The CFO Alliance Blog

How to Fund Innovation

This is the third blog in a series of posts written by May Van, Executive Coach at Kelleher Associates, on the importance of fostering an innovative culture in today's business society. 

There is a misconception that innovation is costly. Some innovations, due to trial and error, do not provide a good short-term return even though they may result in substantial long-term benefits to an enterprise. With investors and funds constantly looking for near-term improvements, how can an enterprise afford the "price" of innovation?

If you agree with my first argument that innovation can be found in all functions of an organization, you should accept the premise that there are some innovations that provide much faster returns than others. As an enterprise is working to develop break-through products requiring long-term funding, other functions, as part of the value delivery system, can identify new ways of doing things that can provide benefits through cost savings. These savings can be used to fund the innovations requiring more investment and a longer time to realize.

Managing a portfolio of innovation at an enterprise level, with certain innovations providing funding for other innovations, minimizes the reluctance of executives focused on the bottom-line to champion innovation. The idea that innovations require a large investment in resources and time is outdated. 

Next: Blog #4 will discuss what to consider if you want to keep the entrepreneurial spirit alive and how to nurture an innovative culture.

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