The Intersection of Strategy and Innovation

Imagine This…

Your company is gearing up for a bold new initiative.

The leadership team gathers in the boardroom, buzzing with ideas. Growth is slowing, and something significant needs to happen.

A strategy consultant - let’s call him Jim—leans forward and delivers his verdict.

“The problem is execution,” Jim says confidently. “We don’t need to rethink the strategy - we just need to work harder and optimise what we’re already doing.”

The room nods in agreement. After all, Jim is the expert - 20 years in the industry, a McKinsey alum, and a knack for using phrases like “proven frameworks” and “best practices” with unwavering certainty.

So, the team follows Jim’s advice. They double down on the plan. They refine, optimise, and execute with even greater precision.

And then… nothing.

The numbers don’t move. Customers remain indifferent. Competitors surge ahead.

It turns out, the problem wasn’t execution - it was the strategy itself.

Jim’s mistake? He treated strategy as a fixed plan rather than as an evolving system that must adapt and integrate with innovation.

In today’s edition, we’re unpacking the real role of strategy, why most companies get it wrong, and how the best ones use innovation to sharpen their competitive edge.

What Strategy Really Is

Most people confuse strategy with planning. They think it's about setting goals, creating roadmaps, or outlining steps to reach an objective. But strategy is not a to-do list.

Strategy is about choices.

At its core, strategy is about how you are going to win. It's the set of guiding principles, tradeoffs, and decisions that shape the actions you take toward your goal. As Roger Martin, author of Playing to Win, puts it:

"Strategy is an integrative set of choices that positions you on a playing field of your choice in a way that you win." Roger Martin

Strategy is a theory. It's a belief in how we will attract and retain customers.

A good strategy answers fundamental questions:

• Why do we exist?
• Where are we now?
• Where do we want to be?
• How will we get there?

A great strategy must be coherent and doable.

Defining the Challenge: The Foundation of Strategy

Richard Rumelt, in Good Strategy, Bad Strategy, emphasises that strategy starts with clearly defining the problem. Many organisations chase vague ambitions—"becoming the market leader" or "delivering exceptional service" - without identifying the bottleneck preventing progress.

A great strategy:

• Pinpoints the key challenge or bottleneck.
• Focuses resources on overcoming that challenge.
• Makes clear tradeoffs - choosing what NOT to do is just as important as choosing what to pursue.

The Role of Bottlenecks in Strategy

A bottleneck is the biggest constraint preventing progress. If you don't solve the right bottleneck, your efforts are wasted.

Take Tesla for example. Tesla didn't just decide to make electric cars—they identified a key bottleneck: consumer concerns about battery life and charging infrastructure. Instead of just producing vehicles, they built a global charging network, making EV adoption viable at scale.

A clear strategy prioritises solving the most pressing constraint, not just setting broad goals.

Furthermore, strategy involves making deliberate choices and trade-offs to achieve a desired position in the market.

Tesla’s approach to electric vehicles (EVs) was fundamentally different from that of traditional automakers. Instead of focusing solely on building better cars, Tesla bet on the entire ecosystem, prioritising infrastructure and platform control.

What People Get Wrong About Strategy

A common misconception is equating strategy with long-term planning. While planning is an element, strategy is fundamentally about making choices under uncertainty.

Henry Mintzberg critiques the traditional emphasis on formal strategic planning, arguing that it often leads to rigidity and an inability to adapt to changing environments.

Strategy is emergent.

In his article The Five Deadliest Strategy Myths, Roger Martin identifies some of the most damaging misconceptions that cause companies to lose their way.

Myth 1. A List of Initiatives Is a Strategy

A widespread misconception is that a company’s strategy is simply a collection of planned initiatives. Many businesses mistake having a long to-do list - expanding into new markets, launching a product, increasing marketing spend - as being strategic.

However, these are tactics, not strategy. True strategy is about making integrated choices that create a clear competitive advantage.

A well-formed strategy doesn’t just list actions; it explains why those actions will lead to success.

Myth 2. You Can Prove a Strategy Is Correct

Another myth is the belief that strategy can be proven through extensive analysis and forecasting. Many companies become paralysed by the need for certainty, avoiding bold moves unless they have ‘proof’ that the strategy will succeed.

However, strategy is about making bets on an uncertain futureand not waiting for perfect information. Companies that refuse to act without certainty often default to maintaining the status quo - ironically, the riskiest strategy of all.

Myth 3. Analytical Strong People are Better Strategists

It’s commonly assumed that the best strategists are those with the strongest analytical skills. While data analysis is valuable, it does not replace imagination and judgment.

Some of the greatest strategists - like Steve Jobs and Fred Smith - didn’t rely on spreadsheets to dictate their moves. Instead, they envisioned a future that did not yet exist and worked to make it a reality.

Successful strategy requires creativity, insight, and courage to challenge conventional thinking.

"Imagine possibilities and choose the one for which the most compelling argument can be made" - attributed to Aristotle

4. Strategy Is a Zero-Sum Game

Many companies approach strategy as a win-lose battle, assuming success comes only by defeating competitors.

However, the best strategies create new value rather than shifting market share. Consider companies like Amazon, Apple, and Tesla have succeeded not by beating competitors but by changing the game entirely - offering unique value that expands markets instead of merely competing in existing ones.

5. Strategy is Formulated at the Top and Then Executed Below

A particularly harmful myth is that strategy is created by senior executives and simply “executed” by everyone else. While this is true in appearance, the reality is that strategy is making choices under uncertainty, competition and constraints - requiring alignment at every level of the organisation.

Frontline employees often have the best insights into customer needs, yet their input is frequently overlooked. The best organisations treat strategy as an ongoing conversation, with teams continuously adjusting and refining their approach based on real-world learning.

How Strategy and Innovation Intersect

One of the biggest challenges in business is navigating the uncertainty of the future while still making clear, strategic choices today.

Strategy provides the logic (what field, how we are going to win, the needed capabilities and supporting systems) of achieving the aspiration, while innovation is a mechanism to help organisations implement creative ideas that have value. But how do they genuinely intersect?

Roger Martin’s Knowledge Funnel provides a powerful way to understand this connection. He describes how businesses move through three stages of knowledge:

1. Mystery – The phase where we don’t yet understand the problem or opportunity.
2. Heuristic – A rule of thumb or general approach that helps solve the problem but without guaranteed success.
3. Algorithm – A repeatable, systematic process that consistently delivers the desired outcome.

Martin argues that the most successful companies don’t just create new ideas (innovation) or optimise existing processes (strategy) - they move knowledge through the funnel.

They transform uncertainties into structured, scalable solutionsthat fuel their strategy and innovation efforts.

Innovation as a Choice Mechanism in Strategy

The innovation process starts by exploring mysteries - problems that don’t have clear solutions. Like when a company notices a shift in customer behaviour, new technology, or a bottleneck in its operations, but they don’t yet know how to capitalise on it.

Through a process of discovering, understanding, creating and testing, knowledge is gained, heuristics emerge and informs strategy. Further experimentation and knowledge development continues during the process of resourcing and implementing ideas iteratively.

Back to our Tesla example, when Tesla entered the EV market, the biggest obstacle wasn’t just making better electric cars—it was charging infrastructure. Tesla solved this mystery by investing in a proprietary charging network, creating a heuristic that addressed range anxiety.

Over time, this approach became an algorithm as Tesla refined its charging network expansion, optimised station locations, and scaled rapidly.

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Strategy as the Guide for Innovation

Once an organisation has identified a heuristic - a promising approach - it must decide where to focus and how to allocate resources.

This is where strategy comes in. A strategy helps prioritise which innovations to pursue and which to ignore, ensuring they align with long-term goals.

For example, Google’s early success in search was based on a heuristic - PageRank, a novel way of ranking websites. However, its long-term strategy was to dominate the digital ecosystem, moving from a heuristic (ranking websites) to an algorithm (a systematic way to organise the world’s information).

Google created an entire business model around it by turning its search approach into a scalable, repeatable process.

The Competitive Advantage of Reframing Strategy as Innovation

Companies that successfully integrate strategy and innovation don’t experiment endlessly - they move knowledge forward as they identify opportunities to create new value. They turn uncertain opportunities into structured advantages that can be scaled.

• Amazon started as an online bookstore (heuristic), but its strategy was to dominate e-commerce, leading it to develop a scalable logistics and cloud computing infrastructure (algorithm).
• McDonald’s wasn’t just a fast-food chain (heuristic) but a company that systematised operations into a repeatable, highly efficient process (algorithm).
• Netflix began with DVD rentals (heuristic), but its strategy led to streaming, content production, and an AI-driven recommendation system (algorithm).

In short, innovation can inform a great strategy and a great strategy is innovation. Strategy is innovation in disguise.

Practitioner Tips

1. Make Strategic Choices: Strategy is about what you do and what you don’t do to achieve your ambition. Be clear about who you serve, what you prioritise, and what you deliberately avoid.
2. Treat Strategy as an Ongoing Conversation: Strategy isn’t a one-time executive decision - it evolves through continuous learning. Engage teams at all levels, reassess priorities regularly, and adjust based on real-world insights.
3. Balance Exploration and Optimisation: Encourage curiosity to explore problems, run experiments to test ideas - all to build knowledge. Then, once something works, refine and optimise it.

By redefining our understanding of strategy and recognising its intrinsic link with innovation, leaders can steer their organisations toward sustained success in an ever-evolving marketplace.

That's all for this week,

Vaughan

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(**Not sure where to start with human-centred innovation? Consider joining 125+ other smart innovators on the DUCTRI Playbook waitlist- https://vaughanbroderick.com/the-ductri-playbook/ - a practical, proven human-centred innovation process)