How Budget Season Starves Growth — and What to Do About It
Executive Summary
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Budget Season Syndrome keeps corporations trapped in short-term efficiency, starving long-term innovation and renewal.
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Core business runs on OPEX—and should. But transformational growth needs its own capital logic and time horizon.
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Dividing the innovation portfolio between OPEX (core, adjacent) and CAPEX (adjacent, transformational) frees OPEX while giving future bets patient capital.
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Corporate Venture Studios (CVS) make this structure real—turning innovation from an annual cost into a balance-sheet asset.
The Season of Retreat
Every autumn, as Europe’s corporations prepare next year’s budgets, a familiar ritual unfolds.
Spreadsheets expand, PowerPoints multiply, and finance teams meet strategy units to negotiate what survives.
The result is rarely inspiring: bold innovation projects shrink, riskier bets are delayed, and most “growth initiatives” quietly disappear before the fiscal year begins.
It’s not a lack of creativity or intent that kills them—it’s the system itself.
Budget season, meant to allocate resources rationally, too often allocates away the future.
This recurring affliction has a name among innovation leaders: Budget Season Syndrome. It is the structural short-termism that quietly drains corporate renewal every October.
The Structural Flaw: One Budget, Two Opposite Goals
In most corporations, all innovation—incremental, adjacent, or transformational—draws from the same OPEX (operating expenditure) bucket.
That means long-term bets must compete for the same annual funds as IT upgrades, marketing, or plant maintenance.
It’s a zero-sum game where predictable wins always defeat potential ones.
That is entirely understandable. The core business runs on OPEX—and it should.
The job of the core is to execute the existing business model as efficiently as possible. Operational excellence is not only its purpose, it’s its obligation.
It is not the core’s role to disrupt itself or invent a new leg for the corporation to stand on. Expecting it to do so is unfair—to the people and to the model.
Execution and exploration live by different rules, and they must therefore be funded differently.
OPEX budgeting rewards reliability. It demands ROI this year, not five years from now.
But adjacent or transformational innovation follows a venture logic, not an operational one. It requires patient capital, flexible governance, and time to compound.
Trying to fund both under the same system is like watering a forest and a bonsai with the same dropper. One will wither.
Two Logics—One Company
Here lies the paradox of modern industry: the same CFO is expected to govern two incompatible species of growth.
| Innovation Type | Funding Source | Logic & Governance |
|---|---|---|
| Core & Incremental | OPEX | Annual budgeting, ROI-driven, cost efficiency, tied to business unit goals |
| Adjacent & Transformational | CAPEX | Multi-year commitment, treated as long-term investment, governed like a venture portfolio |
This division is not cosmetic—it’s structural.
When executives draw this line, both sides benefit: the core business retains its operational discipline, while the venture side gains room to explore and fail productively.
It also frees OPEX capacity. Moving long-horizon projects to CAPEX immediately lightens next year’s expense base—improving reported margins while keeping innovation alive.
For once, finance and innovation pull in the same direction.
How We Got Stuck in the OPEX Trap
The roots of this dysfunction trace back to the 2008 financial crisis.
As liquidity dried up, CFOs became corporate heroes, rescuing firms through austerity and precision. Operational excellence was survival. But a decade of efficiency hardened into a culture of caution.
Today, that same discipline—once vital—has become inertia.
Europe’s industrial giants are unmatched in productivity, yet increasingly stagnant in renewal.
Only 2 % of Nordic industrials have grown beyond their core business, compared with 17 % in the U.S.
Shift Actions’ analysis suggests that Finnish large-cap companies alone lose €3 billion in economic value every year by focusing purely on core optimization while neglecting adjacent and transformational ventures that could renew entire industries.
The irony? Everyone agrees that innovation is essential—just not in this year’s budget.
A Simple Fix: Separate the Streams
The companies that escape this trap do something deceptively simple:
they fund the future differently.
Rather than treating all innovation as an expense, they split their portfolios:
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Keep core and adjacent innovation in OPEX—continuous improvement, process optimization, digital upgrades.
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Move adjacent and transformational initiatives to a CAPEX-funded Corporate Venture Studio (CVS) or equivalent structure.
This shift creates two clean lanes:
one for efficiency, one for exploration.
It lets executives improve short-term margins and commit to long-term ventures—without having to defend them every October.
In practice, this means establishing a legally separate venture studio or investment vehicle that receives capital as a multi-year allocation—much like a factory build or acquisition.
Those funds can then be invested in venture creation, often alongside public or private co-financing.
Crucially, these ventures sit on the balance sheet, not the P&L. Innovation stops being a cost to minimize and starts behaving like an asset to grow.
Why CFOs Are the Real Innovators
Ironically, the most powerful agents of innovation today aren’t the Chief Innovation Officers—they’re the Chief Financial Officers.
CFOs control the architecture of corporate ambition.
By reclassifying a portion of innovation spend as CAPEX, they can:
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Treat venture building as capital formation, not operational drag.
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Protect long-term bets from quarterly volatility.
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Impose clear ROI metrics comparable to any other investment.
This isn’t creative accounting—it’s strategic accounting.
It’s capital allocation discipline applied to the future, not just the present.
The Psychological Shift: From Risk to Portfolio
The deeper change is psychological.
Moving innovation from OPEX to CAPEX reframes failure: from waste to learning.
It enables portfolio logic—some ventures will fail fast, others will scale big, but all contribute to the company’s long-term option value.
In the OPEX world, one failed project is a problem.
In the CAPEX world, ten experiments are a portfolio.
The mindset shifts from “Can we afford this?” to “What are we building next?”
Implementing the Dual-Portfolio Model
Here’s a pragmatic roadmap for leadership teams:
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Quantify your innovation spend.
Identify what portion of total OPEX supports innovation, R&D, pilots, or concept ventures. -
Divide by horizon.
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Horizon 1 (core): Keep OPEX funding.
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Horizons 2 & 3 (adjacent and transformational): Move to CAPEX.
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Create structure and governance.
Establish a Corporate Venture Studio or equivalent entity with multi-year funding and venture-style investment boards. -
Align incentives.
Link venture team rewards to equity, milestones, or portfolio performance. -
Measure like an investor.
Track internal rate of return (IRR), time to market, and option value—not just expense ratios.
This model doesn’t just simplify innovation—it professionalizes it.
It lets companies assess ventures the same way they would evaluate a new plant, acquisition, or joint venture: as capital projects with measurable returns.
Europe’s Window of Opportunity
Europe has the talent, the science, and the industrial base to lead the next wave of transformation.
What it lacks is a capital system designed for exploration.
For too long, innovation has been trapped under the wrong accounting logic—expensed annually, forgotten quickly.
But the world is changing: intangible capital now drives the majority of corporate value.
Companies that learn to invest in new ventures the way they invest in factories or infrastructure will own the future of their industries.
And there’s no better moment to start than now—while budgets are still being written.
The Call to Action
As you review next year’s numbers, ask one question:
Which part of this plan funds the future?
If your answer hides somewhere in “miscellaneous R&D,” it’s time to rethink your structure.
Free the OPEX. Capitalize the ambition.
Treat innovation not as cost containment but as capital formation.
Because the companies that will dominate the 2030s won’t be those that optimized best in the 2020s—
they’ll be those that had the structural courage to fund the future differently.
