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How to balance your innovation budget and resources

Dedicating time and resources to innovation for your business is HARD yes – but here’s how we’ll remedy that situation for you

Day-to-day business operations require a lot of your attention and resources. It can be the time needed to onboard your clients, provide support, or debug software. 

All very valid activities to ensure you serve your customers accordingly. 

Typically organizations spend a lot of time and effort solving yesterday’s problems and fixing today’s problems, leaving little to no room for critical longer-term developments.

Although all of these necessary actions are needed to ensure that your customers are satisfied, it also introduces risk as your business focuses entirely on the short-term results and bottom line. 

The risk you create is that of putting long-term healthy growth and revenue at stake. All of the energy and scarce resources are concentrated at your exploitation portfolio and not aimed at your more disruptive exploration portfolio, leading to a position of only being able to react to changing circumstances.

How can you recognize that your organization’s orientation is too much in the short term? 

Below are a few examples of red flag signals to be aware of:

  • Lower product revenues
  • Lack of defined North Star
  • Little to no innovation projects
  • No or limited roadmap communication
  • Declining CSAT scores
  • No clarity about available innovation CAPEX and OPEX
  • Customer projects take precedence
  • Increase in churn

 

Disruptive innovation, new business models, and improvements are all needed to satisfy the needs and wants of your existing customers and potential clients. 

It is just as important for customers to know about how you can help them and serve them today as to know about your purpose and vision about the future and your roadmap. 

Markets typically are crowded, and lots of alternatives are available to choose from, making it very important to provide perspective and a predictable path to the future to build and maintain long-term healthy partnerships.

Suppose your organization’s policy is more ad-hoc or short-term oriented, or you don’t come around to execute on longer-term developments. In that case, you can adopt a three horizons investment policy and product portfolio development approach. 

The three horizons approach ensures that you allocate enough budget and resources for each type of innovation so that today’s problems get fixed and you develop future income streams in a timely and balanced manner.

I think this is something that we all recognize and sounds logical; however, do not underestimate the impact. (personal thought here on this)

Developing an innovation budgeting policy is one thing, but following through with the implementation and day-2-day execution is harder. Sticking the chosen approach to execute on your long-term roadmap requires perseverance and is all about your corporate mindset and ability to change.

 >> What will you do when this important client project requires significant investments and prioritization? 

>> Are you willing to adjust your targets when your roadmap is re-prioritized for short-term benefits? 

As these decisions are always necessary and complex, you should consider the long-haul implications as part of your decision-making.

The horizons distinguish three types of innovations, each having associated budget allocations. Typically, a distribution can look like this:

  • HORIZON 1: Improve core business – 60% of the budget
  • HORIZON 2: Build incremental new business – 25% of the budget
  • HORIZON 3: Create disruptive new business – 15% of the budget

 

I am writing a little e-book about the three horizons investment policy and product portfolio development approach (add WHY we’re creating this specifically to our audience) 

Comment ‘Horizon’ below and send me a DM with your best e-mail address to shoot over the e-book! 

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