What Is an Innovation Strategy in Business?
An innovation strategy is a customized plan that you will pursue consistently across your organization. Your innovation strategy is the gateway to the future and should describe the operations and activities that leaders and members will deploy to help your organization stay ahead of the competition as well as risks and exposures that might threaten your business.
The innovation strategy for the firm must be formulated to fit the unique mix of capabilities, strengths and goals that will create a sustainable future for the organization. In general, innovation strategies should detail the major goals of all your innovations, projects and the activities that you will implement to successfully apply the innovation strategy and achieve the desired outcomes you are aiming for.
An innovation strategy will have a positive effect on your business results if leaders and individual contributors embrace and actively support it. That’s why an innovation strategy should be easy to understand for everyone from executives to the newest hires. It should create a common language and contain common goals that are used, understood and embedded throughout the organization. All innovation strategies need to include some level of ingenuity and imagination that will enable your organization to be different and stand out from rivals. Smart executives encourage people to be on the lookout for new ideas, services, products and processes that could be viable “now, later or much later” to ensure that the organization remains relevant and competitive. Wise executives understand that the opportunity clock is ticking and that long term sustained success depends on your ability to manage disruptions and take advantage of opportunities by adapting and innovating rapidly.
What Is the Importance of an Innovation Strategy?
In the grand scheme of things, a good innovation strategy can go a long way to help ensure your organization achieves long term sustained success. But more specifically, a good innovation strategy is important because it will:
- Enable your organization to deliver the value your customers need.
- Help create a competitive advantage over your rivals.
- Ensure that your customers look to you for innovative solutions for their emerging problems and challenges.
- Give you an “early mover” advantage and build your brand in the marketplace.
- Help sustain your ability to deliver superior returns for investors and stakeholders.
- Keep people in your organization focused on creating new ways to optimize the use of resources, technology and capital.
- Enhance your firm’s ability to attract and retain the best talent.
- Help your organization get to a place of hope and promise for all stakeholders.
Historically, we have seen the power of innovation strategies and original thinking in companies. Henry Ford did it with the assembly line. Apple and Samsung continue to push the envelope of innovation with digital devices. Today, Elon Musk and his Tesla and Space X lines of business are forging ahead of rivals in the transportation industry. These are but a few high profile examples of innovation strategy. The point we are trying to make is that every organization or enterprise has to have a strategy to deliver results today but they must also have a robust innovation component to shape the future.
The ability to consistently innovate can be crucial to the continued existence of a company. Famously, 3M encouraged their employees to spend 15% of their time on anything they felt like, and this led to the invention of the Post-it, which is one of 3M’s biggest sellers. Today, Goggle insists that all employees spend 20% of their time pursuing new ideas and concepts.
More recently, we see the emergence of organizations that are innovation leaders like R.B.O., Virgin, and Spotify. While these organizations may be on the leading edge of major transformations, every business needs an infusion of innovation and creativity to some degree in order to be relevant in the future and maintain competitiveness.
To ensure that your organization continues to innovate consistently—not just accidentally or when a dire need arises—you need a strategy that outlines how change will happen. Such a strategy should help everyone at an organization focus on clear goals and a plan to solve your challenges and seize opportunities.
A good innovation strategy can also:
- Help employees prioritize activities when they have to choose what to focus on.
- Allow you to make smart decisions in advance about the types of innovation activities that you will use.
- Provide simple metrics for tracking innovation.
- Make innovation part of the organizational culture.
- Reduce silos and unify various departments of an organization around shared goals, thereby reducing costly conflicts and ensuring the wise allocation and utilization of scarce resources.
What Are the Types of Innovation Strategy?
As you are building your innovation strategy, it can help to understand different categories that may describe your strategy. Fundamentally there are four types of innovation strategies that you can choose from depending on your appetite for change, your budget and your creativity. These different types of innovation strategies include:
- Proactive: Companies using this type of innovation strategy focus on being the first mover when it comes to breakthroughs in products, processes and core competencies. They search and borrow ideas from diverse industries, professions and products. They relentlessly research new ways to create value that enables them to be first movers and disrupt the marketplace. Innovation leaders are more open to risk and are willing to make big bets in research, or they may seek to acquire innovative businesses or form joint ventures. They look for big opportunities that alter our experience and how we think about their products and services. Companies modeling this strategy include Apple, Tesla, Disney, Uber, Alphabet, Peloton and many more.
- Active: This type of innovation strategy seeks a way to keep your firm ahead of the competition by steadily improving current practices and technologies. These businesses seek to quickly adopt new technologies and move into new markets once they are tested by others. They are “fast followers” and learn how to adopt best practices and change quickly. They may keep up with developments in many areas, but they take smaller risks than more proactive companies do. They typically engage applied research initiatives internally as opportunities come into focus. Example companies include Jet Blue, Caboni, Microsoft and many other organizations that are constantly improving their offerings and methods of operation.
- Reactive: These companies follow the ideas and actions of other companies once they have been proven to work and focus mostly on performing their operational activities better. These organizations don’t typically innovate very much on their own and tend to be more risk adverse. They might replicate an innovative product, service model or operating practice that other organizations have pioneered.
- Passive: In this strategy, an organization will only innovate if it is pushed to do so by customers, rivals, or regulators. These companies may be large monopolistic or traditional businesses who experience few disruptions that threaten their position in the marketplace. These organizations may rise or fall in a limited specialty market.
What Are the Elements of an Innovation Strategy?
We like to say that nothing will last forever. Therefore, everything you offer and the methods or processes you utilize to produce your products and services will need to be reinvented or replaced at some point in time. So when you are ready to pursue an innovation strategy, try to include the following elements at every level in your enterprise.
- Define exactly why you want to innovate and what you want to accomplish. Do you want to incrementally improve your business model or create a completely new one? Do you want to diversify or focus on a narrow, more specialized offering? Do you want to expand globally or concentrate on a region? Do you want to create a high-performance culture or a more traditional one?
- Choose the specific market segment of customers you can serve well. Define their exact needs or problems they are trying to solve. Assess your organization’s core competencies, capabilities, and assets that can be deployed with your innovation vision. Find the strengths and gaps in your organization’s capacity to develop new solutions. Also, analyze your competitors, how they are already serving customers’ needs, and how they are falling short… or better yet, discover “blue ocean” opportunities where there are uncontested markets and opportunities.
- Explain your unique value proposition and the types of value you can deliver to your customers and clients. Use innovation strategy to create new products, services, or models that competitors would find difficult to imitate.
- Develop organizational abilities and capacities that will be needed to innovate and compete. You may already have them, or maybe you need to enhance them. These can include behaviors, culture, knowledge, research capacity, skills, and values.
- Identify the systems and processes your organization will require to drive the level of innovation you want. This may include ways of measuring your innovation, talent development, setting up research and development initiatives, formulating new sales and marketing plans, and more.
- Finally, as you implement your innovation strategy, you will need a flexible plan of action with the ability to measure progress and make rapid adjustments as you encounter challenges along the way.
How Can Leaders Develop an Innovation Strategy?
To fill in the details of the components of an innovation strategy listed above, your team will need to perform a thorough internal organizational review plus some external research. For example, your leadership team will need to choose clear, realistic objectives for the organization before you can formulate a clear innovation strategy that will support those specific objectives and desired outcomes.
Leaders also must choose a specific set of customers to focus on and pursue. This requires awareness and privileged insights about customer requirements, sentiments, and desired value before your competitors discover their needs.
Next, the team must decide on and develop a unique way that they will satisfy new or emerging customer needs. This will help define the direction your organization must move in and the new activities that team members must learn to perform. A robust strategy session can reveal whether or not the new value proposition is appropriate, whether team members understand it, and if it can be supported and implemented successfully.
Finally, leaders must have a realistic understanding of the resources and abilities the organization already has in its arsenal as well as gaps and opportunities for improvement. Then business leaders have to put active measures in place, upskill or reskill people, use new technologies and revamp existing operational practices to gain the capacity they will need to actively achieve innovation goals. This includes setting up systems and metrics that all contributors will employ in order to sustain innovation over the long-term.
How Can Leaders Implement an Innovation Strategy?
Mapping out a comprehensive innovation strategy is the first step. Then leaders need to consistently follow it and help their workforce use it. It’s vital that the main goals for the organization are well-defined and that leaders can explain them to teams across the enterprise. They also need to help members find ways to work on activities every day that contribute to the innovation strategy in real time.
Leaders should also ensure that their company’s innovation strategy clearly supports critical K.P.I.’s and specific objectives. As yearly objectives are chosen, every team should understand exactly how they will connect to the organization’s innovation aspirations.
Finally, metrics and systems for measuring innovation progress must be embedded in the organization and used on a regular basis. Leaders must know if they’re reaching their goals or if they need to improve.
CMOE’s Leading Innovation learning experience will help develop your leaders and equip them with the skills needed to succeed with your innovation plans. This learning experience will help people discover the strengths they already have, along with new skills needed to inspire creativity, develop a culture of innovation, and more.