Why do companies innovate? If you ask this of any company leadership, they will offer many reasons: “Because of our competition. Because of inspiration or motivation. Because our employees or shareholders want it.”
The problem is, many leaders do not think about innovation during strategy creation. It’s a huge missed opportunity. Leaders often want innovation, but lack strategy, or have solid strategies without innovation threaded throughout. Both are mistakes—successful innovation must be intentional and solidly founded on good strategy.
Strategy defines the direction and purpose of business culture, operations, marketing and sales, and products and services. It is the why, who, when, and how you create value.
Innovation, on the other hand, delivers the what—the actual value. An organization cannot create value for its customers without innovation, and innovation cannot exist functionally, intentionally, or successfully without strategy.
How do you know you have an innovation-friendly strategy? These four guidelines can help you test if you have a healthy connection between strategy and innovation.
Clearly define the who and the what.
Every strategy should specify who to deliver value to, whether it’s your customers, your employees, your shareholders, or society in general. Good strategy shows how to create value for each of these four constituents through the four types of innovation: new products, improved processes, position in the marketplace, or paradigms repositioning how the organization is viewed.
To create an innovation-friendly strategy, these four types of value creation should overlap with the four groups that benefit from that value. Identify exactly how they will each benefit from the different types of innovation and when. This will ensure innovation is embedded throughout your strategy and ultimately decide the pace of innovation in the organization and the resources required to meet those goals.
Don’t rely on forecasts and happenstance.
One of the biggest mistakes leaders make is believing that innovation will happen automatically, or that it is an accidental occurrence. Often, a company without innovation goals will see an opportunity in the market and react—leading it to abandon previous goals. This affects each of your four beneficiaries. Instead, consistently plan for innovation as a part of your strategy.
At the same time, you cannot rely on market projections and forecasts to know what will deliver future growth. Most of the time you will not even have obvious forecasts because innovation itself is surprising and unpredictable, offering unexpected outcomes as the organization learns and its employees become more engaged in the process. Rather, a strategic innovator will look at the growth of his or her customer base and the growth of value delivered to the market, rather than simply relying on unclear forecasts.
Exercise discipline and futuristic thinking.
Planning for innovation consistently requires discipline. As you think about creating new value, you need to exercise discipline in delivering that value—meaning commitment to a budget, to time set aside for innovation and ideation, and even to the way you communicate with your team about innovation.
For example, you cannot over-promise innovation. Your strategy will show clearly—if you are defining the who, what, and when—that innovation will take longer. It will show in your budget when you will reach each stage. Discipline yourself and your team to create and stick to scheduled work plans, to develop communication skills and other tools, to build innovation into your strategy.
Consider both operational and innovation mindsets.
Every good, executable strategy helps guide and guard the right culture for innovation. This is often missed during strategy creation. Most have an operations-focused mindset, and while every strategy needs an operational, or day-to-day, culture, it should consider a culture motivated by growth and innovation.
Unfortunately, there is often discordance between the two. A wholly operational culture becomes the enemy of growth and innovation. To avoid this, clearly delineate culture across your strategy so that it reflects both operational and innovation mindsets. This will impact positions within the organization, the kind of talent your company attracts and keeps, and the kind of markets and customers you serve now and in the future.
Strategy without innovation leads to stagnation and lost opportunity for the business. Strategy with innovation leads to the growth, success, and sustainability of the organization—a company that is futuristically minded and solves real customer problems. Follow these four guidelines and your company can build innovation into every strategy, ensuring the successful creation and delivery of value for your customers, employees, and shareholders. Dismiss them and risk the failure of strategy and innovation initiatives alike.
Pre-order your copy of Optimizing Strategy for Results: A Structured Approach to Make Your Business Come Alive to learn more about how strategy and innovation work together. Coming in February 2022. | Header Photo by Marten Bjork on Unsplash.
