The 70-20-10 Model: How to Allocate Your Innovation Budget Wisely

Innovation, at its heart, is a resource allocation challenge. Every organization faces the same fundamental question: Should we double down on what already works, or risk diverting resources toward what might work next? Do you spend money on sustaining your core or exploring new markets, technologies, and customer needs?

This tension lies at the core of the 70-20-10 innovation model and other strategic portfolio approaches. These frameworks offer practical guidance on how to balance short-term performance with long-term growth. By dividing resources across core, adjacent, and transformational innovation projects, organizations can manage risk, align initiatives with goals, and build a development pipeline that creates a competitive edge.

A systemic approach to innovation project portfolio management strategy connects high-level ambition to operational decision-making. From aligning innovation with goals to building roadmaps and dashboards that guide and measure progress, we outline in this article how to apply the 70-20-10 rule correctly so you allocate your innovation budget wisely.

Summaries and FAQs on innovation portfolio allocation

What is the 70-20-10 innovation model?

The 70-20-10 innovation model is a strategic framework for allocating innovation investments. It helps companies focus on both short-term improvements and long-term growth opportunities. The model divides resources across three types of innovation: 70% for core, 20% for adjacent, and 10% for transformational.

This approach allows organizations to reduce risk while exploring future potential. Instead of putting all efforts into new ideas, companies can improve existing products while testing bold concepts. It provides structure to innovation activities and supports better decision-making.

Origins of the model: From Google's innovation model to global use

The 70:20:10 model's roots lie not in innovation research but in learning theory. According to this school of thought, individuals acquire 70% of their knowledge through personal experience with challenging tasks, 20% through collaboration with colleagues, and 10% through formal education and reading.

Eric Schmidt, the former CEO of Google, later adopted this theory and applied it to promote innovation at Google. Schmidt requested Google employees to prioritize 70% of their time for core business tasks, allocate 20% for projects related to their core responsibilities, and dedicate 10% of their time to new and unrelated projects.

Google popularized the 70-20-10 rule as part of its internal innovation system. They used it to support talent development, encourage experimentation, and drive performance. Over time, the model was adopted by other tech firms and eventually spread across industries.

Spending 70 % on developing the core business and sustaining innovation

The majority of innovation budgets should go toward the core business. This includes sustaining innovation and incremental innovations that improve existing products, services, or processes. The focus is on boosting product performance, reducing costs, learning from customers, and enhancing customer satisfaction.

These efforts are tied closely to strategic goals. They support the existing business and generate steady returns. While not always exciting, this work is critical for maintaining competitive advantage and driving efficiency.

Spending 20 % on developing the adjacent business and architectural innovation

The 20% allocation focuses on expanding into adjacent markets or customer segments. These innovations are not entirely new, but they push companies beyond their comfort zone. Architectural innovation also falls here, involving structural changes to how products or services are delivered.

This part of the portfolio often supports growth initiatives. It may involve repurposing existing technologies for new uses or entering new markets with known capabilities. It’s a way to explore opportunity without stepping too far from the core.

Spending 10 % on developing disruptive innovation and new business models

The final 10% is reserved for transformational innovation. This includes disruptive innovation that can reshape industries or create new ones. It also includes entirely new business models that challenge how value is created and captured.

This investment is the most uncertain but also the most potentially rewarding. It aims to meet future needs and prepare the company for long-term change by investing in capabilities that the competition fears investing in.

These projects often require a high tolerance for failure and learning, and strong support and commitment from leaders.

What other innovation investment strategies are used successfully?

The 70-20-10 model is not a one-size-fits-all approach. While it serves as a rule-of-thumb for many business cases to balance incremental innovations with breakthrough efforts, it’s not always the best fit. Successful innovation investment strategies depend on a company’s history, strategic goals, and the dynamics of its industry.

Different industries face different challenges. Highly regulated sectors like pharmaceuticals or defense often spend more in Horizon 3 to develop new business models and technologies. In contrast, industries like construction or manufacturing may focus more on incremental innovations and learning.

Companies also vary in their risk appetite and their available resources. Those with strong talent development systems and large R&D budgets can afford to explore radical and big picture innovations. Others focus on supporting existing products or improving internal processes to boost performance.

Innovation frameworks must align with the company’s overall growth ambition. A business aiming to lead in its market may need to allocate more resources to emerging technologies, breakthrough innovations, and learning. Others may prioritize sustaining innovation.

The best innovation portfolios reflect the industry’s pace of change, the maturity of the organization, and the type of growth opportunities being pursued. Rather than copy a fixed ratio, leaders must adapt models like 70-20-10 to their strategic context. Successful managers tailor frameworks to business challenges and enhance the long-term value without compromising today's performance.

What are three examples and systemic approaches that apply the 70:20:10 rule of innovation in practice

The 70:20:10 model guides development, implementation, and the performance of innovation projects when applied systemically.

Below are three well-known examples that apply this concept with different types of solutions.

Coca-Cola: Adapting the 70:20:10 rule for product and market innovation

Coca-Cola uses the 70:20:10 model to manage both product innovation and portfolio expansion. Around 70% of its innovation projects are spent on incremental changes to existing beverages (new flavors, packaging upgrades, or health-specific reformulations). These projects improve customer satisfaction while leveraging existing solutions.

The remaining 30% is split between adjacent innovations like expanding into low- or no-sugar categories (20%) and transformational ideas such as experimenting with digital vending platforms and sustainability pilots (10%). Coca-Cola’s innovation strategy is closely tied to consumer insights, market testing, and regional trends. Its implementation varies depending on geography, but the model ensures a clear pipeline of different types of innovations at all times.

Netflix: Innovating through technology and content at scale

Netflix demonstrates a systemic approach to innovation by embedding 70:20:10 principles into both technology and content development. Around 70% of the effort goes into continuously improving the streaming platform, focusing on user experience, performance optimization, and interface design. These changes may appear small, but they are crucial for retention and engagement.

The 20% zone targets adjacent innovation, such as branching into mobile experiences, gaming, or localized content strategies. The final 10% explores disruptive formats, like interactive storytelling or AI-assisted recommendations. Netflix fosters a strong learning culture where cross-functional teams are encouraged to test and scale new solutions quickly. Training, data experimentation, and rapid prototyping are key parts of its innovation process.

3M: A culture of training, freedom, and applied innovation

3M is perhaps the most well-known example of an organization that systematized innovation using a structure similar to 70:20:10. Employees are empowered to spend 15–20% of their time on projects outside their core duties. This freedom adds to the 10% allocated to breakthrough innovations, many of which have led to iconic products like Post-it Notes.

About 70% of innovation work is aligned with existing product categories, using a combination of formal training, continuous process improvement, and applied R&D. The remaining 20% is used to explore new customer segments, test materials, or scale internal tools. 3M’s innovation framework is tightly connected to talent development, performance metrics, and resource allocation processes, making it a model for systemic innovation management.

How to apply your innovation portfolio rule as a systemic approach

Applying a rule like the 70 20 10 innovation model is most effective when treated as part of a broader system.

Instead of managing innovation projects in isolation, successful managers embed the model into core processes. This allows leaders to steer development efforts consistently and respond to different challenges across teams or units.

Aligning goals and innovation initiatives

Innovation efforts must align with strategic goals and the specific needs of stakeholders. What works for one organization unit may vary depending on its maturity, market, or resource availability. By mapping innovation horizons to organizational goals, managers can ensure a balance between developing new solutions and improving existing ones.

Leaders should also foster strong developmental relationships between departments. These connections help avoid duplication and promote the reuse of ideas already created in other areas. It’s an essential aspect of managing innovation across multiple functions.

Roadmaps to steer the development portfolio

Roadmaps provide structure to long-term strategic planning. They help teams visualize how initiatives evolve from early concepts to fully developed offerings. A well-built roadmap includes both incremental improvements and other forms of innovation, ensuring a healthy solution mix in the development portfolio.

Successful managers use roadmaps for coordinating timing, developmental relationships, and investment priorities. These tools also help manage risk by phasing development in line with company goals.

Dashboards to control the innovation investment returns

Dashboards allow leaders to monitor the performance of innovation initiatives. They show in what solutions resources are going and what impact is being created. Metrics should cover both short-term results and long-term potential.

The aspects tracked can include time-to-market, ROI, and learning outcomes from experimentation. Dashboards also support training efforts by highlighting gaps in capability. Used effectively, they help key stakeholders make informed decisions and adjust course when necessary.

Start today managing your innovation portfolio with ITONICS, the best innovation portfolio software

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When you need an enterprise-grade solution, agile-friendly tool, and transparent overview of your innovation program, ITONICS - The Innovation OS is the perfect choice for your organization:

• Stay on top of project spending and progress: Translate your opportunities and ideas into clear tasks and timelines. Build project roadmaps that break down long-term objectives into specific initiatives. Identify roadblocks, track performance against key milestones, and keep efforts aligned with dashboards and reports.

• Secure leadership trust: Leaders want to know how spending translates to concrete organization results and progress. Share ITONICS dashboards as a single source of truth, keeping them informed and assured.

• Reduce operational friction: Eliminate bottlenecks and inefficiencies that slow down developmental relationships. Streamline collaboration, act as planned, and ensure smooth handoffs between teams to keep innovation moving at full speed.