Innovation dilemmas: mouse vs elephant

As a company looking to innovate, you often face choices about how to set this up for your business. There is simply no one right path to successful new products or services.

In this series of blogs, we'll cover the dilemmas you might run into as you lay out your innovation strategy so you make the right choices.

Today: innovation budget

The world is constantly changing and evolving. Last year, for example, AI turned markets upside down. And so again, there is plenty of opportunity or need to innovate. But is an organization with a small budget up to this? Or is a large-scale approach always needed?

In this blog, we discuss the pros and cons of a small or large innovation budget: the mouse and the elephant.

Innovation budget

The innovation budget encompasses all expenses required for innovation efforts. This includes personnel and development costs for those conducting the innovation efforts, procurement or development of new technologies, marketing and communication, prototype creation, and conducting tests.

Large budget

It's obvious that a large innovation budget provides for a longer breath, more room for risk, and the ability to spread opportunities across various projects. This allows you to pursue more radical goals: larger in scale, more future-oriented, and further removed from the current business.

With a large budget, you are able to accelerate and gain speed - and thus create a competitive advantage - by joining innovation forces in a department and investing and scaling up when initiatives demand it.

But there is also a lurking danger: waste of money. Too long and too much is invested in initiatives that actually have little potential and/or are implemented inefficiently. This can come from lack of focus. As a result, too much is worked on at once and results are lost or innovation is done for the sake of innovation without adding any value to business objectives.

‍

Inefficiency can also result from bureaucratic processes that arise and create slow decision-making and create focus on the processes rather than the outcome.

‍

And finally, a large budget can also have a negative impact on the culture of innovation: people rely too much on financial resources, rather than on their own creativity and entrepreneurship. Individual accountability becomes less discernible, leading to it sometimes being less felt and taken on by employees.

‍

Small budget

On the other hand, there is the small innovation budget. With a smaller budget, you take less risk, and initiatives must yield results within a foreseeable timeframe. Incremental innovation goals, improving the current business, therefore fit better here.

A small budget has the advantage that focus often arises naturally due to limited resources. It can also have a positive effect on the culture of innovation: employees constantly encounter constraints and are forced to work creatively and efficiently.

But a small budget also has a downside: too little capacity can cause you to fall behind and lose competitive advantage or miss opportunities completely by investing too late. Even when you've spotted the opportunity in time and created a successful initiative, it can be difficult to get the investment together to scale it up in time.

Is bigger always better?

Do you always need a large budget then? Certainly not. A large budget doesn't guarantee success, and furthermore, a small budget can foster focus and creativity. Consider, for example, a fintech startup that achieves what a cumbersome bank cannot on a specific subject with a small team.

A small budget is okay, as long as it aligns with your objectives. These objectives should then be close to home: incremental. If you're dreaming more radically and bigger - or rather, if it's necessary to do so - then it's not unwise to lobby for a larger budget and a more extensive approach.

This is part of a series on innovation dilemmas. Check our other blogs on the dilemmas of explore vs exploit and internal vs external innovation focus.