Why You Need an Innovation Strategy

Consequences of not having one, the types of innovation strategies, how to create one and the benefits for the company and clients

InnovatingSociety
6 min readNov 30, 2018
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Why should you care?

“Despite massive investments of management time and money, innovation remains a frustrating pursuit in many companies. Innovation initiatives frequently fail, and successful innovators have a hard time sustaining their performance — as Polaroid, Nokia, Sun Microsystems, Yahoo, Hewlett-Packard, and countless others have found. Why is it so hard to build and maintain the capacity to innovate? The reasons go much deeper than the commonly cited cause: a failure to execute. The problem with innovation improvement efforts is rooted in the lack of an innovation strategy.

What is an innovation strategy?

A strategy is nothing more than a commitment to a set of coherent, mutually reinforcing policies or behaviors aimed at achieving a specific competitive goal. Good strategies promote alignment among diverse groups within an organization, clarify objectives and priorities, and help focus efforts around them. Companies regularly define their overall business strategy (their scope and positioning) and specify how various functions — such as marketing, operations, finance, and R&D — will support it. But during my more than two decades studying and consulting for companies in a broad range of industries, I have found that firms rarely articulate strategies to align their innovation efforts with their business strategies.

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What happens without an innovation strategy?

Without an innovation strategy, innovation improvement efforts can easily become a grab bag of much-touted best practices: dividing R&D into decentralized autonomous teams, spawning internal entrepreneurial ventures, setting up corporate venture-capital arms, pursuing external alliances, embracing open innovation and crowdsourcing, collaborating with customers, and implementing rapid prototyping, to name just a few. There is nothing wrong with any of those practices per se. The problem is that an organization’s capacity for innovation stems from an innovation system: a coherent set of interdependent processes and structures that dictates how the company searches for novel problems and solutions, synthesizes ideas into a business concept and product designs, and selects which projects get funded. Individual best practices involve trade-offs. And adopting a specific practice generally requires a host of complementary changes to the rest of the organization’s innovation system. A company without an innovation strategy won’t be able to make trade-off decisions and choose all the elements of the innovation system.

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Can’t we just copy someone else’s innovation system?

Aping someone else’s system is not the answer. There is no one system that fits all companies equally well or works under all circumstances. There is nothing wrong, of course, with learning from others, but it is a mistake to believe that what works for, say, Apple (today’s favorite innovator) is going to work for your organization. An explicit innovation strategy helps you design a system to match your specific competitive needs.

What can happen to my organization without an innovation system?

Finally, without an innovation strategy, different parts of an organization can easily wind up pursuing conflicting priorities — even if there’s a clear business strategy. Sales representatives hear daily about the pressing needs of the biggest customers. Marketing may see opportunities to leverage the brand through complementary products or to expand market share through new distribution channels. Business unit heads are focused on their target markets and their particular P&L pressures. R&D scientists and engineers tend to see opportunities in new technologies. Diverse perspectives are critical to successful innovation. But without a strategy to integrate and align those perspectives around common priorities, the power of diversity is blunted or, worse, becomes self-defeating.

How will innovation create value for potential customers?

Unless innovation induces potential customers to pay more, saves them money, or provides some larger societal benefit like improved health or cleaner water, it is not creating value. Of course, innovation can create value in many ways. It might make a product perform better or make it easier or more convenient to use, more reliable, more durable, cheaper, and so on. 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.

Companies must think through what complementary assets, capabilities, products, or services could prevent customers from defecting to rivals and keep their own position in the ecosystem strong. One of the best ways to preserve bargaining power in an ecosystem and blunt imitators is to continue to invest in innovation.

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The Leadership Challenge

Creating a capacity to innovate starts with strategy. The question then arises, Whose job is it to set this strategy? The answer is simple: the most senior leaders of the organization. Innovation cuts across just about every function. Only senior leaders can orchestrate such a complex system. They must take prime responsibility for the processes, structures, talent, and behaviors that shape how an organization searches for innovation opportunities, synthesizes ideas into concepts and product designs, and selects what to do.

There are four essential tasks in creating and implementing an innovation strategy. The first is to answer the question “How are we expecting innovation to create value for customers and for our company?” and then explain that to the organization. The second is to create a high-level plan for allocating resources to the different kinds of innovation. Ultimately, where you spend your money, time, and effort is your strategy, regardless of what you say. The third is to manage trade-offs. Because every function will naturally want to serve its own interests, only senior leaders can make the choices that are best for the whole company.

The final challenge facing senior leadership is recognizing that innovation strategies must evolve. Any strategy represents a hypothesis that is tested against the unfolding realities of markets, technologies, regulations, and competitors. Just as product designs must evolve to stay competitive, so too must innovation strategies. Like the process of innovation itself, an innovation strategy involves continual experimentation, learning, and adaptation.”

This article is a part of what was originally written by Gary P. Pisano and you can find it on this link.

Conclusion

In conclusion, without an innovation strategy, companies will waste resources on developing things that might not be the best choice when taking into consideration the bigger picture of global, industry and consumer trends. There is no one strategy that works for everyone, because like people, there is no company that is exactly the same as another. That’s why organizations need to start assessing their internal innovation capabilities, configure their long term vision and goals, do market research to discover opportunities, come up with several ideas, test them rapidly and start implementing as soon as possible. Only with a diversified portfolio of products and services a company can keep pace with the fast changing environment.

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InnovatingSociety is a consultancy agency that combines Business Innovation with Product/UX Design in order to help businesses get where they want. Besides consulting, they offer training workshops and write articles on Business Innovation, Lean Start-up, Design Thinking, Future of Workplace, Product Management, Entrepreneurship, and more.

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InnovatingSociety

Suntem pasionati de business si design. Impreuna, lucram pentru ca afacerea ta sa ajunga unde iti doresti. #Business #Innovation #DesignThinking #ServiceDesign