Creating Space for Innovation

I was talking with a client recently about innovation; specifically, about how hard they were finding it to move beyond their core offering and explore new opportunities. It’s a conversation I’ve had many times. The business is running well, the core is ticking along, and yet everyone knows they should be innovating. They can’t seem to create the space for it.

When he asked for advice, I went back to a model I’ve always loved: 70/20/10.

A simple structure for a hard problem

The 70/20/10 model gets used everywhere: learning and development, leadership programmes, but I first saw its power in marketing. Coca-Cola’s marketing team famously championed it, and we used it when I worked with Unilever in a global role years ago. At its heart, it’s a resource allocation model:

70% goes to proven, core activities: the things you know work, where the business makes the bulk of its money.
20% goes to emerging opportunities: new, but adjacent to the core; things you can trial and test with reasonable confidence.
10% goes to high-risk, experimental innovation; the genuinely unproven stuff.

The same logic flows naturally through to media dollars: 70% towards your core channels, so the bulk of your plan is locked before the year starts; 20% towards new ideas linked to proven channels; 10% towards complete experimentation.

What I’ve always liked about it is the discipline it enforces in both directions. It keeps the business honest about the core: where do we actually make our money, and are we resourcing it as effectively and efficiently as possible? It also guarantees that time and thought go to what’s coming next and to the things that could be completely transformational.

The crowded middle

Here’s where it gets interesting, particularly for marketing and communications: most businesses spend most of their time in the core. Which means everyone in a category ends up talking about the same things, in the same ways, to the same people.

It’s often the adjacent and transformational work that creates a disproportionate share of mind, because you’re doing something genuinely different and interesting; it develops legs of its own. It generates PR. It earns coverage. More people talk about it, and more people see you as a leader.

Think about BMW’s advertising through the 90s and 2000s. “The Ultimate Driving Machine” was always illustrated with their best machines: the top-of-the-range vehicles that were exciting, innovative and, frankly, dream-inducing. BMW knew perfectly well that most people could only afford a 3 Series. But it was the halo of the transformational stuff that created desire for the whole range.

In short, the core pays the bills. The edges build the brand.

Marketing and innovation are the business

Peter Drucker made the point decades ago: business has only two basic functions: marketing and innovation. Man, that is such a powerful thought, yet how many businesses really have marketing and innovation at their heart?

For Peter, everything else, in his view, was a cost. His logic was simple: businesses create value by bringing something new to the market, and it’s hard to create new value through core assets and a core offering that the market already knows. New value comes through innovation.

Somewhere along the way, business culture inverted this. Marketing itself is now widely treated as a cost; a function to be squeezed for ever-increasing efficiency. Rory Sutherland has argued that this is exactly backwards: marketers should stop treating capitalisation as a vehicle for exploitation and efficiency, and instead see it as a discovery mechanism. Business, in his view, is a process of discovery; uncovering value nobody knew existed, either by finding an unmet need or by servicing an existing need through an idea nobody had tried.

Sutherland puts it neatly: there are only two ways of adding new value to the world. You can work out what people want and find a really clever way to make it, or you can work out what you can make and find a really clever way to make people want it. The money is no different regardless of the direction of travel, and in reality, most things are a mixture of the two.

The catch is that innovation requires a creative leap. If there were a purely logical answer available in advance, someone would already have solved it. Most great ideas are only explainable in retrospect. Take Red Bull, Nespresso, Dyson, Uber, Five Guys, ten-to-fifteen-billion-dollar companies, and transport yourself back to 2005, and you could construct a perfectly rational case for why every one of them was stupid. If James Dyson had told you he saw a market for an $800 vacuum cleaner, or even madder, a $400 hair dryer, you’d have politely suggested he look at the market data. That might be another Rory point. Thank you, sir.

This is also why innovation so often dies inside organisations. The functions that hold the purse strings - finance and procurement are staffed by the most risk-averse people in the building. Logical, defensible, precedented decisions are their job. Creative, innovative leaps are not.

The real cost of innovation isn’t the innovation

When I talk to clients about why innovation stalls, the conversation always turns to cost. But in my experience, the biggest cost is rarely implementation. It’s time; or more precisely, the perceived time it will take to sell the idea internally. Convincing the boss, getting it through legal. The extra meetings, layered on top of an already full day job.

This is exactly why 70/20/10 works so well as an organising idea. If everyone has already agreed that 70% goes to the proven stuff that worked last year, then the 20% and the 10% aren’t a fight; they’re pre-negotiated space. The question shifts from “should we innovate?” to “what goes in the buckets this year?” As long as the core is looked after, you’ve created permission and budget to try new things. Bloody marvellous.

From budget to ambition

One legitimate criticism of 70/20/10 is that it often defines innovation by budget, and budget shouldn’t be the defining trait of innovation. The common alternative, Now / Next / New, has its own flaw: it’s chronological, and since it is always now and the future technically never arrives, the later horizons are perpetually deferred.

It helps to remember how innovation actually happens. From the steam engine to flight to the electric light, every famous breakthrough hides an accumulation of incremental improvements, often by far less famous people. As Matt Ridley argues in his work on how innovation works, innovation, like evolution, is really infinite gradations across time. Every innovation is built on the back of someone else’s. Ridley also describes recombinant innovation, what he memorably calls “ideas having sex”, where two previously unrelated ideas from different fields fuse into something new. That’s most of what we call creativity: one idea from over here, one from over there, bridged across domains or silos, opening up entirely new opportunities.

So instead of budget or chronology, I find it more useful to reimagine innovation as a structure of ambition:

Do: mandatory innovation. Modest, incremental improvements to things already proven. New ground for your business specifically; a competitor may already do it, but for you it’s new.
Progress: stretch goals. Innovations that are new to your entire industry or vertical. Another sector: autos, travel, finance, FMCG, may have done it, but you’d be leading the way among your competitive set. These are the ones that take on a life of their own: genuine progress is easy to talk about, so PR and earned come more naturally.
Pioneer: the truly groundbreaking. No company, in any vertical, has attempted it. You’d be a genuine disruptor, creating new value and new markets where nobody has been before.

You can still run this through a 70/20/10 lens for time, resource and budget, but ambition, not money, becomes the organising principle.

**Know why you’re innovating**

The last piece, especially if you’re trying to get innovation past the C-suite, is being ruthlessly clear on why you’re doing it. Innovation is not just new stuff. Broadly, there are three good reasons:

Innovating to solve: a current problem or unmet need.
Innovating to adapt: something has changed in the market, or in customers’ wants, needs and usage patterns, and you need to respond.
Innovating to prepare: building the capabilities your brand needs to exist in 2030. How will your core shift? How will your adjacencies evolve? What’s coming that you could use to create a disproportionate share of mind or of market?

Whatever the reason, the test is the same: innovation should be a smart, purposeful solution that adds real value for customers or for the people inside your business. If you’re adopting new technology, be able to say precisely what it improves for the user.

And then think about the experience you want to create. What data do you already possess, or could gather, that could inform an innovative experience? Data layers sit over experiences and touchpoints; with the right knowledge management behind them, they inform, educate, assist and continually learn. Once you know what data you have and what experience it could power, how to innovate becomes much clearer. Every ambition has an entry point, a stretch goal and a moonshot. Plan, execute, learn, adapt.

Start by making space

Which brings me back to where the client conversation started: how do we create space in our organisation for innovation?

70/20/10 is an imperfect model, yes; it leans on budget and resources, though the same split works just as well for time. But its real value is the mindset. Take proper care of your core, run it effectively and efficiently, and you free up time, headspace and money to evolve the business: adjacencies to your core, and entirely new opportunities beyond it.

The businesses that do this don’t just keep up. They create new value for customers, and with it a disproportionate share of mind, and, eventually, of market. That space won’t create itself. You have to build it in. And that’s all rather exciting.