20 min read
Edward Chenard
Framework
Original Framework AI Strategy 8 min read

The B1/B2/B3 Innovation Framework: Prioritize AI Projects by Strategic Impact

Not all AI projects are equal. Some keep you in the game. Some give you an edge. And some redefine the game entirely. Here's how to tell the difference—and allocate resources accordingly.

Edward Chenard
Edward Chenard
AI Revenue Strategist • $2.5B+ Revenue Impact
THE B1/B2/B3 FRAMEWORK

Every AI project falls into one of three categories based on its strategic impact: B1 (Break Even) keeps you competitive, B2 (Break Through) gives you an edge, and B3 (Break Away) redefines the industry. Understanding this hierarchy is essential for portfolio allocation and resource prioritization.

The Problem: Treating All AI Projects Equally

Most organizations make a critical mistake: they evaluate AI projects using the same criteria regardless of strategic intent. A chatbot for customer service is evaluated the same way as a predictive pricing engine. A dashboard upgrade is prioritized against a potential industry-disrupting innovation.

This leads to two failure modes:

Failure Mode 1: All Innovation

Organizations chase moonshots while neglecting table-stakes capabilities. Competitors catch up on basics while you're building the future that never ships.

Failure Mode 2: All Maintenance

Organizations focus only on keeping up, never getting ahead. Incremental improvements while competitors leapfrog with breakthrough innovations.

The solution is a framework that explicitly categorizes projects by strategic intent and allocates resources accordingly.

The Three Tiers of AI Innovation

THE B1/B2/B3 INNOVATION FRAMEWORK

Categorize every AI project by its strategic impact

🏃
B1: Break Even
Table Stakes
🚀
B2: Break Through
Competitive Edge
B3: Break Away
Industry Defining
🏃

B1: Break Even

Projects that keep you competitive

Definition: Table-stakes capabilities that everyone else has or customers simply expect. These projects don't differentiate you—they prevent you from falling behind.

Examples
  • • Standard reporting dashboards
  • • Basic chatbot for FAQs
  • • Data pipeline upgrades
  • • Compliance automation
Characteristics
  • • Low differentiation
  • • Expected by customers
  • • Clear ROI, low risk
  • • Must-have, not nice-to-have
Strategic Question

"If we don't do this, will we lose customers to competitors who have it?"

🚀

B2: Break Through

Projects that give you a competitive edge

Definition: Capabilities that differentiate you from competitors. These projects create advantages that others struggle to replicate quickly.

Examples
  • • Predictive pricing engine
  • • Personalization at scale
  • • Intelligent process automation
  • • Customer data platform
Characteristics
  • • Creates moat
  • • Hard for competitors to copy
  • • Moderate risk, high reward
  • • 12-24 month advantage
Strategic Question

"Will this make customers choose us over competitors?"

B3: Break Away

Projects that redefine the industry

Definition: Industry-defining innovations that create new market categories or fundamentally change how business is done. These are moonshots with transformational potential.

Examples
  • • Industry-specific LLM
  • • New data-as-a-service product
  • • AI-first business model
  • • Autonomous decision systems
Characteristics
  • • High risk, massive reward
  • • Creates new market category
  • • Multi-year advantage
  • • Attracts investors/talent
Strategic Question

"Could this fundamentally change how our industry operates?"

The Portfolio Balance

A healthy AI portfolio requires projects across all three tiers. The allocation depends on your organization's position and risk tolerance:

Recommended Allocation (Growth-Stage Company)
B1: 50%
B2: 35%
B3: 15%
50%
B1: Maintain parity
35%
B2: Build moat
15%
B3: Bet on future

Adjust based on your situation:

Market Leader

More B3 (20-25%), less B1 (40%)

You can afford to take bigger bets and let others catch up on basics.

Catching Up

More B1 (60-70%), less B3 (5-10%)

Focus on reaching parity before investing heavily in moonshots.

Example: Applied at a Series B Logistics Company

At a Series B logistics SaaS, I categorized the entire AI roadmap using this framework:

B1 Break Even Projects
  • • BI Model Rebuild (speed improvements)
  • • Standard reporting upgrades
  • • Data pipeline automation
  • • Product analytics reports
B2 Break Through Projects
  • • Carrier Recommender (AI-powered matching)
  • • Predictive/Prescriptive Models
  • • Customer Data Platform
  • • Load Optimization v2
B3 Break Away Projects
  • • Industry's First Logistics LLM
  • • Data-as-a-Service offering

Revenue Target: $1M profit margin in 12 months

The Logistics LLM became a B3 differentiator that attracted investor attention and positioned the company as an innovation leader—while B1 projects ensured customers had the reporting capabilities they expected.

How to Apply the Framework

1
List All AI Projects
Current initiatives, backlog items, and proposed projects. Include everything.
2
Apply the Strategic Questions
For each project: Is it table stakes (B1)? Does it create a moat (B2)? Could it redefine the industry (B3)?
3
Audit Your Current Allocation
What percentage of resources (time, budget, headcount) goes to each tier?
4
Rebalance to Target
Adjust allocation based on your strategic position. Cut or accelerate projects to hit target percentages.

How This Connects to Other Frameworks

THE BOTTOM LINE

Stop evaluating all AI projects the same way. B1 projects are about survival. B2 projects are about winning. B3 projects are about defining the future. A balanced portfolio needs all three—but in the right proportions for your strategic position.

Edward Chenard

Need Help Categorizing Your AI Portfolio?

I work with leadership teams to apply the B1/B2/B3 framework to their AI roadmaps—ensuring the right balance between competitive parity and breakthrough innovation.

Schedule a Portfolio Review
📘 GO DEEPER — IMPLEMENTATION GUIDE

The Break Away Advantage — $39

This article gives you the B1/B2/B3 categories. The guide gives you the portfolio strategy to win with them.

The Red Queen Effect and the B1 Trap that eats 80%+ of budgets
Deep case studies: Best Buy $1B, Olo IPO, C.H. Robinson
Portfolio allocation models by organization size
15-question diagnostic checklist with scoring bands
Get the Guide → Instant download • Worksheets included
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Edward Chenard
Edward Chenard
AI Revenue Strategist

I spent 20 years building AI and data products at Best Buy, Target, C.H. Robinson, and Olo. I've launched 100+ products, built teams from 2 to 300+, and contributed to over $2.5B in AI-driven revenue — including the data architecture for Olo's $3.6B IPO. Now I publish the frameworks so other leaders can skip the expensive mistakes.