Innovation – Aligning innovation to strategy

Background
I am continuing with the discussion of aligning innovation efforts to the organisation’s strategy. Strategy is a topic of great interest for business leaders and many books and articles have been written on the subject.   The intent of this article is not to go into a detailed discussion of strategy, but the focus is on innovation, and how your innovation efforts should be guided by the organisation’s strategy.
Aligning innovation to strategy
Although the focus here is innovation, I need to define strategy to put it into context for linking it to innovation.  I prefer the very short definition of strategy: The plan of action that is designed to achieve future goals.  In essence, it is making an integrated set of choices that collectively position the firm in its industry so as to create sustainable advantage relative to competition and deliver future goals.  It involves the choices around: what is your winning aspiration; where will you play; how will you win; what capabilities need to be in place; and what management systems must be instituted?
Having a strategy that is coherent with the evolving external market then enables business leaders to make good decisions in the present that will likely lead toward achieving their goals. As the focus of strategy is on grasping the essence of a constantly changing situation, and on anticipating the future, and the goal of innovation is to create the future, innovation is clearly an instrument of strategy. As a key driver of adaptive change from within, innovation is an essential creator of future value for every organisation. From the strategic viewpoint, then, innovation is the means of gaining advantage, while from the operational viewpoint it is often the means of survival, the means of generating new efficiencies that lead to new profits. Strategy is about setting out the vision and goals for your company, and the long term objectives. Innovation is about finding new opportunities or new markets and creating new products, services or business models. Innovation should be in support of, and an enabler to strategy.
Obviously you are now asking, but how do all this work in practice?  Let me take a concrete example to illustrate the concepts described above.  Let’s say your business’ strategy is to be the market leader in your product segment (winning aspiration), in the SADC region (where are you playing), and you will win by manufacturing and distributing the highest quality products at the lowest price (how will you win).  So you need to have at least the following capabilities in place, and be very good at it: quality assurance, distribution, cost reduction and efficiencies in manufacturing and distribution, to name a few.  Your instituted management systems must revolve around these capabilities: a strong quality assurance department, distribution network and information technology (proper ERP system) and manufacturing management systems (theory of constraints, lean manufacturing, etc.). Now that your strategy is clear, where will you focus your innovation efforts?  That is easy!  Improving quality – in products, manufacturing systems and maintenance and support functions, reducing cost (remember your value propositions are quality and lowest cost) and new products that will suit the SADC market.

Next Time
I hope I have convinced you that your innovation efforts should start with an alignment of your innovation strategy with your business strategy.  This answers the “why innovate” question and attending to this first, will lay the foundation for the what, where, how and who questions of innovation.  Next time I will discuss what an innovation consultant does, as I have received a lot of questions on this matter.  I leave you with some food for thought from the legendary Jack Welch:  “Trying to define what will happen three to five years out, in specific, quantitative terms, is a futile exercise. The world is moving too fast for that. What should a company do instead? First of all, define its vision and its destiny in broad but clear terms. Second, maximize its own productivity. Finally, be organisationally and culturally flexible enough to meet massive change”.
Sources:
Martin, R. 2013. Don’t Let Strategy Become Planning. Harvard Business Review.
Morris, L. 2011. The Innovation Master Plan: The CEO’s Guide to Innovation. Walnut Creek, USA: Innovation Academy.
Phillips, J. 2009.  Do you need an innovation strategy? Online: http://innovateonpurpose.blogspot.com