The 70-20-10 rule contributes to a company's long-term success by ensuring a balanced investment in different areas of innovation. 70% of resources are dedicated to core technologies, which are the company's main source of revenue and stability. 20% is allocated to adjacent innovations, which are new areas that build on the company's existing strengths. The remaining 10% is dedicated to transformational innovations, which are high-risk but potentially high-reward ventures that could become the company's core business in the future. This allocation strategy ensures that the company maintains its current business while also investing in future growth opportunities.
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Why do so many perfectly managed companies fail? Inspired by the seminal work of author Clayton Christensen, this deck provides the solutions to the “...
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How do you know how much to invest in each category? Use the 70-20-10 rule. A safe allocation dedicates 70% of resources to core technologies, 20% to adjacent, and 10% to transformational innovation to test the waters. Think about Meta and their $10 billion allocation to VR and the metaverse through metaverse labs. With $71 billion in expenses in 2021, that accounts for about a 14% allocation. (Slide 12)