How to Drive Digital Innovation Without Wasting Resources

Organizations have been investing more than ever in digital technologies, most notably data and AI.

However, today’s environment is getting more volatile and less predictable. Under cost pressure, companies are hitting an “uncertainty pause” in digital innovation—cutting back to maintaining the status quo.

The timing is unfortunate. Pausing digital innovation is not going to help companies keep up with the pace of change induced by technologies such as AI. Instead of pausing, companies must double down on digital innovation. But how can they do so with scarcer innovation resources?

Over the past decade, we’ve studied digital innovators. To better understand their best practices, we conducted in-depth studies of a half-dozen European companies. We discussed our findings with dozens of participants in executive education courses. And in partnership with EY, one of us conducted a quantitative study of 277 companies. From this body of research, we identified three habits that waste resources—and those letting leaders double down on innovation without multiplying waste.

1. Stop funding innovation initiatives based on business cases. Instead, provide funding incrementally based on evidence of impact.

In a May 2025 study of 277 companies, we found that on average 63% of people leading digital innovation initiatives were asked to present a complete business case to receive full funding upfront. This approach to funding ignores the fact that key aspects of a successful digital innovation are simply unknown before the initiative has started; these projects must evolve over time. Project leaders who ignore those uncertainties risk wasting resources: Too often, the proposed solution turns out to be technically infeasible, no longer solves the user problem, or simply doesn’t scale.

How to solve this problem? Here’s one approach: Norway’s postal and logistics group Posten Bring and Spanish energy giant Repsol introduced a stage-gate process for funding digital innovations. The approach makes it very easy for an initiative to receive the limited resource needed to get started. As the project progresses, it needs to prove itself at several stages to receive more resources: Is it technologically feasible? Did it find customers willing to adopt the innovation? Will it scale? At Repsol, at each of these gates, the initiative must convince a “Shark Tank”-like group of company-decision makers to receive funding for the next stage.

The stage-gate process allows executives to delay the decision about bigger investments to a stage when the initiative has much more evidence on the likelihood of success. Repsol finds that 70% of an initiative’s total costs are spent in the scaling stage. A stage gate approach ensures that more initiatives are worth that investment.

2. Stop giving innovation teams more independence. Instead, help them succeed with shared resources.

Innovation teams want autonomy to go fast in their decision making. Yet organizations often confuse autonomy with independence: They leave teams on their own when addressing challenges that are common to many other initiatives.

The trouble with that approach is that innovation initiatives run into many of the same challenges. They include the need for basic functionality that most digital innovations require (e.g., how to register an Internet-of-Things connected device in the cloud while observing regulatory data compliance?); but they can also pertain to good practices of digital innovations (e.g., how to develop a mobile app in a way that makes it easy to operate and maintain).

Having each initiative deal with these issues independently will lead to unnecessary duplication of efforts in the short term. In the long term, uncoordinated initiatives contribute to technological and organizational complexity. The result is an overspend on operations, maintenance, and cybersecurity.

Successful digital innovators use a different approach: They identify common challenges shared by multiple initiatives, and then they incrementally develop shared resources that address these challenges.

At Repsol, the corporate team invests in setting up hubs of shared talent and technology for areas such as data and AI, robotics, and user experience design. For example, 60% of initiatives leveraged its data analytics and AI hub—a central data platform with access to common AI models, as well as data-science experts who help innovation initiatives choose and adapt the models that meet their specific needs. This prevents initiatives from wasting scarce resources by unnecessarily duplicating efforts. A central hub also helps Repsol to attract, develop and retain hard-to-get talent.

A word of warning: Introducing shared resources can create the impression of exerting corporate power over decentral initiatives. That ends up causing resistance. As a countermeasure, the hubs at the companies we studied adopted a mindset of helping initiatives succeed. For example, when introducing shared innovation resources, Munich Re installed a hub technology lead called “initiative CTO” as a kind of co-founder for each key innovation initiative. The initiative CTO’s primary goal is to do whatever it takes to help the initiative be successful. At the same time, the initiative CTO helps identify common needs across various initiatives that can be addressed with a central platform. That’s very different from a mindset of “Here are the corporate standards you have to obey.”

Pairing autonomous innovation teams with shared resources drives impact without wasting resources on reinventing the wheel.

3. Stop some innovation projects. Then reallocate the freed-up resources into the most relevant initiatives.

It’s difficult to be selective about which initiatives should receive an organization’s limited resources. It’s even more difficult to change resource allocations once they are made. Yet, in uncertain and volatile environments, organizations need to respond swiftly to new opportunities and threats. Thus, they must adapt strategic priorities and reallocate resources accordingly.

Too often, once digital innovation initiatives get their business case approved, monitoring is siloed and doesn’t track the contribution to (changing) strategic objectives. Business unit leaders sequester key resources, making them unavailable to those initiatives most likely to have the greatest impact on the organization’s latest strategic priorities. These resources end up wasted on initiatives not contributing to what’s most important to the company.

Successful digital innovators handle this challenge differently. They have a transparent process for regularly updating strategic priorities and then re-aligning key resources with digital innovation initiatives. At Spanish financial services company BBVA, every quarter, top-level executives update the organization’s strategic priorities; they realign more than 2,000 innovation initiatives to those priorities by ranking them by likely impact and reallocate talent and funding accordingly. Thus, their scarcest resources—people—are focused on the most promising opportunities. Initiatives that no longer align are stopped: Every quarter, about 10% of initiatives do not continue. Dynamically reallocating resources this way allows companies to use the freed-up resources either to fund new initiatives and shared resources, to help scale those most likely to have strategic impact. More innovation with less waste.

Take These Steps to Get Started

Shifting from your existing practices to the three habits we describe above requires both a change in mindset and overcoming organizational or political resistance to change. To help marshal evidence that changing your approach to digital innovation makes sense, leaders might want to start with the following actions:

Start measuring to generate evidence.

How many of your digital innovation initiatives are funded via upfront business cases? How many follow a stage-gate approach? What percentage of initiatives leverage a shared digital platform? How many initiatives did you stop last year? And most importantly: How many of your digital innovation initiatives made substantial, measurable contributions to your company’s strategic objectives?

Seeing where you are on these metrics can help make the case for change.

Use the evidence to drive accountability for digital innovation without waste throughout the entire organization.

Innovation without waste is everyone’s responsibility. Three groups of leaders play a critical role—and thus need to be held accountable:

• Leaders of innovation initiatives are accountable for realizing measurable impact; not just delivering a solution. Evidence that an initiative is unlikely to succeed should trigger course correction or termination of the initiative.
• Leaders of shared resource hubs are accountable for helping multiple initiatives succeed easier and faster; evidence linking the use of shared resources to the impact of initiatives helps identify which shared resources to prioritize and which to abandon.
• Corporate and business unit leaders are accountable for translating their entire innovation portfolio into impact on the overall enterprise’s strategic goals. By reallocating resources to the highest-impact initiatives, they prevent waste and ensure alignment with organizational priorities.

Scope out a strategic ambition to pilot the new habits.

By now, BBVA is applying the above habits to all its innovations, company-wide, whether they are digital or not. But the company started with corporate banking as a pilot. Repsol applies the habits to all its digital innovations; Munich Re applied them to 80 digital innovations targeting new business models. You might want to pilot these habits within a specific business unit or for a specific type of innovation; for example, all digital innovations relying on AI.

. . .

The three habits worked well for the companies we studied. And to be clear: finds that companies generating substantial business value from digital innovation are rare. Within five years, Repsol generated over 800 million Euro in free cash flow exclusively from digital innovation initiatives. Most companies can only dream of that. Still, your company is different. Thus, as you stop following certain habits on digital innovations and replace them with new ones, check regularly whether they help you achieve what you set out for: more impact from digital innovation with less resources wasted.