Do Your Really Have an Innovation Strategy?
Your company has a strategy and a strategic plan and you probably go through a yearly exercise to create this year’s ‘strat plan’. So how is an innovation strategy different from a business strategy and why does it matter?
Innovation strategy is simply the way companies plan their innovation efforts to manage future uncertainty. In the past, a company’s general business strategy would cover this. But with the world becoming more complex and uncertain at an ever faster pace, the perspective of innovation is more relevant than general strategy to address the situation.
Uncertainty is a result of the dynamics: other companies are continuously innovating and their actions affect your business, just as yours affect theirs. Sustaining Innovation – incremental improvements to existing offerings – contributes to baseline growth, but if that’s all you do, at some point you get overrun by someone else’s Strategic Innovation.
It’s the transformative projects that keep you ahead of competitors. These projects, however, are the most uncertain. This is where the innovation strategy comes in: it helps to find the fertile areas to explore, identify the likely opportunities in those areas, place bets to make a portfolio, and move the company in the right ways to support those bets.
So how do you formulate an innovation strategy? A good strategy will have several key components, and the Innovation Strategy Canvas (see above) can identify them.
The left side of the canvas contains the strategy components that look at the space outside the company: how the world is evolving and how to change in response. “Futures” looks at forces and trends over the next 10-15 years. “Domains” finds promising areas to focus on based on those futures, and “Portfolio” helps prioritize projects to allocate resources across these domains. Finally, “Sense” looks at how the company sees what’s happening in the world and how to act on it.
The right side of the canvas contains the strategy components that look inward: how the company behaves and how it needs to evolve. “Change Initiatives” are the overall actions taken to change internal culture, structure, and process. “Culture” aims to create an innovation mindset by developing new leadership, people, and competencies; “Structure” and “Process” aim to implement this culture, so innovative projects can actually move forward. And “Measure” asks how to gauge the progress of these initiatives and continue to improve innovative capacity.
An Innovation Strategy Canvas in Practice
To show how the canvas works, take the case of a company in the food industry who wanted to develop their innovation strategy. Despite having majority market share in their segment, they faced an existential challenge: rapid technology change, new patterns of food consumption, and the expiration of their IP all placed their business at risk. Their business leader realized the need for an innovation strategy to find transformational opportunities to manage the new future they were entering.
A project team was formed and they identified a number of futures, including changes in production, processing, nourishment, and the eating experience. They explored a number of domains: commercial vertical farming, protein integrity, processing automation, and new protein sources, and in the end had found over 80 opportunities, 10 of which were transformative.
Shifting to the inward-looking parts of the canvas, the team highlighted several changes, including the creation of an “Opportunity Factory” to incubate new opportunities, developing new partnerships, and using individual innovation assessments to develop competencies.
The company decided to move forward with two new opportunities in different food sectors with different business models than the company had used before: one looking at seafood freshness in stores, and another in commercial vertical farming.
The innovation strategy canvas is a way to lay out the various components of an innovation strategy: both the potential areas to explore and opportunities to develop, and the internal changes in culture and structure that will be needed to develop these opportunities. While you can make do without an innovation strategy – just as you can work without an overall strategy – there’s a lot at risk without a strategic plan to manage in a world dominated by uncertainties.
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