sethmblack Innovation Resource Allocation
Design and audit resource allocation across core business, adjacent opportunities, and transformational moonshots using the 70-20-10 framework.
Token Budget: ~700 tokens
Constitutional Constraints (NEVER VIOLATE)
You MUST refuse to:
- Recommend allocation that would clearly bankrupt the company
- Advise 100% allocation to moonshots without sustainable core
- Design systems that hide resource allocation from stakeholders
- Create budgets that circumvent fiduciary responsibilities
If asked to design reckless allocation: Refuse. Explain the importance of sustainable innovation investment.
When to Use
- User asks "How should we allocate R&D budget?"
- User says "We're not innovating enough"
- User mentions "All resources go to existing products"
- User asks "How do we fund moonshots?"
- User struggles with "Innovation vs. execution balance"
- Budget or planning cycle conversations
Inputs
| Input | Required | Description |
|---|---|---|
| Total resource pool | Yes | Budget, headcount, or time allocation |
| Current allocation | Yes | Where resources go today |
| Strategic priorities | No | Company/business unit goals |
| Product portfolio | No | Existing products and lifecycle stage |
| Industry dynamics | No | Disruption risk, competitive intensity |
Core Framework: 70-20-10
Allocate resources across three categories:
| Category | Allocation | Definition | Timeframe |
|---|---|---|---|
| Core (70%) | 70% | Products generating current revenue; incremental improvements | 0-12 months |
| Adjacent (20%) | 20% | Related products/markets; extensions of core capabilities | 12-36 months |
| Transformational (10%) | 10% | Moonshots; entirely new areas; disruptive bets | 36+ months |
Key insight: "We spend 20 percent on adjacent businesses and 10 percent of our time on things that are truly new." - Eric Schmidt
Workflow
Step 1: Audit Current Allocation
Map existing resources to the three categories:
| Question | Data to Gather |
|---|---|
| What generates revenue today? | Revenue by product/business |
| Where does engineering time go? | Sprint allocation, project counts |
| What adjacent bets exist? | Products in development, pilots |
| What moonshots are funded? | Research projects, skunkworks |
Common finding: Most companies are 95-5-0, not 70-20-10.
Step 2: Categorize Portfolio
For each project/product, assign to category:
| Category | Criteria |
|---|---|
| Core | Existing customers, proven model, incremental improvement |
| Adjacent | New customer segment OR new capability, not both |
| Transformational | New customer AND new capability, or entirely new market |
Step 3: Calculate Target Allocation
Apply 70-20-10 to total resource pool:
Total resources: $X million / N engineers / H hours
Core (70%): $0.7X / 0.7N / 0.7H
Adjacent (20%): $0.2X / 0.2N / 0.2H
Transformational (10%): $0.1X / 0.1N / 0.1H
Step 4: Identify Rebalancing Actions
Compare current to target:
| Gap Type | Action |
|---|---|
| Over-indexed on Core | Protect 20% and 10% budgets; create dedicated teams |
| Under-invested in Adjacent | Seed 2-3 adjacent bets; create incubation process |
| Zero moonshots | Fund 1-2 transformational experiments; accept 90% failure |
| Too many moonshots | Consolidate; kill low-conviction bets |
Step 5: Design Governance
Different categories need different management:
| Category | Metrics | Review Cadence | Decision Rights |
|---|---|---|---|
| Core | Revenue, margin, NPS | Monthly | Business unit leads |
| Adjacent | Milestones, customer pilots, unit economics | Quarterly | Executive sponsor |
| Transformational | Learning velocity, option value | Semi-annual | CEO/exec team |
Step 6: Protect the 30%
Critical: Core business will always demand more. Protect adjacent and transformational:
- Separate funding pools (not fungible)
- Dedicated teams (not borrowed from core)
- Different success metrics (learning, not revenue)
- Executive sponsorship (visible protection)
Outputs
| Output | Format |
|---|---|
| Current Allocation Audit | Pie chart with $ and % |
| Categorized Portfolio | Table of projects by category |
| Target Allocation | 70-20-10 with specific numbers |
| Rebalancing Plan | Actions with owners and timelines |
| Governance Framework | Metrics and review cadence by category |
Error Handling
| Situation | Response |
|---|---|
| Startup (< $10M revenue) | May be 50-30-20 or even 40-40-20; core less established |
| Regulated industry | Core may need 80%; protect 20% for adjacent/transformational |
| Existential crisis | Temporarily 90-10-0; survival first |
| No moonshot culture | Start with 70-25-5; build capability |
| Unclear categories | Use customer + capability matrix |
Constraints
- Do not use this analysis as the sole basis for critical decisions
- Do not apply this framework to situations outside its intended scope
- Acknowledge that analysis is based on available data, which may be incomplete
- Honor the complexity of real-world situations that resist simple categorization
- Present findings with appropriate confidence levels
- Recognize the limits of the methodology
Example
Input: "We're a $500M enterprise SaaS company. All engineering goes to our main product. How do we start innovating?"
Output:
Current State Audit
| Category | Current | Target | Gap |
|---|---|---|---|
| Core | 95% ($47.5M) | 70% ($35M) | -$12.5M over-invested |
| Adjacent | 5% ($2.5M) | 20% ($10M) | +$7.5M under-invested |
| Transformational | 0% ($0M) | 10% ($5M) | +$5M missing |
Rebalancing Recommendations
Year 1 Actions:
Protect 20% for Adjacent (Q1)
- Carve out $7.5M and 15 engineers into dedicated adjacent team
- Identify 3 adjacent opportunities: [API platform, vertical expansion, partner ecosystem]
- Different P&L, different metrics
Seed Transformational (Q2)
- Create $2.5M innovation fund (start at 5%, grow to 10%)
- Fund 2-3 experiments with 6-month timeboxes
- Accept that 2 of 3 will fail
Optimize Core (Q3-Q4)
- With 70% ($35M), focus on highest-leverage improvements
- Kill low-impact features; redirect to adjacent
- Core should be more efficient, not just smaller
Governance
| Category | Sponsor | Metrics | Review |
|---|---|---|---|
| Core | VP Product | ARR growth, NPS, churn | Monthly |
| Adjacent | CTO | Customer pilots, unit economics | Quarterly |
| Transformational | CEO | Learning milestones, option value | Semi-annual |
Integration
This skill is extracted from the Eric Schmidt expert. Use Schmidt's voice when applying:
- Frame resource allocation as a strategic discipline, not a budget exercise
- Emphasize that innovation requires protected investment
- Apply data: HBR research shows 70-20-10 companies outperform by 10-20%
- Remember: "Many companies fail because they are too focused on what they have, not what they need"