To spend or not to spend: Balancing budget between innovation and core business needs

budget innovation business

Imagine this: You’re at a casino with 2 stacks of bills in your pocket. You can either choose to bet everything in one game of roulette — your chances: going home with 10 stacks of cash or turning up empty-handed. Or you can bet one of your stacks on roulette and use the other to gradually double up on poker. Everything depends on how strategic your approach is.

It could be a stretch to say that business is a gamble, but the example fits when you think of balancing your organization’s budget for innovation and core business needs. The catch is to find a middle ground.

“I think innovation and core business go hand in hand,” says Wenceslaus Dsilva, CTO at EasyTech Innovations Private Limited. As a CIO and CTO, Dsilva advises that you need to ask yourself the following questions:

“1. Would the core business improve or solve a problem where we are bleeding?

2. Does it open up other avenues of income?

3. Can it be a standalone product or service?

4. Would it be scalable?

5. Does it hamper my current business?

6. Do I have the resources for the same?

7. Does a solution already exist? If yes, What are the issues with the current solutions?”

How many resources should you allocate to improve the existing products and operations, and how many to invest in innovating new product lines and experimentation It’s a constant balance a CIO has to find, in order to work effectively with the business leaders and cater to their customers.

Albert Dias, CTO at Jett Business Travel, advises, “Ask yourself what you’ll be judged on at the end of the year — and not judged by your line manager or your CEO, but by your customers and your shareholders. If you accept that you’ll never really meet 100% of your core business needs (CBN) in any given year, but perhaps stop short at a score of 90% or 99.9% — you’ll begin to see the cost-benefit analysis more clearly.

Most companies find that shifting 5–15% of their budgets away from CBN to innovation has little impact on their CBN achievement score or the business’ performance at the end of the year. In fact, that shift often leads to a more positive perception of the company as a pioneer by its customers and shareholders.”

Doing the math helps a CIO make a rational choice between the two segments and avoids day to day operations consuming all resources and time. The majority of leading IT organizations understand that a business cannot sustain without both. Kuljeet Sethi, CIO at Bajajsons Ltd believes that innovation and core business goes hand in hand and you can’t fix a rule for spending on the two, but at the same time, a cost-benefit analysis is required. He says, “without innovation, the business has the risk of stagnation, and without a sustainable core, innovation won’t exist”

While many CIOs talk about keeping innovation and core at par, Jeff Roberts, CIO of a real estate firm believes that business needs are hard to ignore and if not attended to, and can hurt IT’s credibility to innovate.

One must build an organizational structure such that there are enough funds for both — disrupting and surviving. A CIO, as explained by Rajeev Jaswal, former CIO at Rapid7, and CEO at Graytitude Inc. can look at it both ways and still allocate the budget strategically enough to improve the status quo to drive value and build credibility with the stakeholders.

For long term sustainability, the CIO has to be farsighted and think about the long term benefits. It’s a battle between today’s instinct and the company’s future.

Move the needle with real-time insights and crowdsourced data & build your knowledge network.

2 comments

Leave a Reply

You May Also Like