Every organisation says it wants innovation. Far fewer are willing to kill the things that quietly prevent it from scaling.
Over time, a pattern emerges across large enterprises. Some innovation teams consistently turn early ideas into material outcomes. Others stay busy but never seem to move the needle.
More often, the difference comes down to innovation funding strategy, specifically what gets funded, what gets protected, and what never gets shut down.
This article is about the budget traps that slow innovation down, the anti-patterns that create the illusion of progress, and the uncomfortable truth about why safe bets often cost more than bold ones.
If you are responsible for deciding where innovation money goes, here’s how to know when to double down and when to stop.
Why a good innovation funding strategy is about stopping the wrong things
Most innovation funding strategy discussions focus on what to start. New pilots, new technologies, new partners, new ventures. Much less attention is paid to stopping.
Yet research consistently shows that resource reallocation is one of the strongest predictors of long-term performance. McKinsey found that companies that actively reallocate capital outperform peers by up to 30% over time through more disciplined portfolio management.
Scaling innovation is not about doing more experiments. It is about doing fewer experiments that matter and killing the rest faster.
Teams that scale well develop strong instincts around anti-patterns. They recognise early signs that a project is drifting toward theatre rather than traction.
Teams that don’t tend to reward activity, protect legacy initiatives, and avoid uncomfortable shutdown decisions.
The first budget trap: overspending on pilots that never graduate
Pilots are meant to be learning tools. In many organisations, they become permanent residents.
A common anti-pattern is the endlessly extended pilot. Small teams continue to receive funding year after year without ever being forced to prove commercial viability or scale readiness. The original justification is often sensible.
But over time, the pilot becomes a safe place to hide. It consumes budget, creates internal visibility, and generates presentations without ever facing the hard question of scale.
Harvard Business Review has written extensively about the pilot trap and why so many organisations get stuck between experimentation and execution.
One recurring theme is the absence of predefined graduation criteria. Without clear success thresholds, pilots default to survival rather than decision.
Teams that scale innovation do something different with their innovation funding strategy. They treat pilots as options, not commitments. Funding is staged and timelines are explicit. Success metrics evolve quickly from learning signals to commercial signals.
More importantly, leadership is willing to kill pilots that hit their learning goals but fail their business case.
The second budget trap: innovation theater disguised as progress
Hackathons, labs, demo days, accelerators, and showcase programs can all be valuable when connected to real strategic intent. The problem arises when these activities become the goal rather than the means.
In many organisations, innovation theater thrives because it is visible, low risk, and politically safe. It creates the appearance of momentum without threatening existing power structures or business models.
MIT Sloan has described innovation theater as activity that is “designed to signal innovativeness rather than produce it.” That signaling may help employer branding or internal morale, but it rarely drives material outcomes.
The cost is not just financial. Theater absorbs leadership attention, distracts teams from harder execution work, and crowds out funding for initiatives that might actually scale but require uncomfortable trade-offs.
Teams that scale innovation use visibility sparingly. They prioritise outcomes over optics and are willing to run meaningful work quietly until there is something worth scaling.
The third budget trap: misaligned consultants and external programs
External partners are often brought in to accelerate innovation but can sometimes do the opposite.
Consultants, venture studios, accelerators, and innovation service providers can be powerful force multipliers when incentives are aligned. Problems arise when success metrics reward activity rather than outcomes.
A common anti-pattern is outsourcing ambiguity. Instead of making hard strategic choices internally, organisations bring in consultants to run programs, generate ideas, and manage pilots. The result is often polished outputs with little ownership or accountability for scaling.
Research on innovation outsourcing suggests that external partners add the most value when internal teams retain strong strategic control and capacity. Without that, organisations struggle to integrate outcomes or build lasting capability.
Teams that scale innovation use external partners tactically. They are clear about what is owned internally versus externally and ensure that knowledge, not just delivery, is part of the engagement. And they do not confuse vendor success with business success.
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The hidden cost of safe bets
One of the most counterintuitive truths about innovation funding is that safe bets are often the most expensive.
Safe bets tend to be incremental, consensus-driven, and politically palatable. They rarely threaten the core business or create step-change outcomes.
Because these safe bets feel low risk, they tend to persist longer than they should.
They attract steady funding, avoid scrutiny, and accumulate opportunity cost over time. Each additional year of funding crowds out riskier initiatives that might actually create future growth.
The irony is that these safe bets can become the riskiest strategy of all when markets shift. By the time disruption becomes obvious, the organisation has spent years optimising the wrong things.
Why killing projects is a leadership skill, not a failure
In many organisations, killing a project is treated as an admission of failure and as a result they build powerful incentives to keep weak initiatives alive.
Teams with a innovation funding strategy that scale innovation flip this logic. They treat fast, well-governed shutdowns as a sign of discipline. They celebrate intelligent failure when it reduces uncertainty and frees resources.
Amazon famously institutionalised this mindset by encouraging teams to “fail fast and learn,” while maintaining extremely high standards for scaling decisions. Jeff Bezos has repeatedly stated that failure and invention are inseparable, but persistence without traction is not rewarded.
The difference lies in intent.
Projects are not killed because they failed to meet unrealistic expectations. They are killed because they delivered the learning they were meant to deliver and the economics no longer justify further investment.
What an innovation funding strategy built to scale chooses to fund instead
When you look across organisations that consistently scale innovation, funding patterns start to look different.
They invest disproportionately in platforms rather than point solutions. Capabilities that can support multiple use cases tend to outperform isolated experiments.
They fund teams, not just projects. Strong, empowered teams with clear mandates adapt better than brittle project structures tied to fixed scopes.
They allocate capital to learning velocity early and execution excellence later. Metrics evolve as initiatives mature.
And critically, they reserve budget for scaling.
Many innovation programs fail not because pilots do not work, but because there is no committed capital to take successful pilots into production.
There is a clear bias toward initiatives that create strategic options rather than incremental optimisations.
The anti-patterns that quietly block scale
Across organisations that struggle to scale innovation, several recurring anti-patterns show up again and again:
- Funding decisions based on internal politics rather than strategic fit
- Pilots with no clear commercial owner
- Metrics that never evolve beyond activity tracking
- Consultants rewarded for deliverables rather than outcomes
- Projects protected because they are visible or legacy-linked
None of these anti-patterns exist in isolation.
Together, they create an innovation system that looks busy but delivers very little.
Why M&A teams often see the problem before innovation teams do
Interestingly, teams responsible for acquisitions often spot these issues earlier than innovation teams.
M&A forces clarity. Valuation requires hard assumptions and integration planning exposes reality. Synergies must be justified in financial terms.
When innovation initiatives are evaluated through an acquisition lens, weaknesses become obvious.
Applying this mindset internally can be uncomfortable, but it is incredibly effective at separating scalable initiatives from theater.
How to build a kill culture without killing morale
Killing projects does not have to destroy trust or motivation. In fact, when done well, it can improve morale.
Teams lose faith when weak initiatives are kept alive for political reasons while promising work is underfunded. Clear decision rules create fairness.
High-performing innovation teams do three things consistently:
- Define kill criteria early
- Separate project outcomes from individual performance
- Recycle talent from killed initiatives into new opportunities quickly
This ensures that failure is about ideas, not people.
The real question behind every funding decision
Every innovation budget decision ultimately comes down to one question. Is this increasing our future optionality more than it is consuming our present resources?
Projects that expand learning, capability, or strategic positioning tend to be worth funding even when uncertain. Projects that consume resources without expanding options should be killed quickly, no matter how safe they feel.
The hardest part is that optionality is harder to measure than activity. It requires judgement, experience, and the willingness to say no.
Choosing discipline over comfort
Innovation does not fail because organisations lack ideas. It fails because they lack discipline.
Overspending on pilots, funding theater, and clinging to safe bets feels comfortable in the moment. Over time, it becomes the most expensive strategy imaginable.
Teams that scale innovation are not reckless. They are decisive. They know what to fund, what to stop, and when to do both.
The real competitive advantage is not innovation itself. It is the ability to allocate capital honestly in the face of uncertainty.
Sources
- https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/strategy-to-beat-the-market
- https://hbr.org/2018/01/why-startups-fail
- https://sloanreview.mit.edu/article/the-problem-with-innovation-theater/
- https://www.christenseninstitute.org/disruptive-innovations/
- https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/why-resource-reallocation-is-critical-to-growth
- https://hbr.org/2019/10/why-so-many-corporate-innovation-programs-fail
