Innovation Strategy

Focus on Strategic Themes and Balance Big Bets With Small Experiments

Innovation isn’t about having endless ideas or copying whatever big tech companies are doing. It’s about repeatedly finding and executing on a small number of high-potential bets that actually move your business forward. That’s the 80/20 Rule in innovation strategy: a minority of experiments and projects create the majority of your impact.

When you apply Pareto thinking to innovation, you stop spreading resources thin across dozens of initiatives and start deliberately focusing on a portfolio of a few big bets and a steady stream of small, cheap experiments – all aligned with where you can create the most value.

Start with Strategic Focus, Not Random Ideas

Innovation is only useful if it serves a strategy. The first step is clarity on where innovation would matter most: new markets, new products, business model shifts, or major improvements to core offerings.

• Ask:
  • Where is our industry changing fastest?
  • Where are customer needs poorly served today?
  • What capabilities or assets do we have that others don’t?
• Use these answers to define a few innovation themes (e.g., automation for small businesses, sustainable packaging, digital self-service).
• Real-life example: A manufacturing company focused its innovation strategy on “smart services” – layering monitoring and predictive maintenance onto hardware – instead of chasing consumer apps or unrelated tech trends.

8020 move: Define 2–4 clear innovation themes tied to your strategy, and use them as filters: new ideas that don’t fit these themes are a lower priority.

Balance Big Bets and Small Experiments

An effective innovation portfolio usually has two main components:

• Big bets – a few larger initiatives with potential to significantly change revenue, margins, or competitive position.
• Small experiments – many low-cost tests exploring ideas, channels, or features, most of which will fail but at low cost.
• The 80/20 insight: a few big bets will drive most impact, but small experiments feed them with evidence and direction.
• Real-life example: A SaaS company ran small pricing and feature experiments regularly, but committed serious resources only to the few ideas that showed promising data, like a new self-serve plan that gained traction quickly.

8020 move: Limit your big bets to a manageable number (often 3–7) and surround them with many cheap experiments that reduce uncertainty.

Use Evidence, Not Opinion, to Prioritize

Ideas are cheap; good ideas are rare. To find them, you need ways to quickly gather evidence about desirability, feasibility, and viability – instead of relying on the loudest voice in the room.

• For new ideas, ask:
  • Can we quickly test whether anyone wants this? (landing pages, interviews, prototypes.)
  • Can we build a minimal version with current capabilities?
  • Is there a plausible path to profit or strategic advantage?
• Score ideas on impact, confidence, and effort; pursue those with strong potential and reasonable feasibility.
• Real-life example: Before investing heavily in a new app, a retailer tested interest with a basic sign-up page and emails. Low sign-ups led them to pivot the concept early, saving months of work on a product few customers wanted as originally conceived.

8020 move: Require simple, quick evidence for new initiatives – even if imperfect – and let that evidence, not only enthusiasm, guide which ideas advance.

Create Time and Space for Innovation Work

Innovation dies when it’s always squeezed into the margins of everyone’s “real job.” A small, protected percentage of time and resources can make all the difference.

• Options include:
  • Dedicated innovation teams or “tiger teams.”
  • Set-aside time (e.g., 10–20%) for experimentation within existing roles.
  • Periodic hack days or innovation sprints tied to your themes.
• Real-life example: A company allowed engineers to spend one day a fortnight on innovation projects within strategic themes. Many ideas went nowhere, but a few became major product features and internal tools that saved hundreds of hours.

8020 move: Decide explicitly how much time and budget you will allocate to innovation, and protect it from being constantly cannibalized by short-term fires.

Build Simple Feedback Loops with Customers

Innovating in isolation from customers is risky. A few consistent feedback channels give you reality checks and fresh ideas at low cost.

• Examples:
  • Customer interviews or advisory boards.
  • Beta programs for new features with select users.
  • In-app surveys or feedback widgets.
  • Tracking behavior data for new offerings.
• Real-life example: A fintech startup invited a group of early adopters into a private Slack channel where they could provide ongoing feedback on new features. This real-time input steered product decisions more than any internal brainstorming ever did.

8020 move: Establish 2–3 regular ways to hear from customers about new ideas and iterate based on their responses, not assumptions.

Accept Failure – But Fail Small and Learn Fast

An honest innovation strategy recognizes that many experiments will fail. The goal is not to avoid all failure, but to make failures cheap and informative. This is where 80/20 and lean startup ideas converge.

• Design experiments with limited scope and clear stop criteria.
• Hold brief post-mortems: what did we learn, and how does it affect our next bets?
• Reward thoughtful risk-taking and learning, not just wins.
• Real-life example: A company’s innovation team sunsetted several prototypes after early tests showed poor traction. Because the tests were small and explicit, senior leaders saw this as disciplined portfolio management, not failure – and continued funding further experiments.

8020 move: Make it normal to stop projects early when data is weak; this frees resources for higher-potential ideas instead of keeping “zombie” projects alive.

Innovation Strategy as Focused, Repeated Bets

Innovation doesn’t have to mean constant chaos or chasing every new technology. With the 80/20 Rule, it becomes a disciplined practice: focus on a few strategic themes, balance big bets with many small tests, use evidence to prioritize, create space for experimentation, and listen continuously to customers.

Do this consistently, and over time you’ll see that a handful of well-chosen innovations account for most of your growth and differentiation – not because you guessed perfectly, but because you set up a system designed to find and nurture the vital few ideas that really matter.