The 70-20-10 Rule for Innovation: Practical Guide (2026)

The 70-20-10 rule is a simple but powerful framework for allocating innovation resources across three distinct categories of work. The rule states that 70% of your innovation budget, time, and talent should go towards improving your core business, 20% towards adjacent opportunities that expand your market, and 10% towards transformational projects that reimagine your future. Originally popularised by Google and its former CEO Eric Schmidt, this framework has become a cornerstone principle for organisations seeking sustainable innovation without losing sight of their primary mission.

The beauty of this rule lies in its simplicity. It acknowledges a fundamental truth: most companies cannot innovate equally across all initiatives. Resources are finite. Focus matters. By creating explicit guardrails around resource allocation, leadership teams gain clarity about priorities and can make better decisions about what gets built, tested, and scaled.

Think of it as a balanced portfolio for your innovation strategy. You are not abandoning blue-sky thinking. You are creating structure around it so that transformation does not cannibalise the revenue-generating core, and core work does not ossify into irrelevance. This guide covers the theory, plus a self-diagnosis, industry benchmarks, a decision tree for tagging ideas, governance mechanisms that protect Horizon 3, KPIs per horizon, six anti-patterns and a customer-benchmarks section.

Diagnosis: where does your innovation portfolio sit today?

Before you set a target allocation, measure the current state. In nine out of ten organisations there is no explicit measurement. Answer these ten questions yes or no:

• We can say in five minutes what percentage of our R&D budget goes to core, adjacent and transformational work.
• Every active innovation project is mapped to one of the three horizons.
• Transformational projects (Horizon 3) have their own budget line that is not the first thing cut when the quarter is hard.
• Our idea management software shows portfolio composition as a default dashboard.
• Leaders can decline a good idea in review because the category is already full.
• Employees understand that 10% of resources are reserved for exploration.
• We review portfolio allocation at least quarterly.
• Transformational projects are evaluated on different KPIs from core improvements.
• Campaigns are deliberately triggered when a category is under-represented.
• The leadership team knows what share of revenue should come from adjacent and transformational work in three years.

Eight or more yes answers: you are running the portfolio deliberately. Five to seven: you have a frame but not enough discipline. Below five: your portfolio drifts to wherever the loudest pressure is, not to where the most impact is.

How does the 70-20-10 split actually work?

Understanding the allocation is one thing. Understanding what belongs in each bucket is another.

Horizon 1: the core business (70%)

This is where the lights stay on. Your core business generates revenue today. It employs most of your people. Its products and services keep your customers happy. The 70% allocation is not about complacency, though. It is about disciplined improvement. Can you make the onboarding faster? The user interface cleaner? Customer support more responsive? These incremental gains compound. They build moats. They increase margins. They create room for investment elsewhere.

Horizon 2: adjacent opportunities (20%)

Adjacent innovation is where expansion happens. You are not starting from zero. You are applying your existing expertise, relationships, and technology to new domains. A software company might expand from SMBs to enterprises. A consumer brand might launch a professional product line. A logistics company might offer supply chain consulting. These moves are faster than transformation because you are building on established foundations.

Horizon 3: transformational projects (10%)

This is where you question everything. Transformational work is exploratory, high-risk, and high-reward. It is the 10% that protects your company from disruption. It is also the hardest to justify in quarterly reviews because results are uncertain and timelines are long. That is precisely why it needs explicit protection through portfolio allocation.

Industry benchmarks: typical allocation by context

70-20-10 is a starting point. The right split depends on industry, market maturity and competitive pressure. Typical patterns:

Use these as a starting point for a leadership conversation, not a rule. The point is to choose deliberately rather than drift.

How do you tag ideas by horizon? A five-question decision tree

The theory is simple, the daily classification is not. Use these five questions to assign incoming ideas to a horizon quickly:

• Question 1. Does the idea touch an existing product, process or customer group? If yes, Horizon 1.
• Question 2. Does the idea use our existing technology or distribution infrastructure to reach a new market or customer type? If yes, Horizon 2.
• Question 3. Does the idea require a new capability we have to build or acquire? Probably Horizon 2 or 3.
• Question 4. Do we expect results inside 12 months? Horizon 1. 12-36 months? Horizon 2. Longer than 36 months? Horizon 3.
• Question 5. Could the idea replace or bypass our existing business model? That is Horizon 3, regardless of timeline.

These questions are not perfect, but they create consistency. Without a clear rule, one reviewer tags "cloud migration" as Horizon 3 and another tags it as Horizon 1. A documented decision rule ends that argument.

Governance for Horizon 3: how to protect transformational projects

Horizon 3 does not die from bad ideas. It dies from organisational physics: the closer the quarter-end, the stronger the pressure to stop transformational investment and redirect the money to core fixes. Three protection mechanisms work:

Separate budget with a separate approval line. Horizon 3 projects are not paid out of the same pot as Horizon 1. Leadership locks the budget at the start of the year and does not touch it, even when Q3 is tough.

Separate decision-maker. An innovation board with a clear mandate (protect and push Horizon 3) is more effective than a shared investment committee where operational pressures dominate.

Different metrics, different time horizons. Horizon 3 is evaluated on learning rate, validation milestones and portfolio option value. Not on first-year revenue. If you set revenue as the KPI, you do not have a Horizon 3 programme; you have a Horizon 1 roadmap with louder vocabulary.

KPIs per horizon: what to measure

A common mistake is measuring all three horizons with the same KPIs. That suffocates Horizon 3. Use horizon-specific metrics instead:

For more on measurement in general, see our guide on measuring innovation programmes.

Why does this framework matter for innovation teams?

Without a structured allocation framework, innovation efforts drift. Teams with good intentions chase too many opportunities simultaneously. Competing projects cannibalise each other. Resources get pulled to fight immediate fires. Six months later, nothing substantial has shipped, and innovation credibility erodes.

The 70-20-10 rule prevents this. It creates permission structures. It lets teams say no to good ideas that do not fit the allocation. More importantly, it allocates enough explicit budget to transformational work that you are not entirely hostage to quarterly earnings. It is a hedge against disruption.

It also forces conversation about what matters. Are we investing enough in the core? Are we exploring adjacent markets aggressively? Do we have enough exploratory capacity for the future? These discussions align leadership, clarify priorities, and build organisational consensus around the innovation strategy.

How to apply the 70-20-10 rule to your idea management programme

A well-structured innovation intelligence strategy becomes far more powerful when aligned with the 70-20-10 framework. Here is how to apply it in practice.

Step 1: Establish your allocation targets

Start by setting explicit targets for how you want to distribute innovation resources across the three categories. This does not need to be exactly 70-20-10. Your business context might justify 75-15-10 or 60-25-15. The point is making intentional choices rather than drifting.

Step 2: Tag and categorise ideas

When ideas come in through your idea management software, tag them into categories: core, adjacent, or transformational. This makes portfolio analysis possible. You can now see whether your incoming ideas match your allocation targets. If 90% of submitted ideas are core improvements and you are targeting 20% adjacent, you need to change your challenge prompts.

Step 3: Use allocation data to guide challenges

Structure your idea challenges to actively encourage ideas in underrepresented categories. If you are light on transformational ideas, create a dedicated challenge on "what if we completely reinvented our business model?" Make it safe to think big. Use your allocation framework to drive the conversation you want to have.

Step 4: Track funding and resource allocation

Measure what actually gets funded. Track whether your allocation matches your targets. If you are consistently overfunding core work and underfunding transformation, acknowledge it and decide whether that is intentional or a planning failure. Measuring your innovation programme against these targets gives you real data for improvement.

Step 5: Align cross-functional teams

Share your allocation framework with product, engineering, marketing, and business development. When everyone understands that 10% of resources are reserved for exploration, it changes how decisions get made. People stop viewing transformation as distraction and start viewing it as strategic necessity.

Six anti-patterns that reliably ruin 70-20-10

1. Rebranding instead of reallocating. All existing projects get tagged into a horizon, but no resources actually move. The portfolio looks balanced but is not.
2. Horizon 3 as a side project. If the only person working on "moonshots" is one part-timer with 5% of their week, that is theatre. Horizon 3 needs real people, real budget, real targets.
3. Same KPIs across all horizons. If Horizon 3 is measured on first-year revenue, you have already killed it before it could start.
4. Innovation team as a silo. A central innovation office that decides in isolation, without operational leaders, has a low implementation rate because nobody else feels accountable.
5. Campaigns that ignore portfolio balance. Three efficiency campaigns in a row, none on new business models. Then leadership wonders why no transformational ideas are coming in.
6. No quarterly portfolio review. Without a fixed rhythm, the allocation drifts back to 95-4-1 inside six months. Quarter-end physics wins if no one consciously pushes back.

When the 70-20-10 rule does not work

This framework is powerful, but it is not universal. There are situations where you need to adjust.

Early-stage startups

If you are pre-product-market fit, you do not have a stable 70% core yet. You might run 40-40-20 or even 30-40-30 while discovering what works. Once you have traction, shift towards the traditional allocation.

Rapidly disrupted industries

If your industry is being upended, 10% transformation might not be enough. Some companies in fintech, AI, or energy have moved to 60-20-20 or even 50-30-20 allocations. Know your competitive context.

Mature, stable businesses

Some industries (utilities, established manufacturers) have stable competitive landscapes and longer product cycles. A mature utility might run 80-15-5 and still prosper. That is fine, as long as the choice is conscious and not accidental.

Crisis situations

During existential threats, you might temporarily reallocate to 50-20-30 to focus emergency resources on transformation. Just be clear this is temporary, not permanent.

The key is this: the 70-20-10 framework is a starting point, not a law of nature. Use it as a conversation starter. Adjust it based on your industry, maturity, and strategy. But have the conversation explicitly rather than letting allocation drift by accident.

Real-world examples of companies using this framework

Google

Google formalised the 70-20-10 rule in its innovation strategy. 70% went to core search and advertising. 20% to adjacent bets like YouTube and Android. 10% to moonshots like Google Glass or Waymo. Not all bets succeeded, but the framework enabled extraordinary value creation by protecting blue-sky thinking while not starving the core.

3M

3M has long used a version of this framework, allocating a percentage of R&D budget to "bootleg" projects that employees pursue independently. Many successful products (Post-its included) came from this protected allocation. The framework prevented these ideas from being crushed by core business pressures.

Amazon

Amazon's core retail business (70%) generates cash. Adjacent opportunities like AWS and marketplace services (20%) scaled rapidly. Transformational bets like autonomous delivery and healthcare reinvention (10%) get explicit investment despite uncertain returns. The allocation framework justifies the risk.

Customer benchmarks: how Hives.co clients run portfolio discipline

The well-known examples (Google, 3M, Amazon) are powerful but feel distant from European mid-market reality. Three more concrete benchmarks from organisations on Hives.co:

• Halfords (UK retailer, 1,000+ engaged colleagues across 400 stores) uses a systematic idea programme to capture Horizon 1 improvements at the front line. The result: 515 implemented ideas and £759,000 in measurable business value in six months. That is Horizon 1 at its best, incremental, cumulative, and real.
• VINCI Energies (90,000 employees, 2,200 business units, 55 countries, €20.4 billion revenue in FY2024) runs a federated model. Each business unit manages its own Horizon 1 and Horizon 2 allocation while the group provides shared infrastructure and protects the Horizon 3 bets centrally.
• Linköping Municipality (Swedish public sector, 160,000+ residents) cut administrative time on its idea process by 66% with 200 ideas in three months. That shows even in 85-12-3 contexts, incremental improvement delivers measurable results when it is followed through with discipline.

See the full Halfords case study, VINCI Energies case study and Linköping Municipality case study.

How idea management software supports portfolio allocation

Modern idea management platforms make the 70-20-10 framework operationally feasible. Without software, portfolio tracking becomes manual and error-prone. With it, you gain transparency across the innovation lifecycle:

• Categorise ideas by allocation category (core, adjacent, transformational) as they arrive
• See portfolio composition in real-time dashboards
• Identify which teams or departments submit ideas in which categories
• Track how allocation shifts from ideation to implementation
• Compare your planned allocation targets to actual results
• Adjust challenge design and communication to rebalance the portfolio

The software does not innovate for you. But it makes intentional allocation visible and actionable. Pricing for Hives.co is flat-rate (Core €695/month, Pro €1,495/month, Enterprise €1,995/month) with unlimited users at every tier and EU hosting.

Practical steps: getting buy-in for the 70-20-10 framework

Introducing a resource allocation framework is not purely strategic. It is political. Some leaders will worry that 10% for transformation is not enough. Others will fear losing control over their budget. Here is how to navigate this.

Start with diagnosis

Before proposing the 70-20-10 rule, analyse your current state. What percentage of your R&D or innovation budget actually goes to core? Adjacent? Transformation? You will likely find it is unmeasured. Making it visible is the first step.

Build the narrative

Frame the conversation around strategy, not budgets. The question is not "how do we cut costs?" It is "how do we ensure we are investing appropriately across time horizons so we grow today and stay relevant tomorrow?" Getting executive buy-in for innovation programmes works best when leadership sees it as enabling strategy, not constraining it.

Use customer stories

Show your executives how companies like Google, 3M, and Amazon use explicit allocation frameworks. This reduces perception of risk. It becomes best practice, not experimentation.

Start with targets, not mandates

Begin with 70-20-10 as a target allocation, not a hard rule. This gives teams flexibility while creating a north star. Measure towards it. Adjust it. But do not weaponise it.

The connection between portfolio allocation and avoiding innovation theatre

Many organisations claim to innovate but deliver only small tweaks and cosmetic changes. This is innovation theatre: the appearance of innovation without substance. One reason this happens is lack of resource discipline. Without explicit allocation, innovation becomes whatever fits between urgent core work. It becomes low-risk, low-impact, easy-to-justify projects.

The 70-20-10 framework fights this. By explicitly allocating resources to adjacent and transformational work, you create space for real innovation to happen. You protect transformation from being cannibalised. You build organisational permission structures around genuine risk-taking.

This does not guarantee success. But it dramatically increases the odds that your innovation efforts deliver meaningful results rather than just optics.

How to measure success with 70-20-10 allocation

Resource allocation is only half the battle. The other half is measuring whether your portfolio is delivering value. Consider these metrics:

• Revenue from adjacent opportunities: what percentage of revenue comes from products or markets that did not exist three years ago? This should be growing.
• Time-to-market for core innovations: how fast can you move incremental improvements from idea to deployment? Faster is better.
• Portfolio diversity of ideas submitted: are you getting ideas across all three categories, or clustering in one? Imbalance suggests communication or incentive issues.
• Transformation success rate: of your 10% transformational bets, how many reach scale? Even 1 in 10 is a win if it is substantial.
• Employee engagement in innovation: employee engagement through innovation tends to increase when people see their ideas across the portfolio and understand how they connect to strategy.

FAQ: common questions about the 70-20-10 rule

Should we apply 70-20-10 strictly or use it as a guideline?

Use it as a guideline first. Set it as a target, track your actual allocation, and course-correct if you drift significantly. Strict adherence can become dogmatic and damage judgement calls. The framework's power is in intentionality, not bureaucracy.

Can we change our allocation based on business cycle or market conditions?

Absolutely. A company facing disruption might shift to 60-20-20. A mature company in stable conditions might move to 80-15-5. Just make these shifts consciously and communicate them clearly to your teams. Ad hoc changes create confusion.

What if we do not have enough ideas in the transformational category?

This is common and fixable. Design challenges that explicitly invite blue-sky thinking. Remove approval gates that punish risk. Create dedicated teams or time for exploration. Share success stories of transformation. Change the incentive structure. Over time, you will build a culture that generates transformational ideas.

How does 70-20-10 work for different departments?

You can apply the framework at the organisational level or within departments. A product team might use 70-20-10 internally. A marketing department might have its own allocation. Both can roll up to the company's overall portfolio. Transparency across levels prevents siloed decision-making.

What is the relationship between 70-20-10 and OKRs or other planning frameworks?

They are complementary. OKRs define what you want to achieve. 70-20-10 defines how you allocate resources to pursue them. OKRs are the destination. 70-20-10 is the journey architecture. Use both.

How does 70-20-10 differ from McKinsey's Three Horizons model?

Both describe the same core idea: investment across multiple time horizons. McKinsey's Three Horizons focuses on the time axis (today, in 3 years, in 5+ years), while 70-20-10 specifies percentages for resource allocation. In practice many organisations use both: horizons for the time model, 70-20-10 for the budget split.

How often should we revisit our allocation targets?

Review quarterly. Adjust annually. The rhythm depends on your industry velocity. In stable industries, annual reviews suffice. In fast-moving sectors like software or biotech, quarterly check-ins make sense. Do not micro-adjust monthly; that creates whiplash.

Key takeaways

The 70-20-10 rule is deceptively simple but profoundly useful. It acknowledges that innovation requires discipline. It protects core business operations while enabling growth. It carves out explicit space for transformation without letting it run wild. Most importantly, it turns resource allocation from an accidental consequence of organisational politics into a strategic choice.

Start by measuring where you are today. Choose targets that make sense for your business context. Use idea management software to track portfolio composition. Adjust your challenges and communication to rebalance the portfolio. Measure the results. Iterate.

Over time, you will build an organisation that genuinely innovates: one that improves its core, expands into adjacent opportunities, and explores its future. That is not innovation theatre. That is real, sustainable innovation.

If you are ready to implement this framework, see how other organisations are using idea management to execute their innovation strategy or explore the Idea Program Toolkit to get started today. Book a 20-minute demo to see how to operationalise 70-20-10 in your organisation.