#2: Protect Growth Initiatives

Elevate, Consolidate, and Protect Innovation Funding

Name and protect explicit growth bets in the capital budget.

The complement to cutting the right costs is protecting critical growth investments. The current economic crisis sees companies planning for increased costs and reduced investment dollars for 2009 by actively cutting capital expenditures across the board—especially targeting capital projects that can be deferred. Yet, CEB finds that the best companies carefully protect their key growth bets from short-term financial pressures. They segment their budgets with targets for both explicit cost savings and growth projects. They then drive both by sacrificing those pockets of “business as usual” spending that have less strategic value.

Incorporate concrete innovation targets into performance expectations and reporting, even amidst belt-tightening.

Herd mentality and high anxiety have public companies largely managing to short-term investor expectations. But in 2009, the best companies will manage to the interests of long-term investors. They will commit to a few concrete innovation projects and allow business owners to decide how best to achieve them. This strategy puts tough trade-offs where they should be—in the hands of business owners—and encourages them to consider efficient sources of innovation that can yield higher ROI. It also brings to light those executives who can best manage scarce innovation resources during a period of belt tightening. CEB research shows that the best companies realize these goals in two primary ways:

• Cascade Innovation Targets into Multiple Functions Simply put, the best companies spread the responsibility for innovation around. In addition to cost and budget levers, companies can hit top-line innovation targets by motivating fresh thinking not just within R&D, but across other functions that can also contribute to growth (e.g., Marketing, Procurement, and Information Technology).
• Create Central “Growth Guardians” Instead of dispersing oversight for emerging growth platforms, the best companies will assign accountability and authority for critical, explicitly named, emerging business opportunities. These guardians will aggregate some investments to preserve big growth bets.