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“Building an Innovation Strategy”

Written by: Roger Ingbretsen

Article Overview: If an organization is to sustain and grow, each member of the organization should see a clear line-of-sight from the innovation strategy to his or her job. People in all areas must develop a high degree of commitment and passion to create and capture the future! Innovation must become a process of object-driven change, which remains flexible with regard to both objective and the path to get there.

“Building an Innovation Strategy”

For innovation to be successful, it needs to be more than an incremental plan. Innovation must become an organizational mind-set or orientation that uses the collective intelligence and imagination of people throughout the enterprise. Each member of the organization should see a clear line-of-sight from the innovation strategy to his or her job. People in all areas must develop a high degree of commitment and passion to create and capture the future! Innovation must become a process of object-driven change, which remains flexible with regard to both objective and the path to get there.

In practical terms, the innovation strategy requires the development of people and processes capable of grappling with continuous assessment, development, and the implementation, of customer value added products, services and processes. These products and services should be aligned with the current, future, and the possible future of your industry. Beyond products and service, innovation can also be built upon demand for what the organization can offer through effective “branding” and creating customer driven desire toward doing business with your organization. Think of your innovation strategy as a living and continuous transformational process.

Because of the importance innovation plays in the future success of the organization; the process and the many factors affecting a systemic approach to developing an innovation strategy will be discussed. As is the case for developing any strategy, it is critical to investigate the linkages that innovation has to other strategies especially the business strategy of the enterprise.

Innovation is more than simply a “big idea” and the product or service that results from it. Innovation can more accurately be defined as “a process” through which the total available knowledge (internal and external to the organization) can be strategically translated into new products, new services or an increase in meaningful productivity, through new and improved methods. It is the complete process or system of interactions between the innovator and those individuals in the organization who can move the innovation from the idea stage, to research and development, to commercialization, and on to implementation and use by the customer. The creative use of product branding, organizational structure, cultural values, and optimization of talented people within the organization is in fact the practice of innovation because collectively they are building an environment driven by human imagination, which is at the heart of innovation.

An innovation strategy defines to what extent, and in what timeframe, the organization wants to use their knowledge and innovation to execute its corporate business strategy. The combination of a coherent innovation and business strategy are key components to the long-term success of the organization because they address the ever-changing business environment, allowing the organization to maintain a sustainable competitive advantage. An organization should continually be asking the question: How do the “innovation initiatives” support the business strategy of the organization, our clients, and the industry it serves?

In a “knowledge-based enterprise” innovation tied to the business is critical for two main reasons. One, “Knowledge Capital” has a relatively short shelf life. (New knowledge is constantly being created worldwide) Two, Change and access to knowledge is happening at a faster rate as the world becomes digitized. Bottom line…in today’s knowledge-driven world, new technologies appear at shorter and shorter intervals. In this environment we must become experts at mastering a continuous innovation strategy. If as an organization you are not diligent in pursuing an innovation strategy, someone can reinvent your industry making your products and services obsolete in a relatively short time. Quoting Bill Gates, “We always work as if we are two years away from bankruptcy.”

Strategies describe actions required to enhance the strength of the organization, relative to the competition. This is particularly true of an innovation strategy. Innovation strategies can be driven by: the customer, competition, technology, breakthrough transformation, stakeholder, resource, project, culture, or a combination of all of the above. A good innovation strategy considers all of the above so it can have the strength and durability to bend and change with new information, but does not disintegrate under the force of unexpected change. A good innovation strategy is like a good topographical map. It details the major land obstacles, mountains, rivers, lakes, valleys, canyons, (competitors, technology, customers, suppliers, culture) so a plan can be formed, but allows all who use it to pick the best route to get there in the quickest time. It is a guide that provides as much critical information to be available as possible, and also allows for the unexpected and unpredictable to play into the equation.

If an organization is to truly become innovative, the following four critical tasks must be undertaken.

• Understand and confront reality. Understand how your industry is doing, how technology is changing, how internal and external strengths, weaknesses, opportunities and threats are changing so the organization can stay on the leading edge rather than on the trailing edge of change.
• Truly stretch the organization beyond its current actual and perceived capabilities in an effort to achieve “breakthrough” transformational innovation.
• Obtain, create and sustain a substantial amount of intellectual capital and the organizational culture of focused energy required to discover, develop, implement and accelerate transformational innovation.
• Paint the big picture by clearly articulating the major elements and processes required by the entire organization to foster a total systems perspective, which allows transformational innovation to flourish.

All of this effort must be closely aligned with the mission, vision and business strategy of the organization and be clearly communicated to all stakeholders. On communication, George Bernard Shaw said, “The greatest problem with communication is the illusion that it has been accomplished.” Certain key people may know and understand what the organizations innovation strategy is; however, the more who know the better will be the support and focus. As in all strategies, an innovation strategy also contains an element of risk. With regard to risk, excessive risk exposure can be greatly mitigated when leadership advocates, and deliberately orchestrates, all elements of the strategy by facilitating the best use of available intellectual human capital, and by realigning resources and the work environment to support the innovation strategy initiative.

As with any strategy, innovation strategy must start with a fundamental analysis of what it will take to win in the market – what will create customer value, is the proposed innovation cost effective, and will the innovation help maximize profits? Some of the things to consider and explore when determining the appropriate innovation strategy for the organization are as follows:

• What are the current and future needs of the marketplace?
• What industry rules or norms can we rewrite or transform?
• What are the critical driving forces for change affecting the marketplace?
• Who are the real competitors and what are they doing?
• What are the key technologies in the marketplace?
• Are the key technologies mature, developing, or in a state of transition?
• What constitutes the next possible window of opportunity?
• Where are the best global opportunities for our products and services?
• What resources are available to implement an innovation strategy? (People, facilities, funding, intellectual capital/property, strategic alliances?)
• What are the long and short-term objectives of the overall business strategy?
• Does our innovation strategy fit our business strategy?
• How will our technology be a differentiator in the marketplace?
• What new functionalities could we/should we create for our industry?
• Does the innovation strategy create options that will both create value for the customer and position the enterprise for future growth?

Discovery is the journey and insight into possibilities is the mechanism, which produces new organizational wealth and sustained growth. Research shows that innovation that exploits change is generally the most effective. Strategic innovation is the continual and purposeful organized search for changes. It is the systematic analysis of strengths, weaknesses, opportunities and threats, finding which can be capitalize upon, and which offers the best possibility for the creation of wealth and growth. Innovation can address change in two ways: incrementally and by a transformational or major breakthrough. Both should be considered when deciding which approach can best satisfy the marketplace and the organizations business strategy. However, it should be realized that incremental thinking in a world of profound change is unlikely to add much value or drive industry leadership.

A useful approach to evolve or create an innovation strategy is as follows:

• Understand the market trends, relevant technologies, the competitive environment, regulatory change and other forces of change.
• Observe users of existing product, yours and your competitors, looking for gaps, inefficiencies, and opportunities for increased performance or consider rewriting of the rules of your particular industry.
• Visualize and predict “possible” and seemingly “impossible” innovation opportunities that could constitute a major breakthrough in your industry.
• Test, try, evaluate and refine the product, service or process in the lab and with the end user to see if it truly solves a problem or enhances performance.
• Obtain and implement feedback quickly from the end user.
• Before being asked, make changes to ensure the end user is more than satisfied with the finished product, service or process.
• Formally launch the production of the new product, start providing the new service, and implement the new process in a dramatic but honest manner.
• Market the new product, service or process, looking for possible spin-off or next generation possibilities.

Strategic alignment of the organizations innovative initiatives, require the constant adjustment of people, structures and systems, so thy can best facilitate the strategic intent of what is trying to be accomplished in real time. Two of the most traceable and visible factors in strategic alignment relative to innovation and growth, is (1) the continual development of the internal ability to develop new products and services, followed by (2) the acquisition and/or strategic alliance strategy, which brings outside innovation into the organization. Rarely can (step 1.) the same people, structure and systems continually produce growth and new innovative products and services. That is why (step 2.) acquisitions, partnerships and strategic alliances should be considered.

The following metrics are typically used to measure the success of the organizations innovation strategy:

• Percent of incremental revenue derived from the new product or service.
• New revenue produced per development headcount.
• Number of new patents/technologies produced.
• Turnover, loss or gain of intellectual capital.
• Time to market.
• New markets entered including acquisitions.
• Total market share.
• Profitability of the new product or service

A good innovation strategy helps to define where the organization is going and how it is going to get there. Of equal importance, it sets boundaries that define where the organization is not going. That is why developing the innovation strategy should be a thoughtful process. This may sound obvious, but research shows that in many organizations the innovation strategy is often a haphazard process. Organizations are often caught hoping that a bright idea will appear and save the day or that a project that has been around a long time may get life or have a miraculous healing, when in fact it should be declared dead. In other organizations the innovation process is strictly a matter of financial mechanics, in which all the numbers must continually line up. Often, organizations take only a cursory look at the possibilities rather than making explicit the underlying and well thought out assumptions upon which their innovation strategy can be based. Still others take only a safe, low key approach, hoping to take a small set of causes or changes in the marketplace and let them drive the innovation process. This usually presents itself as a small incremental change, which does not add significant wealth to the enterprise.

Quoting Gary Hamel, from his book Leading the Revolution “The world is increasingly divided into two kinds of organizations: those that can get no further than continuous improvement, and those who’ve made the jump to radical innovation.” You can’t keep wringing a bit more wealth out of yesterday’s innovation and expect to be the industry leader. Continuous improvement is needed; however, to create new wealth, to meet the rising expectations of shareholders, an organization must innovate. The organization must innovate in ways that the competition are not or cannot. To do this, you must instill a sense of collective curiosity and imagination in which every employee dreams, explores imagines, invents, and creates a product, service or process that makes a difference in the overall success of the organization. Research will quickly point out the fact that high performing companies do not do what everyone else does. They have the courage to be different.

What is needed and found in the industry leaders is a comprehensive and engaging process with high quality analysis, visual ownership, and clear lines of communication to enhance alignment, which quickly leads to focused action planning. The desire to be the industry dominant leader resulting from a predictive and well thought-out innovation strategy is the key to the on-going success and growth of the organization. The future cannot be known, it will be different from the present, but it holds the opportunities for success. Creating an innovation strategy will require analysis of all opportunities through an organized and systematic approach. Strategy, knowledge, innovation, time, technology and action, must be applied together for the greatest results.

As you can see, thinking through a strategy can require time and a focused effort. It may appear to be difficult to write your innovation strategy. Clarity in a complex world takes determination and perseverance, but the effort will in both the short and long-term, keep the organization focused on preserving and strengthening its unique competitive niche.

A final step with regard to strategy is implementation. When a new or radically different strategy is formulated, it most likely will involve structural changes to the organization along with policy and procedural changes. Change always will call upon leaders to handle the tangible as well as the intangible variables, including the motivation and commitment of people, possible restatement of values, the modeling and monitoring of behaviors, and the establishing and networking of relationships. The subject of personal and organizational will be addressed in a later issue Effective change is where the rubber meets the road.

Begin to craft “specific strategies” which will help you sustain your mission and allow your vision to become reality. This exercise will no doubt require the input and collaboration of others. To start this important process list five strategies you believe would have a positive impact on sustainability and future growth of your organization and why.

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Article Tags: assessment development, big idea, business strategy, collective intelligence, continuous assessment, customer value, doing business, driven change, driven desire, enterprise innovation, imagination, incremental plan, innovation strategy, line of sight, linkages, orientation, productivity, service innovation, systemic approach, value added products



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