Innovation: Put your money where your mouth is!

Some views on how to allocate budget towards idea management…

So you’ve bought your first idea management system. The problem now is the exact opposite of the one you faced in the past: You used to not have enough ideas and now you have too many. Let’s take a look at how many innovative companies push ideas through the process and allocate budget to them. After all, the way to keep your smart people involved in the idea management process is to show them you can move ideas to production. This is one of those times that actions speak louder than words.

There is, of course, the fuzzy front end of innovation where a plethora of ideas inundate innovation managers. The trick here is not to nurture too many unsolicited ideas, nor to encourage process improvement ideas. Instead management usually wants to impose some structure upon the chaos by putting challenges or seeds out there. This way all those smart subject matter experts on your team are encouraged to be not just organizationally engaged but strategically aligned. And the results include “breakthrough” ideas.

We can talk elsewhere about the mechanisms that elevate ideas to higher levels but let’s think about funding. During the first stage we’re putting a valuable asset into the ideas: we’re encouraging our team to dedicate time. But then we pick a subset of ideas worthy of promotion to a higher level. Let’s call it a “concept”. If companies have a $100 million dollar idea budget, they usually put about 10% or $10 million into these concepts. They get technical assistance on specific subjects. Innovation managers are eye balling these concepts carefully, looking to see if any of them can get clustered or merged or even be offshoots of the original unit.

If they are worthy to move up to the next level, let’s call it “pre-project”, they deserve marketing and technical exploration even further. They get typically 20% of the budget or $20 million. Each project in this phase might take as much as a year but usually no longer.

Those that make it through to real project get the lion’s share of the R&D budget, or 50% (Yes, $50 million dollars). A project in this stage could easily take from one to three years. Maybe the results are striking and the project doesn’t fit into an existing business unit. Perhaps the company needs to spin off a new business unit to accommodate it. But this stage represents the “research” in the R & D process.

Finally, we’re in development, and we put in the remaining 20% of our funds. This phase can take as long as two to five years, depending on the company, the idea and the marketplace it serves.
This sort of thinking at an innovative company demonstrates a commitment for the ideas.

If you want to seduce your team to participate in the idea management process, they want to see ideas get moved to eventual production. To prove that the effort is worth everyone’s while. Pride of ownership will supersede any points-based system to encourage collaboration.

Companies need to support ideas in their early stages, even after launch. They don’t want to spend too much on each idea at the beginning (the goal there is instead to have lots of ideas). But by planting seeds with time based limitations (you don’t want all of them at once), you can gather the innovative thinking of your team and funnel them into revenue producing services and products.

The lesson here is to dedicate two valuable resources of the organization: Time and Money. Demonstration of those two commitments shows how a company can embrace innovation more than any position paper or announcement.

You can learn more by joining our LinkedIn group that focuses on idea management systems and processes here.