Making innovation strategy choices for the new normal

Executing on an innovation strategy depends on:  

1. alignment of innovation objectives to the overall strategic direction of the organisation
2. a balance the of short (today) and long (tomorrow) term goals or objectives
3. establishment of a focus on a narrow set of common and distinct capabilities that will enable the organisation to better execute their chosen strategy
4. readiness to manage an innovation portfolio (of ideas and investments) with Horizons

The pieces will fall into place.

Here is the full story

Organisations all over the world have had their business models impacted or completely disrupted by the effects of the COVID-19 crisis and had to quickly adapt, with business leaders are trying to find the best possible ‘new normal’ to guide recovery. 

We are now in the ‘new normal’. Humans and many organisations simply cannot operate as they have in the past. Low touch, digital-first, agile, agonising overbalance the short- and long-term investments. In pre-COVID 19 conditions, organisations needed to constantly do ‘better things’ to maintain or accelerate competitive advantage. Now, in the new normal, organisations are forced to do ‘new things’ and innovate to generate value for customers and survive. 

ISO/TC 279 ISO 56000 Innovation management - Fundamentals and vocabulary - 3.1.1 INNOVATION - new or changed entity, realizing or redistributing value 

‘New things’ like challenge your business model, pivot the core business to create new service offerings, utilise unused assets. Innovate.

Recent research from McKinsey & Company suggests that playing it safe may be a short-sighted decision right now. New times force us to make new choices. Now is the time to make some choices about how your organisation is navigating the new normal with strategies for innovation.

Now is the time to make some strategic choices about how your organisation is approaching the recovery from this crisis and prioritise efforts in innovation. 

Businesses can gain long-term advantages by understanding such shifts and the opportunities they present. In past crises, companies that invested in innovation delivered superior growth and performance post-crisis. Organisations that maintained their innovation focus through the 2009 financial crisis, emerged stronger, outperforming the market average by more than 30 per cent and continuing to deliver accelerated growth over the subsequent three to five years (see graph below). 

McKinsey & Company – Innovation in a crisis: Why it is more critical than ever –By Jordan Bar Am, Laura Furstenthal, Felicitas Jorge, and Erik Roth, June 17th 2020 

The disruption we are experiencing now is from which new business models emerge. For example, the sharing economy rose out of the 2009 financial crisis as technology enabled the creation of marketplaces for underutilised assets e.g. Uber and Airbnb

Now, more than ever innovation management is a necessary management practice to manage and enable change - make some choices your innovation strategy.

ISO/TC 279 - ISO 56000 Innovation management - Fundamentals and vocabulary 3.1.2.1  INNOVATION MANAGEMENT - Innovation management can include establishing an innovation vision, innovation strategy, innovation policy and innovation objectives, and organisational structures and innovation processes to achieve those objectives through planning, support, operations, performance evaluation and improvement.  

Strategy - "THE ESSENCE IS IN CHOOSING TO PERFORM ACTIVITIES DIFFERENTLY THAN RIVALS DO" - MICHAEL PORTER

Innovation Strategy

Without strategic direction, organisations are like Alice asking The Cheshire Cat for directions in Wonderland: 

Alice: Would you tell me, please, which way I ought to go from here? 

The Cheshire Cat: That depends a good deal on where you want to get to. 

Alice: I don’t much care where. 

The Cheshire Cat: Then it doesn’t much matter which way you go. 

Alice: …So long as I get somewhere. 

The Cheshire Cat: Oh, you’re sure to do that, if only you walk long enough.  

Without strategic direction (or plan) for innovation, you will end up walking and walking in the new normal, while your competitors are beating you, or until your entire industry is disrupted or even erased.

(Why make it up, go to the) recently published ISO/TC 279 56000 Innovation management - Fundamentals and vocabulary 3.3.4.1 INNOVATION STRATEGY - a strategy with regard to innovation 

Generally, the innovation strategy is consistent with the overall strategy and strategic direction of the organization, can be aligned with the innovation vision and innovation policy and provides a framework for the setting of innovation objectives.  

An innovation strategy generally defines the rationale for engaging in innovation activities and innovation initiatives and how those activities are expected to realize value for the organization and relevant interested parties. 

An innovation strategy can include the choices made in terms of what will be done, types of innovations to be focused on, who will be involved in terms of interested parties, what will be required in terms of resources, structures and processes, who will be responsible, when it will be completed, and how results will be monitored, measured, evaluated, protected, communicated and documented etc. 

Innovation Strategy Checklist: 

An innovation strategy must consider the following (in order of importance): 

1. innovation objectives are aligned overall strategic direction of the organisation 
2. has senior leadership support and resourced team 
3. defines the rationale/value proposition for engaging in innovation objectives 
4. provides a framework (Why, What, How) for managing innovation objectives 
5. types of innovations to focus on e.g. product, process, service
6. innovation objectives have key performance identifiers (KPI) to measure the value 
7. an engagement plan to communicate developments to the organisation 

Without an innovation strategy aligned to corporate strategy and with senior leadership supporting it, innovation efforts are doomed to fail. 

Does your organisation have an innovation strategy? 

We would like to impart three innovation strategies we use to drive innovation objectives and that are used by some of the world's top innovators.

Fundamental Innovation Strategies

2010, Global Innovation 1000: How the Top Innovators Keep Winning - Booz & Company’s annual study identified distinct innovation strategies companies used to create new products and take them to market. 

Innovation Strategies

• Need Seeker 
• Market Readers 
• Technology Drivers 

Choosing your innovation strategy is about identifying your organisation’s core capabilities - what you are good at, not everything. Align with corporate strategy and focus on the right strategy to deliver better business results and achieve competitive advantage.  

Companies with innovation strategies aligned with corporate strategy can be said to be "coherent" in their approach, and more successful than peers in innovation.  

Companies with coherent innovation strategies were found to enjoy 22% higher results than their less coherent industry peers. Being coherent is not the same as spending money on innovation R&D. And, results show - spending more on innovation (e.g. R&D) doesn't make your organisation more innovative or yield better results.

Source: Barry Jaruzelski,   Kevin Dehoff, How the Top Innovators Keep Winning. Booz & Company Inc. (PwC today) Strategy + Business, Issue 61, Winter 2010 

Therefore, choosing the right innovation strategy aligned with core capabilities is paramount. 

How to choose? Does your organisation scan its markets for real future needs rather than currently perceived demands? Are you good at it? Is it a core capability?

Need Seeker Strategy – actively and directly engage current and potential customer to shape new products and services based on superior end-user understanding and strive to be the first to market with those new offerings. 

Photo by Alex Block on Unsplash 

A Need Seeker Strategy means your innovation program will innovating with customers. Understanding the needs and desires of customers at pace and finding products to meet those needs and get them to the market before the competition does.  

An innovation objective that would be of value to this strategy is rapid ideation with Open Innovation, ideating with customers to gain deep insights and even technology trends to help determine how to meet the customer need.  

How to choose? Does your organisation systematically survey the market’s demand? Are you good at it? Is it a core capability?

Market Reader Strategy – watch their customers and competitors carefully, focusing largely on creating value through incremental change and by capitalising on proven market trends. 

Photo by M. B. M. on Unsplash 

A Market Reader Strategy means your organisation is culturally aligned to pursue and analyse customer behaviour cautiously and prefer to innovate incrementally, but their goal is to make sure they are delivering differentiated alternatives successfully. 

An innovation objective that would be of value to this strategy is investment research and development, and managing an innovation portfolio effectively, so the right innovations hit the market at the right time. 

How to choose? Does your organisation exploit new technologies? Are you good at it? Is it a core capability?

Technology Drivers - follow the direction suggested by their technological capabilities, leveraging their investment in R&D to drive breakthrough innovation and incremental change, often seeking to solve the unarticulated needs of their customers via technology. 

Photo by Kvistholt Photography on Unsplash 

A Technology Drivers Strategy would require an organisation to their technological prowess to develop innovations their customers may not know they need. Looking at scenarios of future technology trends at the corporate level, anticipating the issues of tomorrow. 

An innovation objective that would be of value to this strategy is divergent question ideation campaigns with business units, looking at new business models or new technologies and encouraging new ideas and diversity of thought. 

Need Seeker and Technology Driver strategy are critical for today’s business conditions and levels of uncertainty, to focus on competitive advantage. Historically, the Need Seeker strategy has been proven to be the most successful in terms of profit and growth in product innovation, for example, think Apple - all about the Need Seeker.

Choosing the innovation strategy will depend on several factors including, industry, category and resources available. However, it is common for innovation programs to use or combine the least two innovation strategies to meet innovation objectives. 

Work in Horizons

All companies have a conscious or unconscious strategy, leadership, culture, capabilities, and competencies they use to improve and innovate business internally (e.g. processes) and externally (e.g. value propositions). According to Steve Coley (2009), innovation work should be divided into three parallel Horizons, each one representing an S-Curve.  

• Horizon 1 (H1) is about incremental innovation in the existing business, extending the existing S-Curve of the company.  
• Horizon 2 (H2) is about expanding and building a new business (the next S-Curve) through innovations.  
• Horizon 3 (H3) is an explorative approach to future S-Curves, to be commercialized in H2, ending up in H1. 

The insight of dividing innovation work into different Horizons in order to manage it effectively is, in my experience, often well-known at C-level. At the same time, large H1 projects are prioritized to the extent that they cause internal traffic jams among projects that are sharing resources. This results in projects that are too numerous, too big, and often less value-creating than they should have been. Instead, companies can utilize common resources more optimally, improving and caring for today’s profit (H1), developing tomorrow’s profit and market shares (H2), and learning for the future (H3). 

In Summary

Executing on an innovation strategy depends on:  

1. alignment of innovation objectives to the overall strategic direction of the organisation
2. a balance the of short (today) and long (tomorrow) term goals or objectives
3. establishment of a focus on a narrow set of common and distinct capabilities that will enable the organisation to better execute their chosen strategy
4. readiness to manage an innovation portfolio (of ideas and investments) with Horizons

As Magnus Penker says: Build on your existing strengths, compensate for your weaknesses. Build innovations for the future, not just for now, and don’t charge ahead based on the strength of an idea alone. Successful innovators don’t try to be world champions in what they know they are not yet good at. Assess, align, understand and act on your capabilities and competencies and align with your leadership, strategy and value system (which is the foundation of culture). Be curious about how new technology can create new possibilities internally and externally. Finally, do not buy into oversimplified messages. 

Where to start? 

If you're an innovation leader or manager, get buy-in from senior leaders defines the rationale/value proposition for engaging in desired innovation objectives – “new thing” aligned to core capabilities to realise value today and in the future. 

Conduct a Situational Analysis to obtain the context of your organisation and validate innovation objectives. You can engage key stakeholders and level-set on the internal perspective, existing strategy and external factors impacting your current situation. Once you’ve completed this analysis, it’s time to revisit or create an innovation strategy, with a strategic choice – Need Seeker, Market Reader or Technology Driver. Your innovation strategy and resulting portfolio objectives need to be revised and communicated to the organisation. 

Or, take our InnoSurvey innovation management assessment to (quicky) obtain a 360-degree view of your readiness to innovate, capability strengths to leverage and weaknesses to control - make decisions based on data, to design the right innovation strategy. 

If you're a senior leader - the power is with you...only senior leaders can orchestrate the alignment with corporate strategy and must take prime responsibility for the objectives, framework, resources and cultural behaviours that shape how an organisation search for innovation opportunities, synthesizes ideas into concepts and product designs and selects what to do. 

Good luck!

To find out more information, feel free to contact me: [email protected] or let’s meet: https://calendly.com/aj-kennedy

And finally, join our webinar on July 16th 10-11 am AEST “Making innovation strategy choices for the new normal” with Planview Inc. Register HERE