How Startups Raise Money Using the 70-20-10 Method
As a founder, you’re probably always on the lookout for the next best thing that’s going to help you raise money.
The 70-20-10 method can not only help boost performance but can also transform your ROI. Those who have used this method usually outperform their competition by a margin of 10-20%.
It’s often called the ‘rule of innovation,’ but it’s more of a rule of thumb. It’s also adaptable, so if the numbers don’t work for you and your startup, you can jiggle them about until you find a method that fits you best.
So, What Actually Is the 70-20-10 Method?
It’s a formula Google swears by to bolster its innovation efforts. They invest 70% of resources and human capital in the core business, 20% in the new developments, and 10% in disruptive innovations.
More generally, the method is comprised of the idea that 70% of learning comes from experience, experiment, and reflection. This is the hands-on type of working where you get stuck in and learn on the job, essentially.
20% comes from learning by working with others, asking questions, receiving feedback, and coaching colleagues. 10% is social learning with those you work with.
This method has been adapted many different times for as many industries and then adapted further to best suit the business using it.
What Does It Mean for Startups?
Research suggests that because startups are self-driven and social at work, the method should fall at an even split, with 50% on self-learning and 50% on social learning.
Though, as a founder, the method used by Google is probably more tempting, so let’s look into that a little further…
70% Core Innovation
This means taking a critical view of your current products and services and making sure they align well with your strategy and goals.
As core activity-focused innovation usually covers the existing processes and customers, the costs for increasing production and adoption tend to be lower.
20% Adjacent Innovation
Adjacent innovation focuses on a new market. No matter how successful your startup and its product or service is, you will eventually need to adapt it to fit meet new market needs.
Investing in this early, but not focusing on it fully, allow you to stay ahead of the game and extends what you can offer.
This isn’t coming up with something wholly new, but something new for the market you’re in.
10% Disruptive Innovation
Disruptive innovations for startups are like breathing – you’re already in the startup game because you have an idea that is a breakthrough and doesn’t yet exist in your market.
Like with adjacent innovation, disruptive innovation is all about getting ahead of the game and seeks to be on the cutting edge of problem-solving.
Once you’ve got the right percentages down for your startup, you’ll start to see the benefits of implementing them.
It can further the longevity of your startup as you understand where’s best to allocate budget and resources to sustain performance and enter markets not thought of before.
As you’re innovating the core of your business, adjacent markets, and disrupting the market with fresh ideas, you’ll start to discover how many opportunities are out there for startups.
With the focus, determination, and self-motivation that startups are best known for, your ROI will start to increase as you raise more money through bettering your current products or services and by staying ahead of the game with new ideas and markets you can enter.
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