It’s not easy self-disrupting or directing budgets away from what works to build what is new and untested but essential if the company hopes to sustain its growth into the next five or ten years. In this blog post, we’ll explore the choices that make up innovative strategies and how organizations balance a curiosity for uncertainty while not putting their previous successes at risk.
Basic Idea
The “Innovator’s Dilemma,” “First Mover versus Fast Follower Advantage,” “Open versus Closed Innovation, ” and many other trade-off choices have become more popular in the discussion about how to win in a era of technology hyper-competition. While mergers & acqusition still play a role in growth (inorganic), the majority of market leaders have put major stake in their futures using product innovation and business model innovation. Despite the strong emphasis, most businesses continue rely on old program management paradigms to discover and commercialize technology. The research universities system of tech-transfer are lingering examples of modernization that took hold in the last industrial revolution of the mid-1800’s. If the leaders and visionaries of companies were to step back and see room for a new paradigm of innovation they would first begin with the strategic dilemma that must first be addressed.
Alternative Idea
A handful of strategic dilemma come up again and again when seeking to compete on technology leadership. The first of those dilemma is the “Exploit versus Explore” and is also called by other names such as “The Secretary Proble.” and “One Armed Bandit Problem.”
Exploit versus Explore – Is the grass greener?
The Secretary Problem – Are better options out there?
The One Armed Bandit – Should I stay or should I go?
Each of these problems has a unique set of resolutions, context depending, and are critical to answering before redirecting resources away from what is core to the business. When it comes to allocation, a popular rule of thumb is the 70-20-10 Rule, with 70% of budget going to core sustaining innovation, 20% to feature extension and performance improvement, and 10% to new feature capabilities and transformative innovation. During a more unstable economy a business might be risk averse and choose to cut budget to the transformative innovation so they can focus on the core; whereas years of excess profits might encourage a business to draft on their previous gains in the core and invest agressively in the extension and transformative innovations.