How the 70:20:10 rule applies to business innovation

Organizations can apply the 70:20:10 framework in two ways. Traditionally, it is a learning model that helps to increase knowledge and achieve better performance. But 70:20:10 is also used as an innovation model that can transform ROI and enable you to build a portfolio that outperforms others’.

By Kasper Spiro on Sep 24th

innovation

The 70:20:10 business model: managing innovation

As a learning and development tool, the 70:20:10 framework suggests that employees learn skills or obtain new knowledge in three ways. With on-the-job experience, making mistakes, completing tasks, and so on.

That’s the 70% bit of the model. Employees also learn by asking others, working with a coach or mentor, and through social learning. That’s the 20% part. 10% of what employees learn happens outside of work: through classroom training or e-learning. However, some organizations use 70:20:10 as an innovation model, which completely changes its meaning.

70:20:10 as an innovation model

The 70:20:10 model’s second main application is in managing innovation. This model is so popular that Google bases its innovation investment on it.
This model suggests that you should invest your focus and capital in the following ways. Keep in mind that the numbers are just a rule of thumb – it’s not necessary to apply them literally.

  • 70% on core initiatives
  • 20% on adjacent projects
  • 10% on transformational projects

The ROI is typically inverse, with transformative initiatives driving 70% of revenue. Additionally, companies that employ this innovation framework tend to outperform their competitors.

Google has successfully used 70:20:10 for innovation, according to Eric Schmidt, the search engine’s former CEO. He says it is the best method for encouraging innovation within a group of employees.

“Just as importantly, the 70:20:10 model supports a culture of “yes” rather than “no.” It promotes “what-if,” out-of-the-box thinking. This positive framework feeds our core business while also encouraging new ideas and big dreams that can become huge wins for the company—those 10x moonshots we were talking about earlier. In the long run, a few of those unrelated 10% ideas will turn into core businesses that become part of the 70%. And that’s good for business and the bottom line.”

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Core initiatives: 70%

According to the 70:20:10 innovation model, your organization should invest about 70% of its time and capital on improving existing products. These tend to require a lower financial investment and fit your current customer base and work processes. Just look at Apple, they spend more time and money making improvements to their existing product line than they do to release entirely new ones.

Adjacent projects: 20%

Adjacent projects are similar to your current business, yet still a new market. No matter how successful your organization, service, or product is; eventually, you will need to adapt and change to meet new market needs. Investing in adjacent projects allows you to control and take the lead in this process. For example, a new geographic region, a new market, or extending your product offering.

Transformation projects: 10%

Transformative and innovative projects can be risky, which is why resources spent on it are limited to 10%. But when they succeed, the ROI can fund these failed projects repeatedly. Look at Apple’s iPad or iPhone, for example.

How can L&D leverage 70:20:10 for innovation

Applying the 70:20:10 model for managing innovation doesn’t need to be limited to your product team. L&D can extend this thinking to how employees across the organization operate and innovate in their day-to-day roles.

For example, an employee should spend the most significant part of his time on their core role and daily tasks, about 20% on looking for new opportunities, and just a small amount of time on out-of-the-box thinking or personal projects that will improve their overall performance. The numbers of the 70:20:10 model of innovation are not written in stone. Divide employees’ and your organization’s time in the most suitable way without taking the percentages literally

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About the author

Kasper Spiro is the CEO of Easygenerator and a recognized thought leader in the world of e-learning. With over 30 years of experience, he is a frequently asked keynote speaker and well-renowned blogger within the e-learning community.

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