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💰 What They Don't Tell You About Innovation Investments and How You Should Do It - Template Included

This Innovation Hacks edition is brought to you by: At Novatech we craft innovative end-to-end digital solutions through autonomous scrum teams or staff augmentation. Request a meeting to explore our Application Dev, Data & AI, and QA & Cybersecurity solutions.

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Hey Reader,

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Investing in innovation is not just about allocating funds. It's about strategically balancing risk and opportunity to safeguard your company's future. Yet, many executives find themselves navigating this complex terrain with maps that lead to dead ends.
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Let me reveal how to smartly invest in innovation across different time horizons.

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The Untold Truth About Innovation Investments
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• Percentage of Revenue: Common wisdom suggests investing 4% to 10% of annual revenue in innovation, but the right number should reflect your industry's volatility and competitive landscape.
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• Economic Sensitivity: CEOs often cut back on innovation investments during financial crises. Companies face difficulties, there is less money available, and many projects are stopped.

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Decoding the Innovation Horizon Matrix

The Innovation Horizon Matrix helps us strategically place bets across three different investment categories, each with its own risk profile and time to maturity:

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1// Horizon 1 - Immediate Gains: Enhance and optimize what already works.
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Time: Short Term

Scope: Core Business

Focus: Exploration and optimization of existing businesses

Metrics: ROI, NPV

Team: Maintainers

Capacity: Existing

Investment Focus: 70% of your innovation budget.

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Action: Upgrade technology and refine processes to boost efficiency and customer satisfaction immediately.

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2// Horizon 2 - Emerging Opportunities: Prepare for the future by developing new offerings that will become relevant within 2 to 5 years.

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Time: Medium Term

Scope: Growth Business

Focus: Expanding existing businesses and building adjacent innovations

Metrics: Innovation Accounting

Team: Intrapreneur, Builder

Capacity: To be developed or acquired

Investment Focus: 20% of your innovation budget.

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Action: Invest in research and pilot programs that bridge your current capabilities with future market needs.

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3// Horizon 3 - Visionary Ventures: Pioneering ideas that may redefine industry standards.

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Time: Long Term

Scope: Future Business

Focus: Exploration of new businesses, small bets on emerging opportunities, radical innovation

Metrics: Innovation Accounting

Team: Explorer, Adventurer, Intrapreneur

Capacity: Uncertain requirements

Investment Focus: 10% of your innovation budget.

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Action: Fund exploratory work in cutting-edge technologies like artificial intelligence, quantum computing, or sustainable energies.

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This Week's Action Steps

Reassess your innovation investment allocations. Are they in line with the Innovation Horizon Matrix? Ensure that your strategy not only matches market dynamics but also aligns with your company's risk tolerance and growth ambitions.
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​Make a copy of this template to document your strategy & vision.

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And here is a quote from Albert Einstein to inspire you.
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