Why an innovation strategy is relevant
Failure for an organization to innovate goes deeper than an inability to implement or follow through. Very often, a failure to innovate is the result of not having developed an innovation strategy, which guides implementation. Innovation strategies are valuable to an organization because they establish a focus and unified understanding among the varying departments. With innovation strategies comes clear objectives and priorities based on market and competitor analyses, so that a competitive advantage is leveraged. Innovation strategies govern how an organization should work to solve a problem for the consumer in order to create value. Said structure encourages cohesion as an innovation strategy unfolds.
Elements of an innovation strategy
Generating a Game Plan
Developing concrete objectives, rather than overarching goals establishes clarity and creates perspective. That being said, claiming “we would like to innovate in tech” does not suffice. All objectives should coordinate innovation endeavors with an organization’s business model, so that an organization’s competitive advantage remains at the forefront.
In order to create a customized innovation strategy, opportunity identification is key. Opportunities are company specific, but there are universal methods that can be undertaken. Laying out historical innovations in your industry to pinpoint changes and disruptions is one of them. This process allows a company to note radical, disruptive, routine and architectural innovations that have been made in an aim to widen their perspective and to identify current gaps in the industry.
High quality products, services and experiences fill a gap by solving a problem you as a consumer were facing, thereby creating value. Innovation strategies seek to enhance, create or recreate a product, service or experience by delivering value to potential customers. Mentioned value can manifest in a plethora of ways. Value, for example, is created when a stressful purchasing experience is alleviated, when the price of a service is reduced, when the functionality of a product is improved, or when an online shopping experience is made more convenient. A customer analysis allows a business to understand what motivates customers to make a purchase and can therefore be beneficial in developing an innovation strategy. An organization can innovate by filling the hole where a job isn’t yet being done for the customer. Once this gap is identified, an opportunity can be seized.
Who will take your innovation strategy from the brainstorming phase to the execution phase to the adaptation phase is imperative to an organization’s success. According to a Harvard Business Review study on the significance of an innovation strategy, innovation strategies should be left in the hands of the most senior leaders of the organization. In the contrary, according to a Mckinsey study, a diverse leadership council should be appointed from varying backgrounds, rather than solely from the most senior leaders.
Despite who takes the lead, it is crucial that these leaders can effectively articulate an innovation strategy and can ease change management among the workforce. Pisano argues that leaders should first answer the question, “how are we expecting innovation to create value for customers and for our company” and should then focus on clearly communicating that to the company. As history has proven, a successful leader does not act as a dictator, but rather acts as a problem solver. Designated leaders will create a plan to allocate resources and will earnestly evaluate the innovation strategy prior to execution.
Evaluating, executing and adapting
Often times, companies demand numbers too soon, which sets a strategy up for failure. According to a financial management study in the Harvard Business Review, experience suggests that many companies expect meticulous financial estimates much too early, when accuracy will be low. Accordingly, using metrics like return on investment are fine for ballpark estimates, but it is counterproductive to order tasks based on these predicted metrics. It is therefore crucial that once objectives have been laid out, leaders have been appointed and opportunities have been identified, an innovation strategy is carefully evaluated and resources are allocated.
In the execution and adaptation phase, a set of guiding questions will aid in risk management, so that the innovation strategy poses little threat to the company.
· What is the predicted result if a false prediction is made?
· To what degree do we predict our assumptions are correct?
· Is it worth it to put more time into research on a topic or potential innovation?
Seeing as no prediction can be completely predetermined, adaption is a part of the process. As times change, industries evolve and information comes to the forefront, successful execution will be dependent on constant adaptation. This is why an experienced leadership team to move a strategy forward is imperative.