Innovation Budget Planning: 8 Things to Consider (2024)

Innovation Budget Planning: 8 Things to Consider

by Stephanie Creech

in Cyberscouting, Innovation, Innovation Challenge, Open Innovation, Technology


When it comes to , it is typically a laborious process that spans several months with business model canvases, business cases, proposals and pipeline discussions. I remember my inbox being flooded with documents, meeting requests and scientists pushing their research forward for my sponsorship. As Forbes magazine mentioned in an article last year “The presumption is that R&D spending is somehow connected to increased innovation, revenue growth and profits. However, leaders may be asking the wrong questions here. A focus on R&D spending might be a good way to gauge best practice within an industry, but it is not a measure of how innovative any company is. Having a great R&D process and achieving market success with the technologies we invent are two different things.” Nonetheless, budgets are the fact of corporate world and must be developed. Hopefully, I can impart some things to consider that are out of the norm.

Innovation Budget Planning Consideration #1: Understand Your Market

Know your market, what you’re good at and get outside help.

R&D needs to understand the marketplace they are competing in and where those markets are going. With increased velocity, we’ve seen innovation undergo a swift adoption of new models and solutions in the marketplace. A five-year plan may no longer hold true. Think about leveraging partnerships, acquisitions and scouting technology to determine if you can compress your R&D efforts by joining forces with the outside world. Partnering models can help companies avoid financial disaster. Proving out concepts and employing pop-up modeling can allow you to get to go/no-go decisions quickly. In today’s world speed to market is king. Look at megatrends in your ideas, look at the VC firms investing in the ideas your company has and the startups they are investing in. See if you can partner with them. It also validates if your idea is worthwhile. Look at Indiegogo, Kickstarter and quirky to see what’s trending. Articulate a picture of what your competitor could develop that would scare the heck out of your company. Use the Hollywood model when launching ideas. This is like a pop-up store concept. Use experimentation before you go full out on an idea.

This analysis helps to understand the ‘big picture’ and what is happening from the outside in, to your core technologies, the marketplace, and adjacent technologies that can impact your R&D efforts. So, budget to leverage technology that can help you innovate faster such as cyber scouting. In your due diligence of this technology make sure it is dynamic and includes brain swarming techniques. Here at Ezassi, we have a proprietary cyber scouting technology approach to running idea challenges or contests. We use our curated network of over one million expert solvers as well as an approach that utilizes search bot technology to create dynamic solver networks based on client-specific ideation requirements.

Innovation Budget Planning Consideration #2: Align Your R&D Strategy

Corporations do a great job of setting strategic goals, but I’m amazed at how few Innovation/R&D organizations take time to align their R&D/innovation strategy with their corporate strategy. If you want to get the CEO and senior team to buy-into your budgets, take the time to sync up the corporate strategy with a robust innovation strategy and include this in your budget presentation. This one is an easy budget item and only involves an investment in you and your team’s time. This is one you need to do in advance. You pick the timeline but in today’s world, I’d keep it at 3-5 years. Once it’s done keep it fluid as the corporate strategy changes. Ezassi provides a range consultative and planning services that can help with this alignment.

Innovation Budget Planning Consideration #3: Know Your R&D Capabilities

This goes hand in hand with #1 above. As you build out your budget, every business case highlighted should have a line item tied to the resources needed to get the job done. Underestimation can lead to an inefficient use of resources, but overestimation can be catastrophic to the successful completion of projects, meeting revenue and profit targets. If your analysis reveals shortcomings in your capabilities think about outsourcing your R&D or leveraging outside resources that turn up in your cyber scouting efforts. Many times, there is someone else in the world working in adjacent or direct spaces that can help or may already have a solution! Open innovation should be viewed as an extension of your R&D capabilities and resources. Ezassi provides a safe solution for Open Innovation technology.

Innovation Budget Planning Consideration #4: Include Outside Experts, Collaboration and Partnerships

Embrace the external ecosystem when innovating. It is rare in these days, that your R&D Innovation efforts use no external resources but, most R&D labs have an insular focus. As you build your project’s business case, make sure your budget considers possible outside collaboration costs, experts and costs associated with integrating the legal, technological and IP ownership complexities of such an alliance. Outside collaboration and partnership can future complicate your budget especially in corporations where IP is coveted. Picking the right tools to protect your company is very important.

Innovation Budget Planning Consideration #5: Risk and the 80/20 Rule

Remember the 80/20 rule? Well, it applies to innovation as well. Why can’t we change this? R&D labs traditionally focus on solving for technical risk only. Technical risk is about whether a company can create new technologies and make them work. In contrast, market risk is about whether customers will buy and use the product, even if the technology works. Innovation needs to solve for both! Increasing patentable technologies does not guarantee that a company is a successful innovative company. Clayton Christensen speaks about this in the article “Jobs to Be Done”. //

Frameworks can help to build sustainable innovation business models. I like this one because it focuses on what customers want using outcome driven innovation. I like it even more because the projects that run through these models are purported to be 5X more predictable and flip the 80/20 rule in terms of successful launch. So, take time to familiarize yourself with innovation business models and remember to include market risk in your business case.

Innovation Budget Planning Consideration #6: Plan a Realistic Budget — Don’t Break the Bank

Budgets are our best estimation of costs over years of experience and mixed with guesswork.

Expenditure on R&D projects is rarely confined to one fiscal year and it can be several years before a new product is finally manufactured. By breaking down the R&D budget into product-related investment streams, the link between revenue growth and R&D spend can be modeled. We did this using a two-page business case approach. As each business case is developed make sure it includes marketing costs for product commercialization. Many times, R&D departments leave this out but I feel it’s an important element of the total cost of product development to market. If you’re presenting this to senior management. they will appreciate that you’ve factored in commercialization. Last keep in mind that there’s a high likelihood that you may have either under or overestimated. So, keep it realistic. It’s a good idea to build in some contingencies with a realistic percentage. To validate your budget assumptions, include the total addressable market for this solution. Many corporations require profit and growth assumptions with each business case to validate go vs. no/go decisions.

Innovation Budget Planning Consideration #7: Going Global? Look at Outside Sources of Funding

Many companies practicing on a global scale fail to reach out the ministries of economic development in a country. They may be surprised to find that there is grant money that aligns with R&D efforts that could be run in a prototype within that country. Advise your R&D team with business cases that expand internationally to include analysis that considers economic development departments in each country. They usually have money and the responsibility to create jobs and draw in business for their country. Match up the research with their needs.

As companies undergo their budget planning, for each business case they are considering they should determine whether there outside sources of funding they can take advantage of.

Innovation Budget Planning Consideration #8: Plan

In my prior job, we always invested a third of our R&D budget on exploring initiatives. This is not atypical but we are now at a stage in innovation where big change is coming and it’s coming swiftly and from disparate directions.

Blockchain? Internet of Things? Artificial Intelligence and Machine Learning? Quantum Computing? Precision Medicine? Does this threaten our business? Sure, it does. Can you answer that your corporation has looked at these and where your goods and services fit into the future of these outside forces that can’t be stopped? How does this fit into your corporate strategy? What are you doing differently? As we prepare for the future how does the job to be done affect your customers? Make sure you’ve factored the future in your R&D budget.

As my final point, if you are not planning, you need to start now and remember when you do present your plan for next year adjust your presentation style. Technical people who speak technically to marketing is like speaking two different languages you need interpreters! Think about using storytelling to convey your plan.

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Now, let's dive into the concepts mentioned in the article "Innovation Budget Planning: 8 Things to Consider" by Stephanie Creech in Cyberscouting, Innovation, Innovation Challenge, Open Innovation, Technology.

Innovation Budget Planning Consideration #1: Understand Your Market

To effectively plan an innovation budget, it is crucial to have a deep understanding of the market you are operating in. This includes knowing your strengths and seeking outside help when necessary. The article suggests leveraging partnerships, acquisitions, and scouting technology to stay updated with market trends and potentially compress R&D efforts by collaborating with external entities. It also emphasizes the importance of speed to market and recommends looking at megatrends, venture capital firms, and crowdfunding platforms like Indiegogo and Kickstarter to validate ideas and identify potential partners [[1]].

Innovation Budget Planning Consideration #2: Align Your R&D Strategy

Aligning your R&D strategy with your corporate strategy is essential for gaining buy-in from senior management. By syncing up the two strategies, you can demonstrate how innovation efforts contribute to the overall goals of the organization. The article suggests investing time in developing a robust innovation strategy that complements the corporate strategy and keeping it fluid as the corporate strategy evolves [[2]].

Innovation Budget Planning Consideration #3: Know Your R&D Capabilities

Understanding your R&D capabilities is crucial when building an innovation budget. It is important to accurately estimate the resources needed for each project to avoid inefficiencies or project failures. The article suggests considering outsourcing R&D or leveraging external resources through open innovation to fill any capability gaps. Open innovation can be viewed as an extension of your R&D capabilities and resources [[3]].

Innovation Budget Planning Consideration #4: Include Outside Experts, Collaboration, and Partnerships

Embracing the external ecosystem is vital for successful innovation. While many R&D labs have an insular focus, the article recommends considering outside collaboration costs, experts, and the complexities of integrating legal, technological, and intellectual property aspects when building the budget. It also highlights the importance of selecting the right tools to protect the company's intellectual property [[4]].

Innovation Budget Planning Consideration #5: Risk and the 80/20 Rule

The article mentions the 80/20 rule, which applies to innovation as well. Traditionally, R&D labs focus on technical risk, but market risk (whether customers will buy and use the product) is equally important. The article suggests using frameworks that focus on customer needs and outcome-driven innovation to build sustainable innovation business models. By considering market risk in the business case, the chances of a successful launch can be increased [[5]].

Innovation Budget Planning Consideration #6: Plan a Realistic Budget — Don't Break the Bank

Budget planning should be realistic and consider the costs over multiple fiscal years. The article recommends breaking down the R&D budget into product-related investment streams and including marketing costs for product commercialization. It also suggests building in contingencies and validating budget assumptions by considering the total addressable market for the solution [[6]].

Innovation Budget Planning Consideration #7: Going Global? Look at Outside Sources of Funding

For companies operating on a global scale, exploring outside sources of funding can be beneficial. The article suggests reaching out to the ministries of economic development in different countries to explore grant opportunities that align with R&D efforts. Analyzing economic development departments in each country can help identify funding options [[7]].

Innovation Budget Planning Consideration #8: Plan for the Future

Planning for the future is crucial in the rapidly changing landscape of innovation. The article mentions various emerging technologies and forces such as blockchain, Internet of Things, artificial intelligence, machine learning, quantum computing, and precision medicine. It emphasizes the need to assess how these forces may impact the business and incorporate them into the R&D budget. Understanding the "job to be done" by customers and adapting to future trends is essential [[8]].

I hope this overview of the concepts mentioned in the article helps you understand the key considerations for innovation budget planning. If you have any further questions or need more information, feel free to ask!

Innovation Budget Planning: 8 Things to Consider (2024)


What are the eight steps in the preparation of a budget? ›

8 key budgeting process steps
  1. Review the previous period.
  2. Calculate existing revenue.
  3. Set out fixed costs.
  4. List variable costs.
  5. Forecast extra spending.
  6. Scrutinize cash flow.
  7. Make business decisions.
  8. Communicate it clearly.
Jan 17, 2024

How do you budget for innovation? ›

Once you have assessed your current situation, you can set a realistic budget for innovation and creativity. A common rule of thumb is to allocate 10% of your revenue or profit for this purpose, but you can adjust this according to your specific needs and goals.

What factors should be taken into consideration for preparing a budget? ›

If you're ready to roll up your sleeves and crunch some numbers, here are six steps to get you on your way.
  1. Assess your financial resources. The first step is to calculate how much money you have coming in each month. ...
  2. Determine your expenses. ...
  3. Set goals. ...
  4. Create a plan. ...
  5. Pay yourself first. ...
  6. Track your progress.

What are the key points of innovation? ›

The Four Key Elements of Innovation: Collaboration, Ideation, Implementation and Value Creation.

What are the 9 steps of the budget process? ›

How To Make a Budget in 9 Steps
  • Gather Financial Documents. ...
  • Calculate Your Income. ...
  • List Your Expenses. ...
  • Track Your Spending. ...
  • Choose a Budget Method. ...
  • Make Saving Easy. ...
  • Use a Personal Finance App. ...
  • Enlist the Help of a Finance Expert.

What are the 7 steps in the budget process? ›

Follow these seven steps to start a personal budget that can help you reach your financial goals:
  • Calculate your income. ...
  • Make lists of your expenses. ...
  • Set realistic goals. ...
  • Choose a budgeting strategy. ...
  • Adjust your habits. ...
  • Automate your savings and bills. ...
  • Track your progress.
Oct 11, 2022

How do you write an innovation plan? ›

Innovation Plan Template
  1. Define clear examples of your focus areas. ...
  2. Think about the objectives that could fall under that focus area. ...
  3. Set measurable targets (KPIs) to tackle the objective. ...
  4. Implement related projects to achieve the KPIs. ...
  5. Utilize Cascade Strategy Execution Platform to see faster results from your strategy.

What is innovation spending? ›

Purchases that are either required to make new products or that are process innovations owing to their technological characteristics. This also includes directly relevant software programs.

What are the 10 principles of budgeting? ›

The ten principles are:

Ensure that budget documents and data are open, transparent and accessible. Provide for an inclusive, participative and realistic debate on budgetary choices. Present a comprehensive, accurate and reliable account of the public finances. Actively plan, manage and monitor budget execution.

What are 5 basic elements of a budget? ›

What Are the 5 Basic Elements of a Budget?
  • Income. The first place that you should start when thinking about your budget is your income. ...
  • Fixed Expenses. ...
  • Debt. ...
  • Flexible and Unplanned Expenses. ...
  • Savings.

What should I consider in my budget? ›

We recommend the 50/30/20 system, which splits your income across three major categories: 50% goes to necessities, 30% to wants and 20% to savings and debt repayment.

What are the 8 essential practices of successful innovation? ›

Denning and Dunham identify and describe eight personal practices that all successful innovators perform: sensing, envisioning, offering, adopting, sustaining, executing, leading, and embodying. Together, these practices can boost a fledgling innovator to success.

What are the 7 factors of innovation? ›

The elements, or success factors, to innovate effectively are structured in seven key areas: context, leadership, planning, support, operations, evaluation, and improvement.

What are the 5 C's of innovation? ›

The Five C's of Innovation
  • A recent research project on factors affecting total cost of care also provides insights on the market conditions that might best support innovation. ...
  • Competition. ...
  • Collaboration. ...
  • Culture. ...
  • Catalysts. ...
  • Constraints.
May 30, 2018

What are the steps of the budget process in order? ›

The federal budget process typically consists of seven steps, outlined in greater detail below:
  1. President's budget request.
  2. Budget resolution.
  3. Appropriations bills.
  4. Authorization bills.
  5. Revenue measures.
  6. Budget reconciliation.
  7. Debt limit legislation and raising the U.S. debt ceiling.

What are the steps involved in the formation of budget? ›

Preparation: Government: Consultation with different agency and stakeholders. Approval: Parliament: Discussion and approval in general and specific. Execution: Government: Through each level and agency. Recording and Reporting • Monitoring and Evaluation • Internal and Final Audit.

What are the 7 types of budgeting? ›

The 7 different types of budgeting used by companies are strategic plan budget, cash budget, master budget, labor budget, capital budget, financial budget, operating budget.

What are the steps of the budget process quizlet? ›

  • The president submits a budget request to Congress. ...
  • The House and Senate pass budget resolutions. ...
  • House and Senate Appropriations subcommittees "markup" appropriations bills. ...
  • House and Senate floor vote on appropriations bills. ...
  • President signs each appropriations bill and budget becomes law.

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