Now Boarding: Innovation

By: Dennis Leskowski
Published: January 28th, 2025

I hate missing my connection flights. Weather, air traffic congestion, and mechanical issues delay the first flight, and the second one takes off without me, and now I need to scramble. But, in reality, it’s my fault: I’m the one who scheduled only a 28-minute window. I put myself at risk by not building in a margin. Likewise, the artificial intelligence (AI) flight is taking off, and many franchises are being left behind. Let’s explore one of the big ways you can get your franchise on board.

IT R&D budget

Many franchises mistakenly believe tech research and development (R&D) is only for tech giants, start-ups, or new products. However, neglecting R&D creates a blind spot, preventing franchises from leveraging emerging technologies like AI to boost customer satisfaction and operational efficiency. In some industries, IT innovation is essential. In franchising, IT R&D will be a key differentiator to distinguish the best brands.

One of the root issues of franchises not having an IT R&D budget is the need for “not having projects fail.” History is full of innovative initiatives that resulted in no deployment. There is a sense of embarrassment we feel when a project fails. To counteract this, there should be two expectations for every R&D project:

First, change your mindset about R&D projects. Learn lessons and strengthen your innovation muscle: identify use cases early, limit losses, close bad paths quickly, and embrace agile principles like inspection and iteration. The more you practice R&D, the better you’ll get.

Second, consider your R&D budget as a holistic investment - not one-by-one. While we should avoid waste, R&D is a game of chance. It’s not about every dollar directly driving production. Success isn’t determined by individual projects but by the overall impact. In the end, the big wins will far outweigh the multiple failures, often by 10 or 100 times

In this infographic “Guidelines for IT Budget R&D Allocation,” accommodations must be made for where each franchise sits in relation to its industry, its journey from start-up to maturity, its competition, its dependence on technology, and what emerging technologies it plans to explore. (For example, the US military spends 10-15% on R&D innovation.) Regardless, let’s not miss the main point: there is no “0%” on this chart. The R&D budget must exist in all companies.

R&D IT people

Franchises do not need to allocate full-time IT professionals to R&D innovation projects. However, there are other ways to mobilize personnel to run with next-generation technology.

• Find people who are excited about testing the waters. Not everyone in your organization needs to be involved in R&D innovation. Many people excel at maintaining systems and keeping franchisees happy. Identify others who are passionate about pushing boundaries and salivate at the idea of Google’s “20% time” spent on exploring new ideas and driving change. Give them the space, resources, and permission to experiment. 
• Create a R&D community. Gather innovators from different departments and franchisees who are willing to collaborate. This ensures IT doesn’t operate in a silo - and can quickly match technologies to real-life use cases.
• Ensure people know that it’s ok to fail, but put a cap on the path. Specifically for franchising, there’s no reason to spend months and years on technologies. Try something new, and fast – and see if you can find a fit. 
• Take the occasional interesting product meeting.
• Let the software industry “do its thing” and develop the tech. You don’t need to build it in-house. Every once in a while, get intrigued by an emerging product and let their salespeople show it off. It may spark an idea. You may say, “This will get better in 4-6 months” - and then wait.
• Set short-term goals and check in often. As a part of “fail fast, fail often,” it means measuring progress regularly, pivoting quickly, and adjusting course to stay on track and maximize results.
• Get to use-cases fast. The POC (proof-of-concept) is my most common “R&D” tool. It’s not MVP. It’s not ready for production. Instead, it’s ready for others to evaluate and see if they can find value.

When engaging your team for R&D innovation, it’s important to note that this is different from “personal development.” Personal development benefits the individual in their skillset. R&D is development that benefits the franchise in upskilling the technology stack as a whole. Yes, there is a wonderful synergy when the two coincide. But there is also a great synergy when an expert who already knows an area has the margin to apply their skillset to an innovative idea - and is now granted the permission and encouragement to pursue that R&D path.

Your flight is now boarding

AI has evolved from a buzzword to a transformative force reshaping industries. It can automate back-office tasks, such as accounting and payroll, reduce response times through chatbots, and enhance customer service by predicting needs before they arise. However, these AI-driven capabilities require upfront investment in technology, talent, and experimentation—all of which fall under IT R&D.

Here’s where the challenge lies: If you’re not setting aside resources for R&D, you're not just skipping AI adoption; you’re passing on growth, efficiency, and customer loyalty. AI solutions can enable franchises to:

• Improve Customer Engagement: Predictive analytics can help anticipate customer needs and tailor promotions.
• Automate Routine Operations: AI tools can streamline scheduling, inventory management, and marketing campaigns.
• Analyze Data in Real-Time: Machine learning algorithms can identify trends and offer insights for better business decisions.

Without an IT R&D budget, your franchise risks falling behind and missing the flight on the opportunities that will drive its future success.

Dennis Leskowski is the CTO of Goldfish Swim School.

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