Innovation Strategy - the link between Vision and Realization

"Strategy is saying no to a thousand good ideas" - Steve Jobs

A well-crafted business strategy is the backbone of any successful organization. It provides a clear roadmap for achieving long-term goals, allocating resources effectively, and making informed decisions, outlining how a company will create and capture value in its markets.

But one key aspect that is often overlooked is that business strategy, at its core, is about being different. Michael Porter, arguably the biggest name on the topic, emphasized that competing by trying to do the same as our opponents but better is a battle with no winners in the long run. Rather, companies must understand their competitive environment, value chains, and unique capabilities, to then offer something that nobody else is offering.

The hardest part is not picking how we want to position and differentiate ourselves - it's saying "no" to everything else. Every strategic decision implies a series of tradeoffs and will almost certainly make stakeholders and important customers unhappy. Companies that cave to these pressures and try to "be everything to everyone" end up accelerating their path to mediocrity.

Where Strategy Meets Innovation

OK, now that we are on the same page about what strategy really is, why stick the word "innovation" in front of it? Just to make it cooler?

In fact, there are many levels to strategy in an organization. At the top level, Mission & Vision will set the tone for the whole organization. The Business Strategy then defines the goals and path to growth for each part of the company to materialize that Vision. However many companies fall short when it comes to turning the business strategy into intentional innovation efforts, ending up with disjointed innovative projects that are picked based on dubious criteria, following unarticulated execution, without a clear understanding of outcomes.

This scenario is often accompanied by splashy innovation initiatives and events that are more for show, producing poor or inconsistent results. That's what Strategyzer's founder Alex Osterwalder calls "innovation theater".

That's why we need a strategy hierarchy, that cascades the higher aspirations from the business into a more tangible innovation strategy that will guide the portfolio of innovative projects, ensuring their alignment with the business objectives:

1. Mission and Vision: The company's purpose and aspirations.
2. Business Strategy: The overall approach to achieving the vision, usually by business unit or product line.
3. Innovation Strategy: How innovation will contribute to the business strategy.
4. Functional Strategies: How each department (e.g., R&D, marketing, operations) will support innovation efforts and the portfolio of projects.
5. Portfolio Management: The process of selecting, prioritizing, and managing innovation projects collectively.
6. Project Management: The execution of individual innovation projects.

(Concept Source: PDMA - Product Development and Management Association)

Key Elements

When crafting a comprehensive Innovation Strategy for a business or product line, here are some of the key elements to consider:

• Understanding the context: Analyze industry and technology trends, customer needs, and competitive landscapes.
• Defining innovation goals: Determine the strategic initiatives and how to split investments among the different types of innovation you want to pursue (e.g., sustaining, incremental, transformational).
• Selecting innovation vehicles: Choose the methods for pursuing innovation (e.g., internal R&D, Open Innovation, acquisitions).
• Evaluating ideas: Establish a framework for assessing the potential of new ideas.
• Measuring success: Define key performance indicators (KPIs) to track progress.

In conclusion, a well-crafted innovation strategy is essential for businesses looking to thrive in today's rapidly changing marketplace. By following these guidelines, you can increase your chances of developing groundbreaking offerings that drive growth and create a competitive advantage.

What's your experience with business strategy? Does your company have a well-defined innovation strategy? Leave a comment and share your thoughts!