What is an innovation strategy?

Hari Vignesh Jayapalan

October 09th, 2017

Despite massive investments of management time and money, innovation remains a frustrating pursuit in many companies. Innovation initiatives frequently fail, and successful innovators have a hard time sustaining their performance — as Polaroid, Nokia, Sun Microsystems, Yahoo, Hewlett-Packard, and countless others have found. Why is it so hard to build and maintain the capacity to innovate? The reasons go much deeper than the commonly cited cause: a failure to execute. The problem with innovation improvement efforts is rooted in the lack of an innovation strategy.

Innovation strategy — definition

Innovation strategy can be defined as, a plan made by an organization to encourage advancements in technology or services, usually by investing in research and development activities. For example, an innovation strategy developed by a high technology business might entail the use of new management or production procedures and the invention of technology not previously used by competitors.

Innovation strategy — a short description

An innovation strategy is a plan to grow market share or profits through product and service innovation. When looking at innovation strategy through a jobs-to-be-done lense, we see that an effective strategy must correctly inform which job executor, job, and segment to target to achieve the most growth, and which unmet needs must be targeted to help customers get the job done better. When it comes to creating the solution, an innovation strategy must also indicate whether a product improvement, or a disruptive or breakthrough innovation approach is best. Unfortunately, most innovation strategies fail in these regards, which is why innovation success rates are anemic.

Myths that mislead

Innovation strategy is not about selecting activities to pursue that are different from those of competitors. This is the myth that misleads. Selecting activities is not a strategy. An innovation strategy is about creating winning products, which means products that are in an attractive market, target a profitable customer segment, address the right unmet needs, and help customers get a job done better than any competing solution. Only after a company produces a winning product or service should it consider what activities are needed to deliver that product or service.

Tactics for innovation strategy

Global competition and a weak economy have made growth more challenging than ever. Yet, some organizations such as Apple, Amazon, and Starbucks seem to defy the laws of economic gravity.The most successful growth companies adopt at least four best practices.

Find the next S-Curve

Nothing grows forever. The best products, markets, and business models go through a predictable cycle of growth and maturity, often depicted as an S-curve. Diminishing returns set in as the most attractive customers are reached, price competition emerges, the current product loses its luster, customer support challenges emerge, new operating skills are required, and so on.

Unfortunately, growth company leaders are often blinded-sided by this predictable speed bump. Once the reality of the S-curve becomes apparent, it may be too late to design the next growth strategy.

The time to innovate — the innovation window — is when the first growth curve hits an inflection point. How do you know when you’re hitting the inflection point? You never know. So the best companies are forever paranoid and make innovation a continuous process.

Lean on customers

Successful growth companies have a deep understanding of their customers’ problems. Many are embracing tools such as the customer empathy map to uncover new opportunities to create value. This customer insight is the foundation for their lean approach to product innovation: rapid prototyping, design partnerships with lead users, and pivoting to improve their product and business model.

Think like a designer

Managers are trained to make choices, but they don’t always have good options. Innovation involves creating new options. This is where designers excel. Apple’s exceptional user experiences were largely the creation of Jonathan Ive, a professional designer and Steve Jobs’ right hand man.

Lead the way

Unless the CEO makes innovation a priority, it won’t happen. Innovation requires a level of risk-taking and failure that’s impossible without executive air cover. The best growth companies create a culture of innovation:

  • Howard Schultz decided Starbucks had lost its way. He flew in every store manager from around the world to help redesign its café experience.
  • Google encourages employees to spend a day per week on new ideas.
  • P&G tracks the percentage of revenues from new products and services.
  • Gray Advertising gives a Heroic Failure Award to the riskiest ideas… that fail!

Final thoughts

Finally, without an innovation strategy, different parts of an organization can easily wind up pursuing conflicting priorities — even if there’s a clear business strategy. Sales representatives hear daily about the pressing needs of the biggest customers. Marketing may see opportunities to leverage the brand through complementary products or to expand market share through new distribution channels. Business unit heads are focused on their target markets and their particular P&L pressures. R&D scientists and engineers tend to see opportunities in new technologies. Diverse perspectives are critical to successful innovation. But without a strategy to integrate and align those perspectives around common priorities, the power of diversity is blunted or, worse, becomes self-defeating.

 About the author

 Hari Vignesh Jayapalan is a Google Certified Android app developer, IDF Certified UI & UX Professional, street magician, fitness freak, technology enthusiast, and wannabe entrepreneur. He can be found on Twitter @HariofSpades.