fuel your innovation.