The 70-20-10 rule in innovation is a strategic framework used by organizations to allocate resources and time towards different types of innovation. It suggests that 70% of efforts should focus on core innovations, 20% on adjacent innovations, and 10% on transformational innovations. This rule helps businesses balance risk and reward while fostering continuous growth and adaptation.

What Does the 70-20-10 Rule Mean in Innovation?

The 70-20-10 rule is a popular innovation strategy that encourages organizations to diversify their innovation efforts. Here’s a breakdown of what each percentage represents:

• 70% Core Innovation: Focuses on improving existing products or services. This involves incremental changes that enhance customer satisfaction and operational efficiency. It typically provides steady, predictable growth.

• 20% Adjacent Innovation: Involves expanding into new markets or using existing capabilities in new ways. This type of innovation allows businesses to leverage their strengths to explore new opportunities and reach new customer segments.

• 10% Transformational Innovation: Entails creating entirely new offerings that can redefine the industry. This high-risk, high-reward approach focuses on breakthrough innovations that can significantly disrupt the market.

How to Implement the 70-20-10 Rule?

1. Assess Current Innovation Efforts

Before implementing the 70-20-10 rule, evaluate your current innovation strategy. Identify which projects fall into core, adjacent, and transformational categories. This assessment helps in reallocating resources effectively.

2. Allocate Resources Accordingly

• Core Innovation (70%): Invest in projects that enhance existing products or services. Use customer feedback and market analysis to guide improvements.

• Adjacent Innovation (20%): Explore new applications for existing technologies or expand into related markets. This requires understanding market trends and customer needs.

• Transformational Innovation (10%): Dedicate resources to breakthrough ideas with the potential for significant impact. Support a culture of experimentation and risk-taking.

3. Foster a Culture of Innovation

Encourage a mindset that embraces change and experimentation. Provide teams with the tools and freedom to explore new ideas. Recognize and reward innovative thinking to motivate employees.

4. Monitor and Adjust

Regularly review the outcomes of your innovation initiatives. Use metrics to assess the success of each category and adjust your strategy as needed. Flexibility is key to responding to market changes and new opportunities.

Benefits of the 70-20-10 Rule

Balanced Risk Management

By diversifying innovation efforts, the 70-20-10 rule helps manage risk. Core innovations offer stability, adjacent innovations provide growth opportunities, and transformational innovations can lead to significant breakthroughs.

Sustainable Growth

This approach ensures a steady flow of improvements and new offerings, which supports long-term business growth. It allows companies to adapt to changing market conditions and customer needs.

Encourages Creativity

Allocating resources to transformational innovation encourages creative thinking and experimentation. This can lead to groundbreaking products or services that set a company apart from competitors.

Practical Examples of the 70-20-10 Rule

Google

Google is a well-known advocate of the 70-20-10 rule. The company dedicates 70% of its resources to core products like search and advertising, 20% to adjacent areas such as Google Maps, and 10% to transformational projects like self-driving cars.

3M

3M applies this rule to maintain its reputation for innovation. The company invests in improving existing products, expanding into new markets, and developing new technologies, ensuring a balanced approach to innovation.

People Also Ask

What are the origins of the 70-20-10 rule?

The 70-20-10 rule was popularized by Eric Schmidt, former CEO of Google. It has roots in management theories that emphasize diversified investment in innovation to balance risk and reward.

How can small businesses apply the 70-20-10 rule?

Small businesses can scale the 70-20-10 rule to fit their resources. Focus on improving core offerings, explore related markets, and allocate a small portion of resources to innovative, high-impact ideas.

What challenges might a company face using the 70-20-10 rule?

Challenges include resource allocation, maintaining a balance between innovation types, and fostering a culture that supports experimentation. Companies must also manage the risk associated with transformational innovations.

Is the 70-20-10 rule applicable to all industries?

While the principles of the 70-20-10 rule can be applied broadly, the specific allocation may vary based on industry dynamics and company goals. Adaptation is key to its successful implementation.

How does the 70-20-10 rule impact company culture?

The 70-20-10 rule promotes a culture of innovation by encouraging employees to think creatively and take risks. It supports a dynamic work environment where new ideas are valued and explored.

Conclusion

The 70-20-10 rule in innovation provides a structured framework for organizations to balance their innovation efforts effectively. By focusing on core, adjacent, and transformational innovations, companies can manage risk, drive growth, and foster a culture of creativity. Whether you’re a small business or a large corporation, this strategy can be tailored to fit your specific needs and goals, ensuring sustainable success in an ever-evolving marketplace. For further insights on innovation strategies, explore our articles on incremental innovation and disruptive innovation.