Different business functions, such as sales, marketing and operations often have neatly aligned strategies and specified tactics to ensure each part of the business is executing the grand vision and taking things in the right direction.
This, however, isn’t always the case with innovation.
Despite the fact that the majority of executives have defined innovation as a strategic priority, companies rarely have a dedicated strategy that aligns their innovation efforts with their overall business strategies.
Weak understanding of an innovation/R&D strategy is one of the reasons why innovation efforts fail as it can be difficult to ensure a sustainable performance without one.
What is an innovation strategy?
An innovation strategy is the plan for harnessing innovation to support the long-term goals of an organization. Building an innovation strategy isn’t about mapping different innovation tactics but about linking innovation to the grand vision and core value proposition an organization has for defined markets. A clear strategy helps set and reinforce company-wide guidelines and practices for innovation.
Innovation management isn’t any different from other business functions in a sense that it’s just one of the means for achieving long-term strategic objectives. Once companies learn to treat innovation as a supportive mechanism instead of a goal in itself, building and aligning an innovation strategy suddenly becomes much easier.
Why do you need an innovation strategy?
A study by Booz & Co. has investigated the effects of having a highly aligned innovation strategy on the growth of the enterprise’s value together with a pro-innovation culture and reported a 30% improvement over organizations that didn’t possess both. For many companies, having a systematic approach to innovation is the best way to grow their businesses.
Generally speaking, strategy sets the direction for innovation initiatives at all levels of the organization. With a systematic, strategic approach to innovation, you’re able to pinpoint existing problems and apply new solutions faster, which helps make the business more productive and profitable.
Building a strategy is about making a choice between a number of options that will give you the best chance to win. As it’s impossible to do everything at once, clear direction is vital to be able to achieve any type of goals.
With a coherent innovation strategy, people understand what is important and are likely to stay focused as strategy helps prioritize initiatives that have the most potential to succeed.
“The essence of strategy is choosing what not to do.” – Michael Porter
A clearly defined innovation strategy also helps ensure that different parts of the business are actually working towards the common goal. Without one, there’s a risk that different business units may start pursuing contrasting point of views and priorities.
Thus, having an innovation strategy helps get everyone on the same page and ensures different units are actually doing things that support the bigger picture.
Build a unique strategy to secure long-term success
According to HBR, an explicit innovation strategy helps you design a system to match your specific competitive needs to drive long-term innovation.
Different businesses have different purposes and capabilities that make them unique and competitive. What works for one may not work for the other, which is why finding your own thing is really the only thing that can make you stand apart from your competitors.
There are many different ways to approach innovation and although you can learn from others and get inspired by them, an innovation strategy shouldn’t be copied but built around the specific capabilities of an organization. Only then there’s a real chance to succeed.
Amazon, for example, has built its innovation strategy and culture around the customer. Putting customer-centricity at the core of their operations and strategy work has allowed them to keep succeeding in creating new innovative business models. IBM, on the other hand, has throughout the years emphasized research. They create new technologies and then patent them.
Both have had great success with their approaches.
How to get started with innovation?
Building a plan for innovation takes time. However, careful planning is the only way to make sure the execution process is as effortless as possible. Especially for large organizations, a clear plan and communication are critical for successful implementation of the strategy.
There are three essential tasks that can help get started:
1. Define how innovation will create value for customers and the organization
Creating unique value that others can’t offer is really what innovation is about. To develop an innovation strategy, you need to determine your objectives and strategic approach for innovation by choosing what kind of value your innovation will create for the customers and the company.
Your innovation objectives need to go beyond common generalities and be specific enough so that you can understand what types of innovations really matter for your business now and in the future.
"Choosing what kind of value your innovation will create and then sticking to that is critical, because the capabilities required for each are quite different and take time to accumulate.” – Gary Pisano
2. Allocate resources to different kinds of innovation
For companies to be able to actually execute the strategy, they should evaluate their assets and properly allocate resources to support it. Innovation portfolio management is all about finding the right balance and also depends on the risk the company is willing to take.
Depending on the organization’s nature, its maturity and the industry it operates in, Google’s 70-20-10 model can work as a solid framework for allocating innovation resources especially for larger organizations:
3. Constantly improve, learn and adapt
Once you’ve defined what you want to achieve with innovation and chosen the allocation of your resources to support it, it’s time to take the vision to reality and integrate the strategy into the actual ways of working.
Contrary to what some companies seem to believe, strategy isn’t something that can just be done once every few years. It’s good to keep in mind that working on innovation strategy should be a continuous process focused on achieving great results in the long term. Companies that make the mistake of doing too much at once are at risk of losing focus from what really matters.
Therefore, it’s important to keep your eyes on the prize and constantly focus on improving, learning and adapting your strategy as the business develops.