A Strong Business Case Won’t Save Your Innovation Budget. Here’s What Does.

Finance sends another savings target. The business line asks what innovation does with all its money. Responding with a strong business case may not be enough, because corporations don’t fund on the numbers alone.

Patrycja Anna Jakubiuk trained in finance and investment management. In that world, an investment that promises high returns in a short time is an attractive one. So one question kept bothering her: why is innovation usually the first thing a company kills when it starts cutting costs?

She has spent 15 years in innovation teams at corporations and startups. Before that, she worked on transformation programs in the early 2000s, all centered around cost cutting. That taught her where to find money in a big corporation.

Today she leads a portfolio of about 80 innovation initiatives at a large corporation, most of them AI applications for drug development. Her team owns the early stages of each initiative: scoping, ideas and a prototype. After that, R&D, the business line or IT takes over to build and run the solution.

Business school teaches you to judge an investment by its numbers: net present value, return on investment, payback period. Banks and venture capitalists fund that way, with a full view of both cost and revenue. Corporations work differently. Their funding follows business strategy or necessity, and they see the full cost of an initiative but only part of its revenue.

In a corporation, funding decisions are partly subjective. Her four steps are for working in that world. The first two keep initiatives funded through the handover to the business. The last two help when finance demands cuts.

When a company starts cutting costs, everyone is expected to save. Business-line colleagues then point at the innovation team: “You guys have so much money. What do you actually do with it?” Why should they cut operations while innovation keeps spending?

Patrycja then answers with a question of her own: what does the old way of working really cost?

Total cost of ownership (TCO) is everything a company pays for one process or product, added up into a single figure. That figure covers what it costs to run a process, to bring a product to market or to keep offering it to customers. Total cost of legacy is the TCO of the old way of working: what the company pays today, before the innovation initiative goes live.

Both figures matter because large corporations spread costs across many budgets. A process may belong to the business line, while IT and procurement each pay for parts of it from their own budgets. As a result, the business line’s budget shows only a slice of what the old way costs, and the rest sits in other departments’ budgets.

Last year, Patrycja’s team started measuring both figures for its initiatives, pulling the costs from every budget into one total. Both figures grow every year: the new solution’s costs rise, and so does the cost of keeping the old way.

This finding moves the funding discussion beyond the innovation team’s project budgets. The business line now sees two full totals side by side: what it pays for the old way and what it would pay for the new one. Patrycja counts this shift as the first thing that helped her protect her portfolio.

The innovation team designs the funnel and the stage gates, but it rarely owns an initiative from start to finish. In Patrycja’s experience, initiatives lose momentum at the handovers, and many die before they are implemented. The handover also changes who pays:

The early stages are easy to fund: one sponsor pays once for a pilot. The trouble starts when the next owner has to commit its own budget for several years.

So Patrycja talks with the business about the whole lifecycle, using the three numbers from step 1. That predictability helps budget owners secure funding after the handover and keeps initiatives alive.

Venture capitalists always told Patrycja to talk about value when people in the corporation questioned her spending. Her approach below is for the years when talking value is not enough: the company is in real difficulty, and the innovation program is at risk of closing.

Patrycja protects the initiatives closest to results: those in build or buy, near go-live, in adoption or already scaling. These initiatives can show measurable impact, and that evidence shows the business and management that the program delivers value.

Even these advanced initiatives go through her budget process, which gives her three moments to prune:

Strategic fit has become a harder call. Last year, Patrycja saw management in many corporations order teams to stop everything that doesn’t have AI in it. A team may then have to close an initiative with good performance metrics only because it has no AI.

Pruning works when finance asks for savings once, maybe twice, in a budget year. Some years bring more: one savings target during budgeting, then two, three or four more as the year goes on.

By the later targets, the remaining options are harsh: cut every initiative until each has too little money to develop, close initiatives, or close the whole program. Before choosing any of them, Patrycja borrows a move from her transformation years, one she first used last year. She brings the budgets of all her initiatives into one view and looks at the portfolio’s cost structure, meaning the breakdown of where the money goes: the mix of internal and external people, software licenses for AI models, and cloud.

The savings sit in those categories because of how initiatives grow. Up to design, Patrycja’s teams move fast on their own. In development and implementation, they run on central services priced by central policies, and innovation teams usually lack visibility into how those services are priced, whether they hold the right plan or workforce mix, and which capabilities the organization already has.

Her team had two management meetings a month. In the wider one, people from IT, procurement and finance kept challenging the portfolio’s spend. She brought them her analysis there and asked them to be part of the solution, with each function reviewing the category it manages:

The people who challenged the portfolio’s spend now had a reason to help: during cost cuts, every function wants to show its contribution to overall savings. Patrycja estimates that a portfolio using this lever for the first time can find about 20 to 30% in savings.

The people who used to ask what innovation spends its money on now help make the numbers work.