Summit 2013 Highlights: A Balanced Approach to Innovation Investment

“The best way for us to look at an organization’s strategy is to look at its budget,” said Jeff Lash, research director for SiriusDecisions’ Product Management service, in introducing the final presentation of Summit 2013.

“56 percent of organizations we surveyed reported that more than half of their new offerings fail to meet financial and performance objectives,” Lash noted. “That’s an astounding number. So why does this happen? Because only 11 percent of organizations align their process for investing in new offerings with marketing and sales budgets.”

Lash got more insight from the Summit attendees when he polled them about what investments and costs are included when a business case is approved in their organizations. Only 9 percent answered “Funding for all of the necessary resources and programs.” Lash recommended that organizations always consider the fully loaded cost of innovation investments, as the cost of developing a new offering may be only a tiny fraction of the overall cost of sustaining and supporting it.

To guide organizations toward balancing their innovation spend, Lash introduced the SiriusDecisions Innovation Framework – a model that analyzes innovation investments on a continuum between higher-risk breakthrough-innovation offerings for new markets and buyers and lower-risk core innovation for existing markets and buyers.

The framework encourages investment informed by market conditions and driven by organizational strategy. “Your budget is the extension and expression of your strategy,” Lash said.

After explaining the Innovation Framework, Lash explained how it should be used in an overall process to identify, select and balance a company’s investments. A consistent approach to screening and evaluating individual investments is key to maximizing ROI, he noted.

“Innovation is the fuel for your company’s growth,” said Lash. “But it’s not enough to place your bets in the right place,” Lash said. You need to optimize your investments.”