As we wrap up November, we’re also getting toward the end of budget-planning season. (I know not every company works on a calendar fiscal year, but for a lot of us, Oct./Nov. is when we plan out budget allocations for the next fiscal year). We’re sorting out what we want to prioritize in 2024 but staring down the barrel of… economic uncertainty (to put it mildly). Experts can’t seem to decide if we’re gunna nail this soft landing, if inflation is going to spiral out of control, or if a long-rumored recession is coming home to roost. Against that backdrop, though, it becomes difficult to figure out what to prioritize as a company next year. While so many big name companies are downsizing, do you double down and invest in innovation? Do you cut budgets too? Are they mutually exclusive?
Maybe you’re gearing up for an innovation investment, but you need to convince some C-Suites to loosen the purse strings? Or are you getting pressure from above to tighten the proverbial belt, but you also know doing so might surrender market share?
It’s a fraught time to be sure. That’s why I gave a live webinar about this very thing a few weeks ago (which you can find in full here):
Below, you can find some of the highlights from the video above.
One of the biggest things we try to dispel is the notion that innovation necessarily means revolution. The two do not mean the same thing.
Innovation is necessary for revolution, but it’s not sufficient on its own. You can innovate without completing changing the world (the overwhelming majority of innovations fall into this bucket, mind you).
Public perception of innovation often looks like Alphabet’s moonshots — completely out of left field, could be revolutionary… but also might burn a few billion dollars without a tangible end result. That’s fine for a $1.5-trillion company… but most companies can’t afford huge swings and misses like that.
The good news is that’s only a very, very narrow way to think about and conceptualize innovation. So, change your frame of reference. You can innovation without revolutionizing your entire industry. You can make huge gains against competitors without sinking massive sums of money into an innovation effort. You really don’t have to spend years in R&D and tons of cash to build an innovation product.
When budgets are tightening, you have fewer shots… fewer things you or your company can invest in. You have to be more intentional about what they are. You also have to be very clear about what overall company priorities are, where this fits into that, and make sure you’re not derailing other priorities that might actually be more important right now.
To that end, though, you can make a strong case for an innovation effort in that environment, you just have to be very clear about where it fits into the overall corporate priority list, why it fits there, and how it ties to the broader goals of the organization.
You have to have a clear P&L case for your innovation effort. It must be in lockstep with overall corporate business objectives and overarching strategy. Only if you’ve got all these ducks in a row do you have a chance of securing funding for an innovation project in today’s hazy economic environment.
If you’re trying to secure funding for a project, especially in a turbulent economic environment (or amidst budget cuts), your plan for that project needs to be rock solid.
The plan needs to be:
Part of that well-detailed plan is what we can validation gates. A validation gate is basically a go/no-go point in software development. We stagger them throughout a project, and at each gate we have to prove to ourselves (and usually our client(s)) that we have achieved enough validation to continue onward. Did we do user testing and get good enough feedback that we keep building? Do we have a realistic change of getting a Minimum Lovable Product built on time and on budget? At the end of every 2-4 sprints, are we tracking progress precisely with the roadmap we laid out?
In an economic environment like we find ourselves now, these validation gates need to be crystal clear with associated timelines. And, more crucially, each validation gate needs to be a potential off ramp if you missed the gate and aren’t going to achieve it within an acceptable margin of error.
These type of intermittent goals (with off ramps) give your executives transparency, makes you accountable, and gives you both an opportunity to cut bait if you’re not on target or on budget (without wasting a ton of cash).
If there’s a chance to invest in a high-priority innovation initiative, but the execs don’t have to eat the entire apple at once… but can re-evaluate at multiple bites along the way? You’re much more likely to secure funding for that.
I know this sounds simplistic, but you’d be amazed at how many times in my career I’ve seen employees or partners not secure funding for a project or product simply because they never made the formal request.
Yes, it’s tough to ask for funding in a belt-tightening phase of the economy… but you also never know what’s going to happen if you don’t make the ask.
If your plan has everything we listed in the last section, there’s a non-zero chance you get it approved. But if you don’t ask, then you’re definitely not getting anything. So make the ask!
Even if you don’t get funding in Q1 or Q2 of 2024… if you’ve made a well-researched, well-presented and bottom-line impacting pitch, you’re more likely to secure funding when budgets do loosen up. So the earlier you can make a compelling pitch, the more likely it’ll get done at some point.
Another big frame of reference problem we see all the time is that an enterprise says to themselves, “well, we need to innovate around X division or priority… call a big 4 consulting firm.”
Like the old adage used to go, no one ever got fired for hiring IBM.
But for far too many companies, that’s not actually the best way (or at least not the most cost effective way) to innovate.
There are more limited engagements, like our Innovation Lab, that can get you the clarity you need to make an immensely better-informed decision.
Documentation, prototypes, road maps… these can all be achieved for a fraction of the cost of hiring a big consulting firm. It also allows you to prove out your concept, see a clear and achievable road map all without sinking moonshot money into an idea.
This also provides a much faster timeline to validation, it’s much more cost effective, and lets you tackle things incrementally (which can be a huge help in a budget-conscious time).
This is more future looking, but companies that innovate effectively often have it baked into their corporate culture. You don’t go from a “tried and true” type of shop to an innovation hub overnight… it takes time and commitment to innovation as a core value.
… but none of that happens without someone (or a group of someones) pushing it… selling it… being cheerleaders for it.
Culture is created. What you value and reward in your company reflects your culture. So if you want to build a culture of innovation, you have to live it.
If you’re trying to make your company more innovative, you need to be that ambassador of innovation. If might not get your project funded in the next quarter, but it will make every future project easier and easier to get buy in.
Obviously there are a lot of complex calculations any organization has to undergo when making budget priorities for the next year; whether or not your preferred innovation effort is certainly among those considerations, especially given the economic climate. As such, we hope this post (and the more in-depth video I recorded) helps prepare you with the insight necessary to get your project off the ground (if not now, sooner than it otherwise would).