The Innovation Ambition Matrix: Core, Adjacent & Transformational (70-20-10)

This is one of RoadmapOne ’s articles on Objective Tagging methodologies .

Every product roadmap I review has the same problem. Ninety percent of the work is incremental improvement to existing products for existing customers. The remaining ten percent is labelled “innovation” but is really just the same customers getting a slightly different feature. Nobody is working on the thing that will matter in three years.

Clayton Christensen warned us about the Innovator’s Dilemma—the tendency for successful companies to optimise what works today while ignoring what will destroy them tomorrow. The Innovation Ambition Matrix, published by Bansi Nagji and Geoff Tuff in their 2012 Harvard Business Review article “Managing Your Innovation Portfolio”, offered a practical antidote: a framework for deliberately splitting investment across three levels of ambition—Core, Adjacent, and Transformational—so that near-term optimisation doesn’t crowd out long-term survival.

The recommended starting point is the 70-20-10 rule: 70% of innovation resources to Core initiatives, 20% to Adjacent, and 10% to Transformational. But here’s the finding that should keep every board member awake at night: returns follow the inverse ratio. Nagji and Tuff’s research found that while companies invest 70% in Core, approximately 70% of long-term returns come from Transformational initiatives. The 10% allocation generates the majority of future value.

That’s the Innovation Ambition Matrix in a nutshell: invest mostly in what works today, but deliberately protect a slice for what will matter tomorrow—because that slice is where the real value creation happens.

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The Three Ambition Levels

The Innovation Ambition Matrix builds on Igor Ansoff’s classic 1957 growth matrix (which maps existing vs new products against existing vs new markets in a 2×2 grid). Nagji and Tuff’s key modification was replacing Ansoff’s binary choices with a spectrum, creating three zones instead of four quadrants. The two axes are “Where to play” (customers and markets) and “How to win” (products and assets), ranging from existing through adjacent to entirely new.

Core Innovation: Optimising What You Have

Core innovations are incremental improvements to existing products for existing customers. They optimise what already works—faster performance, better UX, additional features within the current product scope, and operational efficiency. Neither the customer base nor the fundamental offering changes significantly.

Core work is essential. It defends your current revenue, satisfies existing customers, and funds everything else. But it’s also seductive—it’s low-risk, easy to justify, and produces visible short-term results. Left unchecked, Core work will consume your entire roadmap. This is what I call Crown Jewel maintenance —keeping your most important capabilities competitive is critical, but not at the expense of future growth.

Examples:

• A SaaS billing platform adding multi-currency support for existing enterprise customers
• An e-commerce site optimising checkout conversion through A/B testing
• A logistics platform reducing API response times from 2 seconds to 500ms

Adjacent Innovation: Extending Into New Territory

Adjacent innovations take something you already do well and apply it to a new context—either new customers, new markets, or new capabilities built on existing assets. Either the customer base or the offering extends into new territory, but not both simultaneously.

Adjacent innovation is where most sustainable growth comes from. You’re leveraging existing strengths—technology, brand, distribution, expertise—but pointing them somewhere new.

Examples:

• Amazon launching AWS: leveraging existing infrastructure capabilities to serve an entirely new customer base (developers)
• A UK fintech expanding into European markets with its existing product
• A B2B analytics platform launching a self-serve tier for SMBs (same product, different customer segment)
• Uber extending from ride-hailing into food delivery (same logistics platform, different service)

Transformational Innovation: Creating the Future

Transformational innovations create new offerings for new markets. Both the customer base and the product change significantly. These are the bets that create entirely new business lines, disrupt existing markets, or define new categories.

Transformational work is uncomfortable. It’s expensive, risky, slow to show returns, and hard to justify in quarterly board reviews. Most of it will fail. But the small percentage that succeeds generates outsized returns—which is exactly what Nagji and Tuff’s inverse returns finding demonstrates.

Examples:

• Amazon launching Alexa and the Echo: entirely new product category (voice computing) for new use cases
• Apple developing the original iPhone: a computer company entering the phone market with a device that didn’t exist yet
• Google’s Waymo self-driving car programme: new technology, new market, new business model
• A logistics SaaS investing in autonomous fleet management using IoT sensors

Tag your roadmap by Core, Adjacent, and Transformational—free sign-up

The 70-20-10 Rule and the Inverse Returns Paradox

The benchmark allocation proposed by Nagji and Tuff—based on their research into outperforming companies—is:

• 70% Core — defend and optimise current revenue
• 20% Adjacent — extend into new markets or capabilities
• 10% Transformational — create the future

But the truly striking insight from their HBR research is that returns follow the inverse ratio:

• Core initiatives (70% of investment) generate roughly 10% of long-term returns
• Adjacent initiatives (20% of investment) generate roughly 20% of long-term returns
• Transformational initiatives (10% of investment) generate roughly 70% of long-term returns

This isn’t a theoretical argument. It’s an empirical finding about where value actually comes from. The implication is profound: the slice of your roadmap that feels riskiest and hardest to justify is the slice that generates the majority of future value. Cutting Transformational investment to boost short-term EBITDA is rational quarter-by-quarter but catastrophic over a five-year horizon.

The 70-20-10 Is a Starting Point, Not a Rule

The right allocation varies by industry, company stage, and competitive context:

The point isn’t to hit exactly 70-20-10. The point is to know your current allocation, have a target allocation, and track the delta over time. Without tagging, you’re flying blind—and the gravitational pull of Core will silently consume everything else.

Google’s 70-20-10 in Practice

The most famous real-world implementation came from Eric Schmidt during his tenure as Google CEO. Schmidt asked Google employees to allocate their time as 70% on core business tasks, 20% on projects related to their core responsibilities, and 10% on new and unrelated projects.

This wasn’t just resource allocation—it was cultural permission to innovate. Gmail, Google News, and AdSense all reportedly emerged from the “20% time” concept (which maps to the Adjacent zone in the Innovation Ambition Matrix). Google’s approach demonstrates that the 70-20-10 framework isn’t just about budgets—it can also shape how individual engineers and product managers spend their time.

Google wasn’t the first. 3M introduced a “15% time” policy back in the 1950s—employees could spend 15% of their working hours on personal passion projects. The Post-it Note, one of the most successful office products ever created, emerged from this policy. Google’s 20% time was a more aggressive version of the same principle: structurally protecting time for non-Core work.

The important caveat: Google could afford a generous Adjacent and Transformational allocation because their Core business (search advertising) was enormously profitable and relatively stable. A company fighting for survival can’t afford the same luxury. Context always trumps benchmarks.

Innovation Ambition Matrix vs Three Horizons of Growth

The Innovation Ambition Matrix is often confused with McKinsey’s Three Horizons of Growth framework. They’re complementary but different:

The key difference: Three Horizons is about when value arrives; the Innovation Ambition Matrix is about how different the work is from your current business. A Transformational initiative might have a Horizon 2 payoff (2–3 years) if the technology is ready but the market is new. Conversely, a Core initiative might have a Horizon 3 payoff if it’s a long-running optimisation programme.

Both frameworks fight the same enemy: the tendency to over-invest in short-term, low-risk work at the expense of future growth. They’re complementary lenses, and in RoadmapOne you can tag objectives with both frameworks simultaneously to get a richer picture of your portfolio balance.

Tagging Your Roadmap with the Innovation Ambition Matrix

In RoadmapOne , you can tag objectives using the built-in Innovation Ambition Matrix template:

1. Enable the tag group — Navigate to Objective Tagging in your preferences and enable “IAM Ambition” with Core, Adjacent, and Transformational categories
2. Tag each objective — When you open the Objective panel, assign the ambition level. Ask: “Does this change our customers, our product, or both?”
3. Check the analytics — The analytics tab instantly shows your portfolio breakdown. If you’re at 92% Core and 8% Adjacent with zero Transformational, you have a problem
4. Set guard-rails — Pre-agree your target allocation with leadership. Review the delta monthly

How to Decide: Core, Adjacent, or Transformational?

The decision framework is straightforward. Ask two questions:

1. Are we serving existing customers or new ones?
2. Are we enhancing existing products/capabilities or building new ones?

Note that an initiative crossing one boundary (new customers OR new products) is Adjacent. Crossing both boundaries (new customers AND new products) is Transformational. This distinction matters because it drives risk assessment and expected time-to-value.

Epics that look small can be Transformational if they open a gateway to new markets—tag meaning trumps size. Conversely, a massive replatforming effort that serves the same customers with the same product is still Core, no matter how expensive it is.

Anti-Patterns to Watch For

Core Creep

The most common failure mode. Boards panic-cut Transformational during downturns, boosting Core to 90%. Short-term EBITDA rises; the five-year R&D pipeline collapses. When the market recovers, competitors who maintained Transformational investment are two years ahead.

Core Creep is insidious because each individual decision is rational. “Let’s pause the new market research to finish the enterprise feature” sounds sensible in isolation. But when you make that decision twelve quarters in a row, you’ve silently eliminated your future.

The fix: treat Transformational allocation like a minimum capacity commitment, the same way you’d protect KTLO (Keeping the Lights On) investment. It’s not optional. It’s not the first thing to cut. It’s the cost of having a future.

Transformational Vanity

The opposite problem: moon-shots with no kill criteria. Leadership falls in love with a bold vision and keeps funding it past the point of evidence. Transformational bets must have explicit go/no-go gates tied to validated learning, not just time served.

Require kill criteria at each funding gate. If the Transformational initiative hasn’t validated its core assumptions within a defined timeframe, kill it and reallocate. Disciplined experimentation, not endless patience, is what makes Transformational investment productive. Opportunity Scoring can help—if customer Importance is low for the problem you’re trying to solve, the Transformational bet may be a solution in search of a problem.

Category Drift

Like Kano categories , ambition levels aren’t permanent. What’s Transformational today becomes Adjacent or Core as the market evolves. AWS was Transformational in 2006; by 2015 it was Amazon’s Core business. The original iPhone was Transformational; annual iPhone iterations are Core. If you’re still tagging work as Transformational based on two-year-old categorisation, you’re probably overstating your innovation investment. Recategorise annually.

Adjacent Masquerading as Transformational

Teams sometimes label Adjacent work as Transformational to make it sound more impressive. Launching your existing product in a new geography is Adjacent, not Transformational—you’re not creating a new offering. Mislabelling inflates the apparent Transformational allocation without actually investing in future-creating work.

The test is simple: if you could reuse more than 70% of your existing codebase, customer acquisition playbook, or operational processes, it’s probably Adjacent, not Transformational.

Visualise your Core vs Adjacent vs Transformational split—free sign-up

Risk-Adjusted Funding

Transformational bets scare CFOs—and rightly so. Most will fail. The Innovation Ambition Matrix doesn’t ask you to ignore risk; it asks you to manage it deliberately.

In RoadmapOne, combining the Innovation Ambition Matrix with SVPG product risk tags gives you a two-dimensional view: a high-risk Transformational epic with unvalidated Value and Feasibility risks should trigger a deeper discovery spike before capital release. A Transformational initiative where the technology is proven but the market is unvalidated needs customer research, not engineering.

The principle: the higher the ambition level, the more discovery investment required before committing delivery capacity. Core work can go straight to delivery. Transformational work should spend significant time in discovery first, validating assumptions through experiments before scaling investment.

Talent Allocation

Different ambition levels need different team compositions:

• Core squads optimise for efficiency and quality. Rotate graduates through Core teams for onboarding. The work is well-defined and the codebase is familiar—ideal for building engineering fundamentals.
• Adjacent squads blend veterans who understand the existing platform with domain experts in the new segment. They need people who can bridge “what we know” with “what we need to learn.”
• Transformational teams need autonomy, tolerance for failure, and protection from quarterly KPI pressure. Shield them from sprint-by-sprint accountability. Compensate with milestone-based vesting rather than velocity metrics.

Tag-driven capacity charts ensure each team fights on its own battlefield, not for the same few senior engineers. If your Transformational team keeps losing engineers to Core “emergencies”, the allocation exists on paper but not in reality.

The Boardroom Narrative

Here’s the slide that makes Innovation Ambition Matrix tagging worth the effort:

“Today we’re at 68% Core, 22% Adjacent, 10% Transformational. If we delay the autonomous-fleet prototype to accelerate the enterprise dashboard rewrite, Core jumps to 78%. That moves EBITDA +1% next year, but slices our 2028 TAM by an estimated £0.5bn. Here’s the trade-off—which do we want?”

When ambition is tagged and visible, trade-offs quantify themselves. Without it, the board is debating feature lists. With it, they’re debating portfolio strategy. That’s a fundamentally different—and better—conversation.

The Innovation Ambition Matrix is particularly powerful in combination with Run/Grow/Transform tagging. RGT tells you whether work maintains the business, grows it, or changes it fundamentally. The Innovation Ambition Matrix tells you whether the offering and customers are changing. A Transformational ambition initiative might still involve Run-level foundation work to get started. Seeing both lenses simultaneously gives the board a complete picture.

Conclusion

The Innovation Ambition Matrix solves a problem every product leader faces: the gravitational pull of Core. Left unmanaged, roadmaps drift toward safe, incremental, short-term work—because it’s easier to justify, lower risk, and produces visible results. Meanwhile, the future quietly dies of neglect.

Nagji and Tuff’s research tells us this drift is not just strategically dangerous—it’s value-destroying. If 70% of long-term returns come from Transformational initiatives, then companies spending 0% on Transformational are systematically destroying their future.

The fix is simple in concept but requires discipline in practice:

1. Tag every objective as Core, Adjacent, or Transformational
2. Know your current allocation — most teams are shocked when they see the real numbers
3. Set a target allocation — 70-20-10 is a starting point, adjusted for your context
4. Protect Transformational investment — treat it as non-negotiable minimum capacity, not discretionary budget
5. Review monthly — watch for Core Creep and course-correct before the drift becomes irreversible

The Innovation Ambition Matrix won’t make Transformational bets less risky. But it will make their absence visible—and that visibility is the first step toward building a portfolio that serves both today’s customers and tomorrow’s.

For more on Objective Tagging methodologies, see our comprehensive guide .