A strategy is a framework for making decisions about how you will play the game of business. It’s making choices to have the best chance at “winning,” and innovation is one of the means to achieve your strategic goals.
Without a good one, it’s actually quite difficult to achieve long-term success and orient your business for speed in order to secure a competitive advantage.
As many as 94% of executives have defined innovation as a strategic priority. However, the lack of a clear innovation strategy is a fundamental problem especially for established companies when optimization of existing business becomes a priority.
While developing an innovation strategy isn’t necessarily difficult in itself, aligning it with your overall business goals and ways of working is what takes most of the time and effort. Here, you’ll find five steps for developing an innovation strategy and tools that can be used when mapping your strategic goals in order to make the best choices for long-term success.
1. Determine objectives and strategic approaches to innovation
Define your winning aspiration. What is your innovation objective and the why behind your innovation strategy?
The planning process of your innovation strategy starts with defining your objectives: What do you want to achieve with innovation?
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 to support your business objectives and vice versa.
2. Know Your Market: Customers and Competitors
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.
3. Define Your Value Proposition
The most important step is to define a unique value proposition. How will you win? What type of innovation allows the company to capture that value and achieve a 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.
To be able to create a unique value proposition, the ability to identify and exploit new uncontested markets is recommended. This can be done through value innovation.
Value innovation was first introduced in the HBR article called Blue Ocean Strategy and later in the classic book bearing the same name.
The purpose of value innovation is to achieve sustainable competitive advantage by looking beyond your current understanding of the industry and reforming your value proposition to stand apart from the competition.
Securing new competitive advantage is done by making the competition irrelevant. To succeed, one must adapt existing products or services through differentiation and lower cost.
Often, companies imitate their competitors offering slightly improved products and services with a slightly more competitive price. Because rivals and imitators are about to attack fast, both the value proposition and the profit proposition should be outstanding.
This makes your business model more difficult to imitate and gives the best chance for you to be able to swim in that blue ocean.
To reach value innovation, try to clarify which customer segments your competitors are focused on, and how do these segments overlap with the ones your new offering targets. Is it possible to adapt any of your existing products to differentiate them further for the geographies or segments that will face the most pressure?
4. Assess and Develop Your Core Capabilities
When assessing your set of capabilities that need to be in place, consider the following:
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.
5. 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 to be able to link our innovation infrastructure elements together? What are the most important systems that support and help in measuring the results of our innovation strategy?
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 structure of the industry
- The production, marketing and finance systems
Best Practices – How to Make your Innovation Strategy Work
Pick your focus
After you’ve selected your strategic approach to innovation and mapped all of the most important elements related to it, it’s time to put your innovation strategy to work.
To make sure innovation remains a strategic priority, stay focused on your goals and execute your innovation strategy in a systematic manner.
“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
Your strategic long-term goals give structure and support to your innovation work. Having boundaries and staying focused on your end goal is the only sure way to get there.
Align innovation strategy with your business goals
Aligning your innovation strategy with your overall business goals is one of the most difficult tasks when it comes to succeeding in innovation. So much so that 54% of innovating companies struggle to bridge the gap between innovation strategy and business objectives.
According to the Deloitte 2016 Global Board Survey, one of the reasons for this might be that the overall understanding seems to be weak with regard to talent management and innovation/R&D strategy. Other common issues are uncertainty and the unusual time horizon of innovation results.
To succeed with strategy alignment, aim for communicating the role of innovation within the entire portfolio to drive innovation across all units in your organization. Ensuring that innovation is fully embedded into an overall business strategy is the only way to allow your organization to innovate in the long term
Communicate and integrate your strategy into the ways of working
No matter how great your innovation strategy is, it won’t get you far if you fail to get people committed to your innovation management processes.
Often, the root cause of these types of challenges is management. If senior managers fail at the top-down communication, even a good strategy won’t work if not integrated into the actual ways of working.
Because senior leaders are often the ones making the decisions, prioritizing active communication and engagement can help motivate people to be more active. When your employees are aware of the goal and purpose, as in, why you’re doing what you do, it will make the long-term commitment much easier.
To integrate innovation into the ways of working, you might want to consider partnering with your key people and set individual goals that support your innovation strategy. Providing clear direction and guidance can help you to make innovation a part of your everyday work.
Measure systematically and adapt
Last but not least, to be able to tell how your innovation strategy works in practice, you should be able to measure it in a systematic manner. Picking the optimal metrics and setting the right expectations helps monitor your progress.
Systematic measuring is the only way to be able to adapt to changes to achieve better outcomes in the future. So, don’t do it in a silo, but aim for a bigger impact by making a systematic measuring a part of your innovation strategy.
Innovation strategy is about making the best-educated choice between a number of feasible options. To succeed in developing the best possible innovation strategy for you, you need to identify and map your best possible strategic choices required to win.
However, making those choices is only half the battle as it’s equally important to test and validate your approach.
For your innovation strategy to work, strategic alignment and seamless integration to the ways of working is the key. By clear communication as well as supporting metrics on the company and individual level will help you make innovation a continuous practice.
When you have the right innovation strategy in place, the next step is to build a systematic process for generating, developing, evaluating and implementing new ideas.