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If cost savings are critical, it’s essential to identify quick wins that still align with the corporate strategy. You have to readjust your lens to determine what type of revenue a product could bring in the short term while still keeping an eye on long-term strategies.
Research and development (R&D) investments are key to moving innovation forward in every company. And according to a recent study by Capital Economics and Accenture, spending continues to grow, with a 17.5% increase in R&D investments in Q3 2021, compared to Q3 2020.
The need to continuously identify new and innovative solutions to solve customer problems and compete with more nimble companies isn’t waning. In this everchanging economic climate, how do organizations experiencing reduced budgets keep up and keep innovating?
Innovation fuels growth. You can’t put new product development on hold, so you have to focus on how you do it. In my experience, there are a number of actions an organization can take to keep innovation progressing while creatively addressing a smaller pool of resources.
Here are six new product development process strategies to consider when budgets are constrained.
1. Align innovation with company strategy
Innovation should always be mission-facing, but this idea is especially true during times of “belt-tightening.” Sometimes a project directly ladders up to the company’s mission, while other times, it is more peripheral. When budgets are tighter than usual, consider concentrating on projects with a more obvious connection to the mission. These projects represent less risk and are more likely to take the company where it needs to go.
2. Re-evaluate risk tolerance
In a previous blog post, we explored the idea of new product development ambidexterity—the ability to manage core products and potentially transformative products. When budgets are restrained, new products risk is magnified. Every company has parameters for the level of risk they’re willing to take on. That level should be changed when budgets shrink. This isn’t to say that R&D and radical innovation initiatives stop—just the opposite. However, you have to scrutinize the risk-reward proposition more intensely based on the space you’re in, the company’s corporate strategy, and its track record for delivering on high-risk/high reward initiatives.
3. Rebalance product portfolio planning
If cost savings are critical, it’s essential to identify quick wins that still align with the corporate strategy. You have to readjust your lens to determine what type of revenue a product could bring in the short term, while still keeping an eye on long-term strategies. This type of product portfolio planning requires a thorough portfolio audit to find those products that represent the best combination of market need and confidence that can be developed and launched with as little friction as possible. For example, if a product requires new methods for production or equipment, it should probably be tabled until budgets are a little more robust.
4. Repurpose innovation
Review your successful products and find ways to update or recycle them with low investment innovation. Perhaps, there’s a new feature that was targeted for a limited number of products. When budgets are constrained, plans for introducing this feature might be accelerated. Or maybe there’s a premium feature that’s already available in a few products in your portfolio. Making that feature more widely available can help create the opportunity for faster revenue with limited risk. In some industries, a “facelift” (a simple change to how a product looks) can bring in a new revenue stream for an existing product
5. Consider product refactoring
I have spoken and written before about product refactoring. Sometimes it has been from the lens of modifying a product that you’re planning to bring to market but faces technology or business challenges. Sometimes it has been about modifying a product already in the market or is about to be released that's facing (or will face) supply chain issues. Product refactoring can also be useful when looking for ways to cut costs or accelerate a product to market.
6. Implement the right innovation process management system
In today’s data-rich business environment, organizations must have a suitable automation system to organize and centralize data. We like to call this a single source of truth. The influx of new data, even daily, is hard to manage using manual systems. With constricted budgets, you need to trim administrative and operational costs. Every hour spent trying to find information that could have been at your fingertips equates to potentially delayed time-to-market. Having an innovation process system also gives visibility to all the R&D activities in play at every location across the globe. It creates conditions that allow large organizations to standardize innovation processes and see opportunities that would otherwise not be visible.
It’s important to change your innovation approach when budgets become constrained because new product development is always a necessity. The companies that win will get creative and find new approaches to make it happen. The six strategies here are good places to start.
Listen to this episode of Innovation+Talks with Ester Gons, Founder and CEO of GroundControl, to learn more about the necessity for innovation accounting.
