4 easy ways to make your budget more innovative

Innovation is about finding new and efficient ways to solve existing problems and challenges. So is it possible to approach budget setting in an innovative way - after all, isn’t it “just a plan with numbers”? After a lot of research, it turns out that it might be a good idea to rethink budgets and financial planning. In an article On the future of IT spending, one commentator said, 

Priorities are shifting from dealing with all of the changes compelled by the pandemic back to worrying about how to grow and transform companies to run and expand current businesses and create new opportunities.

As you develop a budget for the upcoming year, don't be afraid to challenge your budget assumptions. What if you made more money available for new initiatives or revamped some of your current programs? Maybe you could take a chance on an innovative idea that would enable your organisation to accomplish more with less.

Here are a few ideas to consider as you develop budget plans for the upcoming year, especially if you feel that there might be a better and different way.

What is the overall strategy of your organisation?

As you develop your budget, be sure you understand your organisation’s strategic initiatives and goals for the year and for the future. If you understand that, you can highlight the more challenging and innovative aspects of your budget that will make the case and resonate with your budget holders. 

It’s easy to get stuck thinking about day-to-day operations and lose sight of the big picture. It's important to think about what outstanding work has been done over the past year and how it's brought value to your organisation. Sometimes, it might be necessary to reallocate existing funds in order to better reflect priorities that have shifted within your organisation.

Doing things differently: The past couple of years has changed everything and we can recognise the benefits of listening to - and creating a workplace for - the next generation. Why is your firm worth the effort? Ultimately, it’s about convincing management that they can do things differently, and get everyone involved and invested in the future. 

Dealing with disruption: Disruption can be a force for creation or destruction. Some of the most interesting examples of corporate collapse have been because of their lack of imagination in the face of change. Take Blockbusters and Netflix, or even Kodak and the brave new world of social media! As the HBR noted, 

Companies often see the disruptive forces affecting their industry. They frequently divert sufficient resources to participate in emerging markets. Their failure is usually an inability to truly embrace the new business models the disruptive change opens up. Kodak created a digital camera, invested in the technology, and even understood that photos would be shared online. Where they failed was in realizing that online photo sharing was the new business, not just a way to expand the printing business.

When you’re planning for the unknowable, a still-profitable company should acknowledge the disruption but not overreact! Instead, they should plan, prepare, listen and invest. Your clients are perfectly placed to get involved in doing things differently with you because they have a vested interest in your success. 

Benchmark yourself against the competition

Benchmarking is a great way to make sure that your budget is realistic. As part of the budget setting process, you must do research on how much other firms allocate to their library and information or innovation budgets. Look at surveys (BIALL, AALL, ILTA) and market industry trends (Gartner, Thomson Reuters) to see where other firms are spending their money. 

This information is essential since your competitors are dealing with similar circumstances and challenges. From there, you can aggregate the data and make an informed decision about future spending. If you find that your company is spending significantly more/less than others, it might be time to rethink your strategy. 

Or not! As one recent industry report states, 2021/2022 is a rare budget planning season in which it is unlikely that any single line item will be able to be responsibly cut back from last year’s resource allocation. Every expense will need to increase and everyone's competing for talent, resources and business. The report concluded,

The 2021 budget process was thrown into unchartered territory due to COVID-19 lockdowns, [whilst] the 2022 law firm budget planning cycle requires leadership teams to make some bold resource allocation decisions in a macro-environment full of uncertainty.

Start thinking outside the box to get the data you need

In my experience, historic budget information and monthly expenditure reports form the basis for the most current iteration. By reviewing past budgets against actual results you can identify what worked well and why, as well as anything that didn’t work so well and why. Learning from both good and bad experiences can inform your current experience. 

However, as we are always being warned, past performance is not necessarily the best predictor for future performance - especially in times of uncertainty. For instance, who in 2019/20 would have built in budgetary wriggle room for extra database licences, e-books access, and other now-essential online systems to enable remote working during lockdown and beyond? These extras will now become an essential mainstay in your current budgetary plans. 

Once you have done your benchmarking and explored potential for new initiatives, you can research the costs associated with them. You need to compose a business case for each one so all stakeholders are aware of the costs and risks. 

For instance, you might set aside £15,000 for a current awareness project. Along the discovery journey, you learn that you might benefit from an add-on or you might get more subscribers than expected. For transparency purposes, you need to highlight to budget stakeholders issues around extra costs, delays, or any other issues around project implementation plans.

Does historical/existing data give you information on the following - if it doesn’t, you need to start thinking outside the box to get the data you need: 

• Are your vendors/suppliers likely to raise or lower prices? alternative solutions?
• Are you expecting to roll out extra services to your end-users? 
• Are you planning to collaborate with other departments OR clients, so that you can share costs?
• Do your staff/end-users/clients need extra training and support?
• Is the firm expanding? Are specific groups coming onboard?
• Are you planning to pursue other special innovation proj­ects or initiatives through partnerships?

The first point is a major consideration and we are seeing a lot of anecdotal evidence that vendor price rises are steeper than ever. The rate of inflation, supply-chain issues, cost of development, etc can all impact costs in an unpredictable way and budget holders should be mindful of this.

Building a culture of experimentation isn’t always about the bottom line

If we are thinking about changing our approach to budget setting, it’s worth revisiting with a more entrepreneurial view. Whilst you are planning for the next year and beyond, ask yourself, how does your budget affect your clients and their behaviour? Remember that their world has changed as much as yours has and they will have different needs.

Whilst researching this, a recent article on building a culture of experimentation resonated with me,

Experimentation encourages innovation, but it can also be time and resource-draining. To make experimentation a productive activity in your organization, you must manage several conditions. What you learn from experiments, how you apply your learnings, the opportunities presented by your learnings, and, perhaps more importantly, the conversations you have with colleagues about your findings should have an impact on organizational decision making.

If the press and social media are to be believed, technology continues to transform the legal market. Your budgets need to reflect this transformation, so you need to keep an open mind,  be constantly aware of the competition, and ensure you share your knowledge with colleagues. You must take advantage of new opportunities while achieving better outcomes and delivering higher value across your firms.

Conclusion

Information and innovation professionals don't always have the financial expertise to crunch numbers, but you do have the imagination to work innovatively within a strategic framework. If the pandemic has taught us anything, it’s that we can transform ourselves and we can create new opportunities from this brave new world.

I would hope by now that your firm has recognised the value of their information and innovation centres. Creativity, flexibility and lateral thinking will flesh out the stories behind the figures. Your budget is the way to future success, so have the confidence to present it like that.