Does Your Budget Match Your Strategy?

When we start with a new client, often the first subject that comes up is strategy. Some clients provide an overview of their business strategy by explaining it or giving a strategy presentation. However, we can get a much better understanding of a client’s strategy by looking at its budget.

Budget is the ultimate expression of strategy. A client might say that its strategy is to invest in innovative new products to meet the needs of new buyers and markets, but its budget says the company is spending most of its resources on enhancements to existing offerings to resolve complaints from its current customers.

Misalignment between a declared strategy and actual investment and budget allocations goes beyond money spent on product development. Problems often extend to budgets for marketing, sales and other necessary functions, such as customer support.

In fact, according to our research, only 11 percent of companies believe they have strong alignment between their product investments and their marketing and sales budgets. It’s no wonder the failure rate for new products is so high! Many companies scrutinize their investments in products, but they do not make supporting investments in marketing and sales.

Our new Innovation Strategy Framework is a decision support tool that organizations can use to ensure their innovation investments support their growth strategy and match opportunities in the market. The framework also verifies that investments in enhancing existing products and creating new offerings are aligned with the necessary budgets for marketing and sales.

At a webcast we held on August 14, we explained the framework in detail, sharing some results of the research that went into its development, and outlining a process for implementing it within an organization to guide investment decision-making.

Here are some simple steps for determining whether your budget is supporting your intended strategy or working against it:

• Audit your product investment spend. Compare spending on maintaining and enhancing current offerings to spending on developing new offerings. Also examine whether investments are intended to help products better meet the needs of current markets and buyers, or to reach new markets or new buyers. Compare these investment allocations to the organization’s high-priority areas of focus and declared strategy.

• Compare your product investment to budgets for marketing and sales. See if there is a mismatch between investments in offerings and the budget needed to market and sell those offerings in order to meet goals and targets. Are you shortchanging marketing and sales by underinvesting, thus setting them up for failure?

• Evaluate the way budgets are allocated, especially in your new product approval process. One mistake we often see is that business cases don't include all of the necessary costs associated with building, launching and growing a product. Considerations for approving a product include not only the technical requirements for developing the product, but also the staff to manage, market, sell and support it, as well as program spend for launch and ongoing marketing programs.

Through our research, we’ve identified how best-in-class organizations align their strategy with their product, marketing and sales budgets, as well as how they select the right investments and optimize them for success.

Create an Innovation Investment Strategy

Organizations are struggling to identify the criteria needed to validate product investments, and when (and how much) to re-invest in offerings. Get an overview of the SiriusDecisions Innovation Strategy Framework and view our OnDemand webcast, Innovation Strategy: Choosing the Right Products and Opportunities to Drive Company Growth.