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Bigger Budget = More Innovation and Creativity? Not so fast…

Michael Schrage of the Harvard Business Review on the Connection between budget and innovation.

When advising project teams frustrated by their seeming inability to deliver promised innovation or creativity to key customers, one provocative recommendation almost always produces positive results: Cut whatever’s left of the budget by 15%. Innovate with that.

This seems to contradict all our preconceived notions. One might argue that the more funds you inject in R&D, the more innovation and creativity you will channel, but as Schrage adds:

Despite an embarrassing wealth of anecdotal data and econometric surveys, little positive correlation exists between R&D spend and successful innovation outcomes. That’s why I can’t help but laugh when mainstream business media whine that companies in this sector-and-that “don’t spend enough on R&D.”

Innovation and creativity are based far more on mental than bugetary efforts.

The point and purpose of the 15% provocation is to remind people that human capital always matters more than financial capital. Call it “disruptive innovation for disruptive innovation.”

A team which can achieve better results with limited means (limited without becoming insufficient, far from it) will have a lot more chances to find forward-thinking solutions to existing issues.