The 70-20-10 Rule for Innovation

Managing innovation resources can be challenging for companies, as they often have to decide between betting big on unproven but potentially breakthrough ideas or focusing on improving existing products. The 70-20-10 rule provides a useful guide for investing in innovation, where 70% of resources should be devoted to sustaining innovation, 20% to exploring adjacencies, and 10% to building new paradigms. Sustaining innovations are improvements to existing products that align with the organization's current strategy and are responsible for creating the vast majority of value. Exploring adjacencies involves exploring new markets and capabilities, which is riskier but can leverage existing resources to create something significant. Building a new paradigm involves creating something fundamentally new, which is highly speculative and should be limited to what can be sustained over a long period without incurring material risk to the organization. The rule serves as a guide for investing wisely, with the most neglected aspect being the last 10% of investment into completely new business and technologies, which is critical for innovation.