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Why you need a slush fund

30.07.22InsightTechnology Strategy
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Let’s get this straight… Of course we’re not talking about “black funds” or political bribery in any way… A slush fund, in this case, is more like the rainy day fund, funding learning and exploring. With that in mind, why the need for a slush fund?

Forecasting for the unknown

It’s easy… It’s not just smart, it’s also prudent. The threat of new competitors, rapidly changing consumer behaviour, and new technologies are cropping up every month. To truly retain and grow your market share, and be at the front of customers' minds, you need to have a culture and team mindset of learning by experimentation.

Budgeting for this activity will unlock creative thinking between your teams, allowing unexpected opportunities to surface. This type of slush fund is more than rainy day money, it’s a commitment to staying relevant and agile.

“Innovation is not just ideas”

The very nature of innovation is that of exploration. You're willingly stepping into the unknown with the optimistic outlook of finding the next big thing. Following the right approach can indeed get you profound ideas, however when they are left to be just ideas, there is little commercial value.

People often misinterpret innovation as just ideas.

And that is one of the issues with recognising the value of a slush fund… People often misinterpret innovation. Innovation is not just about ideas, true innovation is finding value in those ideas through collaboration that demonstrates visible change. Budgeting for just idea generation alone can be relatively predictable, however accommodating for experimentation and exploring value in those ideas is where traditional budget setting falls short.

Habito, the four-year-old digital mortgage broker has stormed the industry, by creating a product and customer experience that fixes all the fundamental things wrong with the convoluted process of buying and selling your house. Their mission of “setting people free from the hell of mortgages” will relate to many of us I’m sure, however for so long we came to just accept that’s just the way mortgages are.

By seeing the opportunity, Habito went about innovating the lengthy and painful process of finding and applying for mortgages. However with such a large, unpredictable challenge in front of them, they needed to get out there to learn and fail fast. This commitment to learn and fail fast has allowed them to build a product around a unique proposition that resonates so closely within our lives. Listening to customer reactions to the product and proposition has allowed them to adapt quickly to changing scenarios along the way, resulting in a more refined product in recent months that now has the feeling of “finally a product that fixes this awful process...”

Ideas with legs must be given wings

Finding true value is the tough part of ideas. With so many variables, creating true value out of a new idea cannot be easily predicted from a budgeting perspective. So an iterative mindset can really support the concept of “learning as an outcome”. Businesses need to harness the mindset of progression by learning, above speed and overnight success.

Invest into learning as an outcome

By embracing learning and exploring as an outcome and a clear indicator for your teams' commitment to innovation, you are also accepting the fact that those solutions off the back of learning exercises are not fixed assets. No longer can you launch a product and leave it untouched. Predictions will only take you so far. Measuring and learning as a feedback loop must be incorporated into the product's lifecycle to keep it relevant and front of mind with your customers.

"Solutions are not fixed assets."

Think more like Walt Disney

There are plenty of frameworks to help with idea generation. Walt Disney was a big advocate of them as a method of team collaboration, problem solving and idea generation. The Disney Method used a process broken up in three chunks: the dreamer, the realist, and the spoiler (or critic). This way, nothing stopped the dreamer from dreaming. Nothing squashed the dreamer’s ideas prematurely. To relate it back to our case, nothing stopped innovation from happening.

What if?

When it comes to discussing a slush fund with your colleagues, I think a great starter is to ask the ‘what if’ question to your team. Try taking one of the rules that governs your industry, and ask the ‘what if’ question with an open mindset. This is how Habito aimed so high with their ambitions to improve the mortgage system.

Setting aside your slush fund will allow this type of idea and value generation to build momentum, and push your business to challenge the norm, and stay present. Your team won’t be afraid to think of truly innovative ideas "because they require funding".

An island of its own

Lastly, budgeting for a ‘launch, learn and optimise’ way of working can be relatively straightforward by setting aside an exploring (or slush!) fund. A fund like this sits separate to marketing, product, operations, offering the essential breathing room required to explore new possibilities of finding value in ideas. It allows for experimentation, real learning and the testing of hypotheses.

In the end, slush funds allow you to explore the ‘what if’. It gives creativity breathing room to thrive, to solve complex problems and enables you to be more competitive in the market by staying agile.


Author: Tom Downing, Technology Director at Freestyle

Tom is the go-to expert for businesses to evolve their customer experience offering with emerging technology. He’s an advocate for businesses pushing the boundaries of how they go about communicating to their audiences exploring new innovative technology with a creative view, to bring a more meaningful emotive experience to the customer.

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At Freestyle, we partner with organisations to help them evolve their business and customer experiences for the future, by building venturing capability and creating new products and services.

If you're ready to have a chat about how we can help you innovate, drop us a line:


Tom Downing Technical Director at Freestyle

Tom Downing

Technology Director Freestyle

Contact us:

+44 1926 652 832

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