New Research on Innovation Investment Allocation

Note: Interested in learning more? Make sure to attend the SiriusDecisions 2014 Summit on May 21-23 in Orlando, FL. I will be presenting The SiriusDecisions Innovation Strategy Framework: One Year Later − where I’ll discuss the results of research on innovation strategy, lessons learned from organizations that have used the Innovation Strategy Framework framework for strategic planning, as well as implications for your product roadmaps, marketing and sales planning.

Think about your monthly household budget. You need to determine how to allocate your income to different areas – housing, food, utilities, transportation, entertainment, clothing, etc. Some of these are things you absolutely need, some are very important, and some are luxuries. Some expenses are consistent from month to month, and some fluctuate.

Organizations go through a similar process to divide their product investments. There is often a fixed pool of money to invest into the existing product portfolio and into new products, and companies must figure out how to divide this money among many choices. As with a household budget, the number of things the company can spend money on often exceeds the funds available. During this process, companies often struggle with questions like:

• How should we divide our investments for maximum ROI?
• How much should be invested in offerings for different markets?
• How much should be allocated toward new vs. existing products?
• How should we evaluate and compare various opportunities?
• What criteria should we use when evaluating whether to invest in a new innovation?
• How can we optimize investments after they have been made?

Investment choices are often made on an ad hoc basis without objective criteria, or simply based on the HiPPO (highest paid person's opinion). As budgets are scrutinized and investments come under pressure, organizations must use limited resources as effectively as possible to maximize ROI.

We're conducting ongoing research into how best-in-class b-to-b organizations optimize their investment decisionmaking, including how to allocate investments appropriately, pick the right initiatives to pursue and ensure those investments succeed.

We’ll be sharing some of our findings in this blog, in our online publications and at our events. We invite you to take part in this survey. [Note: The original survey is now closed.]

Some participants have reported that the exercise of filling out the survey has prompted them to think about how their organizations approach new product investment and portfolio investment, and to consider some areas of evaluation they previously hadn't considered.

The information we've gathered so far includes:

• How to align product investment with corporate goals and segment-level targets
• Specific criteria used by best-in-class organizations to evaluate potential new offerings
• How investments in product enhancements should be compared with investments in new products
• How companies should align investments in product development with investments in marketing and sales resources and programs
• What organizations should do on an ongoing basis to ensure the maximum return on product investments

I’ll be blogging about additional research results in the coming months.