3 ways to free up money for innovation

Spending too much money keeping the lights on? Consider these three steps to fund more innovation
Up
293 readers like this, including you
Digital transformation ROI

The information technology industry exists to spearhead the research and development of technical innovations. But most IT organizations spend 72 percent of their finances on routine, “keep-the-lights-on” functions and only 28 percent on the execution of creative new projects, according to Forrester Research. Some leaders in the IT space are reluctant to budget for innovation because they think it’s a smarter use of funds to invest in established operations instead of taking a chance on experimental ideas they might not be able to afford.

At first glance, this sounds like a valid approach. But in reality, there is room in any size budget to plan for innovation if you are strategic and resourceful.

“Over the past dozen years, our annual Global Innovation 1000 study has found no statistical relationship between the dollars spent on innovation and financial performance,” according to PwC, which implies that how you choose to allocate money is more important than how many of those dollars you spend.

[ Read also: 5 questions to ask when organizing for innovation. ]

Before you assume that your budget is too small for the inclusion of new brainstorms, processes, and advancements, consider these three tactics to help create the extra financial margin needed to innovate.

1. Root out expensive legacy systems and processes

Is a sizable portion of your budget used to maintain outdated and overpriced technologies? This reliance on legacy systems can inhibit you from introducing accelerated processes that make your business more efficient and competitive for less money in the long run.

For instance, in 2016, about 90 percent of hospitals still required their doctors and nurses to communicate with pagers instead of smartphones, based on data from the Healthcare Information and Management Systems Society. But since pagers are obsolete, the hospitals overpaid by 45 percent just to keep a legacy system that staff members found “inconvenient.”

Archaic processes should be rooted out of your budget for innovation to occur.

2. Think and evaluate like a risk manager

The more digitized your infrastructure is, the more equipped you need to be in the area of risk management. When sensitive cloud-stored information is not secured properly, it creates greater potential for a costly data breach. This halts innovation because the finances you could have spent on formulating new concepts and high-tech applications must be used to retrieve your lost data and rebuild the compromised network. Part of an agile innovation approach is to try to predict or forecast a risk before it happens.

“A security breach or data loss can cost significantly more in both time and money than properly handling the risk to begin with,” wrote Frank Ohlhorst in an article for Tech Republic. “That is exactly where proactive risk management comes into the IT picture. It all comes down to the ‘cost of not doing business’ as opposed to the ‘cost of doing business.’”

3. Connect with external sources for grant funds

Keep in mind that financial resources can be accessed outside of the company budget too. Industry grants are often available for IT businesses through both state and federal economic development offices such as the Small Business Innovative Research program. “Each year, federal agencies with extramural R&D budgets that exceed $100 million are required to allocate 3.2 percent of their R&D budget to these programs,” according to the SBIR.

These grants are intended to mobilize scientific and technical innovation and entrepreneurship in all socioeconomic brackets. If your business has an original, creative, and unique idea, apply for a grant to fund the overhead costs of your project so you can focus on turning the abstract idea into an actual product.

Innovation is a strategy: It requires vision, effort, time, and money. But if you allow concerns with the budget to stand between how your business functions right now and how it could be optimized to build the future, then your plans to innovate might not become a reality. Use this framework as a starting point to free up cash flow and take your technical ingenuity to the next level.

[ Are you leading toward a more innovative culture? Get the free eBook, Organize for Innovation, by Red Hat CEO Jim Whitehurst. ]

Scott Terrell is senior vice president and chief information officer for HealthMarkets Insurance Agency, one of the largest independent health insurance agencies in the United States. Terrell has 20 years of information technology experience in a variety of industries, with most of those years spent in management.

Social Media Share Icons