Definition
Resource Allocation Filtering describes the bottom-up process by which an organization decides which projects to fund. In this model, middle managers act as “filters,” selecting only those proposals they believe will satisfy the firm’s financial criteria and win senior management approval. This process often kills disruptive ideas long before they reach the executive level.
Why It Matters
Middle-management ‘filters’ often kill disruptive ideas long before they reach leadership, usually to avoid career risk. If this filtering process isn’t bypassed, an organization will inevitably starve its future to fund the failing projects of its past, leading to total irrelevance in a changing market.
Core Concepts
- Middle Management as Gatekeepers: Proposals for innovation typically bubble up from engineers or sales personnel. Middle managers decide which ideas to package and sponsor. They are biased toward projects that are low-risk and high-reward in the context of the current Value Network.
- The Career Risk Bias: Sponsorship is a high-stakes activity. Managers are often more penalized for “market failure” (the product doesn’t sell) than for “technical failure” (the technology doesn’t work). This leads them to favor sustaining innovations for known customers over disruptive innovations for uncertain markets.
- Invisible Strategy: Senior management may believe they are setting the firm’s strategy, but the “real” strategy is often the result of the cumulative filtering decisions made by middle management.
- Bower-Burgelman Model: This theory posits that the resource allocation process is a powerful internal selection mechanism that aligns the firm’s actions with its most powerful external resource providers (customers/investors).