An Innovation Funding Board (IFB) can play an effective role in reducing innovation-related struggles. In my second blog on this topic, I share key principles and questions to consider before putting an IFB in place. But first, it's important to establish a little more clearly what an IFB is and when it's most needed. An IFB can be defined as:

A governance process, decision-making group and forum for selecting, funding reviewing and guiding early-stage innovation opportunities.

In short, it's a mechanism to nurture and support higher-risk business opportunities that otherwise would be less likely to obtain funding through existing core business processes. All successful organizations should be developing and managing a diverse portfolio of innovation projects that support their business and growth goals. However, as many organizations grow they tend to become increasingly risk averse, and over time can develop a strong bias toward low-risk projects at the expense of truly innovative ideas and projects. This is where an IFB can play a critical role in getting innovation back on track.

Understanding the need for a new approach is the starting point for improving innovation, but an IFB requires careful planning and management for a lasting positive impact. Organizational leaders should begin by thinking about existing circumstances to determine if an IFB is the right way to go. Three of the most important questions to ask are:

 Q. Are there existing funding mechanisms in place for higher-risk innovation projects?

If yes, an IFB may be unnecessary. However, if not then it can be used to ensure appropriate levels of funding are apportioned to projects most likely to contribute to the organization's future growth.

 Q. If established, will the IFB be standalone within the organization or part of a larger funding governance group?

If it's the latter, the IFB must remain free of interference and be able to make decisions based on longer-term innovation goals. If not, it risks losing its core purpose.

Q. Is there internal support for an IFB?

More specifically, is senior leadership committed to supporting one? If such support doesn't exist there's a risk the board will be created but not funded consistently-or that members of the leadership team will circumvent IFB decisions they don't personally agree with. The end result is failure.

The Guiding Principles of Success

If, after considering these questions, it's decided that an IFB is the right strategy, there are a series of guiding principles behind a successful implementation.

First, ensure there areclear and disciplined processes for all participantsin the IFB initiative-from the senior leadership team and the IFB members to the innovation teams in charge of idea generation. Removing ambiguity and clarifying requirements on all sides is fundamental to success.

Second,the IFB portfolio should encompass a diverse range of investments, which follow a select number of themes.Investments should be diverse enough to provide a spread of strong bets along related themes, but not so diverse that the organization can't react to rapid market movements.

Third,project funding should never be provided up front, in full. Given the nature of innovation project funding, there's a high chance that many ideas will never be seen through to development and release. As such, providing full project funding up front is a risky approach. Instead, funding should be provided in periodic tranches, with each tranche unlocked once a pre-agreed set of project milestones are achieved.

Finally, an IFB should never be afraid to kill a project going nowhere.A central pillar of any IFB is the ability to spot projects that aren't going anywhere early so funds can be channeled elsewhere.

Planning effectively and adhering to these guiding principles is the key to getting a successful innovation programme off the ground, but it's just the beginning.

In my next blog, I'll share the best way to establish an IFB governance framework and the key parties involved. I'll also discuss how to ensure innovation remains on track throughout the entire IFB process.