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Do Budgets Drive or Deter Innovation?

Organizing a budget is a balancing act. There are plenty of ways to spend money. Unfortunately, you can’t do it all. You have to make decisions based on organizational priorities. Do you want to invest in sustaining innovations and refine processes? Or do you want to spend the next fiscal year exploring opportunities that could potentially create future success for your organization?

What really puts a strain on this balance is clear: You don’t have unlimited funds to fully invest all your efforts into both options. A good budget makes clear (and funds) your strategic goals for the next year without sacrificing operations. That’s the balancing act. The decisions you make will drive or deter the innovative processes that will grow your business.

Firefighting versus planning it out

Technology is always evolving, and even with sufficiently advanced technology you’re going to run into bumps in the road — something breaks, needs an upgrade, or support. In short, you’ll probably face an expense (figurative) fire this year. That’s why it’s a smart idea to set funds aside to tackle any potential technological problems head-on.

But how much is too much to set aside for the yet-unseen problems? Decision makers say that the turbulent demands of today’s operations are robbing their organizations of an ability to invest in the future. Or a better question: What could you be doing with your firefighting money to kill the problem at its source?

A Harvard Business Review study found that many leading organizations are diverting resources away from today’s broken technology to fund the innovations that will deliver tomorrow’s value.

Setting aside funds specifically for innovation

In order to have money set aside for innovation in your company’s mission goals, you’ve got to be ruthless about locking aside funds for improvement and innovation. If you don’t, day-to-day operations and unforeseen circumstances can and will eat up any extra resources you have earmarked for long-term goals. Once you’ve got your innovation fund set aside, don’t dip into them to finance other issues that come up.

Take a look at the past. You know what’s eating into your budget now. While you figure out your long-term initiatives, try to figure out how you got there. Did you move too fast on the last big move? If you’re able, spend a bit more earlier in the planning process to save money later. One leader explained this approach as “slow trigger, fast bullet.”

Higher quality is better than higher quantity

When it comes down to figuring out the long-term goals for your innovation budget, err on the side of doing less. Focus on ultra-focused pilots that will eventually solve strategic issues, and track fewer measurements — but track them to the absolute best of your ability.

Piloting initiatives and scaling has one giant advantage. If despite all your planning you hit a dead end, you’ll know it, and you can move on to something else. Importantly, don’t keep a zombie project alive just because no one wants to declare it dead.  

Allow your team to integrate fewer initiatives with much higher quality, as opposed to investing minimal effort across the board.

In conclusion

When considering whether to take care of your current issues or focus your efforts on the future, what’s happening now will win every time — unless you consciously, strategically decide to set aside and lock funds specifically for the future.

If you firefight with your funds, you aren’t going to have time, money, or resources to innovate. But if you go about developing your budget in a strategic manner and keep your funds locked into their applied avenues appropriately, you’re going to set yourself up with a solid base to create something really beautiful, and more importantly new.


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