The Innovation Trap

When markets get turbulent, the instinct is predictiable: cut innovation budgets, put projects on hold, wait it out. In capital-intensive sectors such as energy, transport, telecommunications, and construction, that reflex is especially common – and especially costly. Because while companies pause, the environment keeps shifting: regulatory pressure mounts, customer expectations evolve, and digital competitors move in. Organizations that threat  innovation as a strategic lever and manage it accordingly, emerge from downturns stronger than those that don't.

The innovation trap: When cost-cutting hite the wrong targets

Across-the-board cuts can look resonsible on paper. In practice, they keep orgaization's weakest projects alive while starving its most promising initiatives.  Percentage-based reductions treat everthing equally – regardless of strategic relevance or market potential.

For infrastructure companies, the stakes are particularly high. Innovation cycles are long, permitting processes are complex, and the cost of rebuilding momentum after the innovation pause is substantial. This is already playing out in the engery sector: according to EY/BDEW Municipal Utility Study 2025, utilities will need to quadruple their investment levels over the next decade to keep the engery transition on track. Organizations that freeze innovation spending today aren't just losing time – they are losing the institutional knowledge and capability they'll need to deploy those investments effectively.

The more effective respone to budget pressure isn't a blanket cut – it's a deliberate realignment of the innovation strategy around fewer, better-chosen bets. Bold prioritization over diffuse austerity.

An example: Stadtwerk Hassfurt GmbH, a German municipal utility, won the 2024 STADTWERKE AWARD (VKU) for it's EU-funded pilot project eCrew. The utility already generates twice as much energy from renewable sources as it consumes. Rather than treating that surplus as a grid management headache, it developed a community energy model in which households pool generation and storage capacity to reduce grid congestion. The VKU jury specifically recognized the holistic and original approach. It's a clear illustration of what happens when an organization commits to a small number of stategially relevant projects – and stick with them even when conditions get difficult. (VKU Municipal Utilities Congress Hanover, September 4, 2024)

Focus over volume: Managing the innovation portfolio strategically

Innovation management is a long game, not a sprint. What determines outcomes isn't the number of projects in the pipeline – it's the quality of how the're managed. Organizations that run too many initiatives in parallel spread resources thin and risk seeing none of them gain real traction.

Three key questions help to sharpen the portfolio:

• Which initiatives directly support the corporate strategy – and which have simply taken on a life of their own?
• Which projects actually have a dedicated team behind them, with the bandwith to focus 100 percent on execution?
• Where is the customer value clear and easy to communicate – and where does it remain valgue?

The last question is especially critical for infrastructure companies. Wheter the customer is a municipalitiy, an industrial client, or a private households, the expectation in uncertain times is the same: convrete solutions with fast, visible impact. Organizations that consistently back projects with a clearly comminicable value proposition – fewer failures, shorter response times, lower operating costs – build the internal and external credibility that innovation programs need weather difficult periods.

Looking beyound your own industry: Cross-sector innovation as a growth driver

In regulated, mature markets, differentiation rarely comes from within the industry itself. Incremental product improvements and best-practice benchmarking against successful competitorstend to produce imitations – not genuine competitive advantage. Cross-sector innovation offers a different path: ideas, business models, and solutions from entirely different industries get adapted and applied to your own domain.

For infrastructure companies, the possibilities are more concrete than they might initially seem:

• Energy & Utilities: Subscription models from the software industry are inspiring new rate structures – flat rate plans for households with heat pumps and electric vehicles instead of traditional per-kWh pricing.
• Telecommunication: Platform logic from e-commerce is enabling network operators to integrate third-party services and expand their offering without building  eerything inhouse.
• Transportation & Mobility: Route optimization algorithms from logistics are beeing adapted for scheduling and fleet management in public transit.
• Construction & Real Estate: Data-driven diagnostic tools from industrial manufacturing – predictive maintenance applied for buildings – are enabling early indentifications of maintenance needs before they become costly failures.

The prerequisite here isn't a methodology – it's a shift in mindset. The “Not Invented Here” syndrome has to go. Organizations that systematically train their people to look outside their own industry – through lateral hires, structured knowledge transfer, and external perspectives – unlock innovation sources that remain invisible to companies focused only inward.

Measuring innovation: From creative exercise to managed process

Too many infrastructureorganizations still treat innovation as a creative free zone that operates outside normal business management disciplines. That's a mistake. Running an innovation portfolio without clear objectives, milestones, and measurable success criteria isareliable way to lose oversight and waste resources.

The critical link is between innovation strategy and corporate strategy. For a utility, that might mean evaluationg innovation projects by their contribution to decarbonization goals and not by technological maturity scores or how they played in an internal pitch. The EY/BDEW Stadtwerke Study 2023 found that  68 percent of the companies surveyed viewed the energy crisis as a driver of decarbonization and had already updated sub-strategies and accelerated investments in renewables accordingly.

This is especially true in organizations with complex structures – the kind typical of large infrastructure groups with business divisions, subsidiaries and equity stakes. Without enterprise-wide visibility into what's running where, the result is duplicated effort, silo thinking, and strategic blind spots.

Value Capture: Making sure innovation actually pays off

Even the most promising innovation fizzles out if the organization can't translate thevalue it creates into revenue. For infrastructure companies operating under return-on-investment pressure and regulytory revenue caps, this question is particulary urgent.

The range of approaches is broader than most organization explore: value-based pricing, new payment models, strategic bundling of services. For infrastructure companies, the real opportunity often lies in asking asimple but powerful question: waht could we develop and monetize around our core service? A utility company that takes its energy management system to market a as a standalone B2B offering. A network operator that sells real-time grid data as a planning tool for municipalities. Iin both cases, the value doesn't emerge despite existing infrastructure., it emerge from it. The prerequisite is asking that question systematically: not once during a strategy review, but as an integral part of every innovation evaluation.

Companies that ask such questions systematically tap into growth potential that overlooks purely product-focused approaches.

Conclusion: Innovation is a leadership responsibility and a system question

Innovation doesn't succeed on good intentions alone. Itrequires desciplined management: clear strategic prioritization over a spray-and-pray approach, the courage to look outside your own industry, consistent alignment between innovation and corporate strategy, and relentless focus on how the value created actually gets captured.

In capital-intensive infrasucture sectors, where the cost of misallocated investments is high and innovation cycles are long, the quality ofmanagment is what makes the difference. Organizations taht cut innovation first buy short-term relief at long-term cost. Those that prioritize deliberately, manage rigorously, and look outwards for inspiration will be the ones that come out ahead.

The EVO-Cloud: Making decisions, nit just managing projects

The EVO-Cloud gives innovation managers full visibility into which projects in the portfolio are actually delivering impact – and which are not. Investment decisions become objective and defensible, even when budgets and capacity are tight. For infrastructureorganizations that must simultaneously meet regulatory requirements, manage transformation programs and coordinate innovation portfolios across multiple Business units or subsidiaries, that's not a nice-to-have. It is a prerequisite for running innovation that actually works. Learn more about the EVO cloud

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