Strategizing Innovation
Innovation is about creating new value people are willing to use and pay for, whereas strategy is the plan for harnessing for example marketing, operations, finance and R&D to support achieving the competitive goal.
To clarify, innovation strategy isn’t about innovation tactics, such as setting up an idea challenge, but more about mapping organization’s mission, vision and value proposition for defined customer markets. It sets boundaries to your innovation performance expectations by simplifying and structuring your innovation work to achieve the best possible outcome.
Before moving forward, it’s important to mention that your innovation goals shouldn’t be separated from your overall business objectives as having a unified vision and common goals for innovation will help fight the silo effect and increase your operational efficiency.
If you think about marketing, for example, you wouldn’t want to separate your marketing strategy from your overall business objectives but rather make sure your marketing strategy and initiatives help contributing to your overall business plan and vision.
The same goes for innovation. There’s no point of innovating just for the sake of it, as it has to contribute to your bigger plan. So, before starting to develop an innovation strategy, make sure you’re aware of how innovation helps you to achieve your goals.
5 Steps for Developing Your Innovation Strategy
- Determine objectives and strategic approach to innovation
The first step in the strategy choice cascade is to define your winning aspiration. In other words, your innovation objectives and the why behind your innovation strategy.
If we take a step back, think about your long-term business goals and the things that are most likely to drive your business forward even after some time. As already mentioned, your innovation strategy should help supporting your business objectives and vice versa.
An example of a good strategic approach introduced in Playing to Win is Olay. Olay’s winning aspiration is to become a leading skincare brand that wins convincingly in their chosen markets and channels. Along with hair care, it will help establish a key pillar in the Procter & Gamble beauty-care business.
It’s likely that your approach to innovation will be something different. Typically, there are two different approaches to innovation strategy: business model innovation and leveraging existing business model.
The second step in the strategy choice cascade is defining the right playing field, as in, the market you’re operating in and the customer segment you’re offering value for.
To be able to innovate and to respond to your customers’ needs, you should listen and understand what your customers really want and remove the rest. To be able to do that, knowing what happens in the market is essential.
However, because competitive needs are individual and often very specific, a strategy that worked for another player in your field shouldn’t be copied but learned from. Although defining your playing field is important, your unique value proposition is what will make or break your innovation strategy.
- Define Your Value Proposition
Next, and probably the most important step is to define that unique value proposition. How will you win? What type of innovations allow the company to capture that value and achieve competitive advantage?
Because the purpose of innovation is to create competitive advantage, you should focus on creating value that either saves your customers money and time or makes them willing to pay more for your offering, provides larger societal benefit, makes your product perform better or more convenient to use, or becomes more durable and affordable compared to the previous product and the ones in the market.
- Assess and Develop Your Core Capabilities
The first three steps in the strategy choice cascade really come down to one thing; your fundamental capabilities required for winning.
When assessing your set of capabilities that need to be in place, consider the following:
- Culture
- R&D
- Behaviors
- Values
- Knowledge
- Skills
For example, if you want to win at delivering breakthrough technology, you must have internal skills and knowledge to be able to build that. The ability to connect and develop these capabilities is key to innovation.
- Establish Your Innovation Techniques and Systems
Last but not least, to be able to execute your innovation strategy in a scalable and integrated manner, you should find out what systems need to be in place.
Define: which innovation techniques and systems do we need in to be able to link our innovation infrastructure elements together? What are the most important systems that support and help measuring the results of our innovation strategy?
According to a recent study, Christopher Freeman defines the system of innovation as ‘the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies’.
This includes the following elements:
- The role of company R&D, especially in relation to technology
- The role of education and training related to innovations
- The conglomerate structure of industry
- The production, marketing and finance systems