Innovation budget vs Product budget
Most early-stage products start off as novelties. They’re fresh and exciting. When speaking to B2B clients, they are often placed into the organization’s “innovation budget.” This is natural when there’s not much market validation or social proof yet.
However, the ultimate goal for any ambitious founder is to transition from a nice-to-have item to a true business necessity— meaning something that is seen more of as a “need” than as a “want”. This is what I call the product budget.
Innovation Budget
Early adopters love experimenting with cutting-edge solutions, and that’s exactly what the innovation budget is for. Companies allocate a bit of cash to test new ideas, hoping to gain a strategic advantage or boost performance in some way.
However, staying in the innovation bucket forever isn’t viable. Over time, a founder wants to see their product recognized as essential—especially once the product and its market have matured enough to prove reliable benefits.
Product Budget
In contrast to the innovation budget, the product budget is for established solutions that a company knows it needs.
Being here offers multiple advantages:
Higher Budget Allocation
When a purchase is deemed mission-critical, organizations dedicate more resources to it. This puts less pressure on short-term results and more focus on the long-term value the product provides.Structured Sales Process
Clients shopping for a core business tool will perform more thorough comparisons. They’ll want to see how one product stacks up against others. This isn’t a threat; it’s a signal that the market considers the product important enough to demand due diligence.Clear ROI Expectations
Moving out of the “let’s see if this works” mentality also means justifying every dollar spent. Clients expect tangible benefits and trackable returns. A founder who can confidently speak to ROI gains immediate credibility.
Lessons from Slack
Slack started out as an innovative idea—an alternative way for teams to communicate. However, even after some time, and when the market was more mature, its CEO, when speaking with clients, was finding himself always on the innovation budget.
How did Slack make the leap from innovation to product budget?
Identifying a Key Metric
Slack discovered that a certain threshold of active users in a workspace led to a tipping point in retention. Beyond that, teams simply couldn’t imagine going back to email chains. Defining and focusing on such a core metric helped Slack prove it wasn’t just a nice to have, but that it was integral to the daily operations of customers.Proving Value with Social Proof
Case studies, testimonials, and quantifiable success metrics played a pivotal role. By showcasing exactly how Slack boosted productivity, the company shifted itself from “interesting idea” to “best-in-class solution.”Building Integrations and Partnerships
Slack’s real power was in how it linked seamlessly with other tools. By making workflows easier for both technical and non-technical users, Slack positioned itself as a hub rather than an isolated product. This reinforced its place in the product budget because it became essential to an entire operational ecosystem.
Action Steps
Aim Beyond Novelty
Embrace the innovation phase but remember that the ultimate goal is long-term relevance. Regularly ask, “What evidence do we have that our product is crucial to our clients’ core operations?”Prepare for Comparisons
Once organizations start viewing a solution as a necessity, they’ll seek out competitive alternatives. Stay on top of the market landscape. Know the strengths and weaknesses of potential rivals, and be ready to articulate how your offering is different—or better.Show Tangible ROI
Lay out clear numbers that illustrate precisely why a client should invest. This could be time saved, revenue generated, or any other performance metric that resonates with decision-makers.Think in Milestones
Recognize that transitioning from “innovation” to “indispensable” may take time. Break down the path into actionable steps—feature enhancements, case study development, integration partnerships—and let these milestones guide product decisions.
Conclusion
The real game-changer is becoming a commodity—one that teams can’t (and won’t) do without.
