Innovation – Aligning innovation with strategy
In the previous article I looked at the question of where to focus innovation. My approach is to firstly make innovation a mind-set and to always be on the look-out of how you can do things better, easier, faster or cheaper. If you get the little things right, the big ideas and innovations will follow. However, this “shotgun” approach will drive the incremental improvements of your organisations and create the culture of critical thinking and questioning the status quo, but this does not guarantee success, the business will still require a proper strategy to be competitive. So what do I mean by “strategy”? The strategy topic is just as popular and much debated as innovation. Defining strategy is a complex matter, so I am not taking it lightly, I just don’t have the space to discuss it in depth!
A number of different definitions for strategy exist. In its original military context, as defined by General Ulysses Grant in the 1860’s, strategy is: “the deployment of one’s resources in a manner which is most likely to defeat the enemy.” Mintzberg later extended the definition of strategy in a business context to include both strategy as a plan, “a consciously intended course of action” and as a perspective, “an ingrained way of perceiving and interacting with the world, a company’s personality.”
To me, an organisation’s strategy is defined as: a plan designed to achieve a particular long-term aim. This aim is usually expressed in the likes of profit, market share, return on investment, shareholder value, etc.
Aligning innovation with strategy
Innovation activities are inherently risky due to the uncertain nature of innovation. They demand significant commitment and often require the application of a large amount of resources. Furthermore, a decision by a company to pursue one line of innovation at the detriment of others could have a significantly high opportunity cost. The correct innovation approach is required in order to optimally use limited resources to achieve the company’s overall strategic objectives.
The term for aligning innovation efforts with the organisation’s strategy, is “innovation strategy”. Innovation strategy can be defined as a plan which will enable a company to achieve its long-term goals through the use of innovation. So, if strategy is defined as a guide for the allocation of resources in order to achieve the company’s objectives then an innovation strategy guides decisions on how resources are to be used to meet a firm’s objectives for innovation and thereby deliver value and build competitive advantage.
If the innovation strategy is not aligned with the overall business strategy, this process and these resources will not be able to contribute successfully to achieving the overall company goals and objectives.
This is great, but it’s all theoretical you say, what does this mean in practical terms? Let’s look at a short example. Two of the most well-known strategies are first to market and low cost provider, the former is where the business seeks competitive advantage by being the first to market with a new product or service, and the latter is where the business seeks a competitive advantage by offering lower price products and services. Aligning your scarce innovation resources and efforts to the first to market strategy will require a strong focus on creating new products, services and business models.
In the next delivery I will discuss the issue of knowing why you are innovating – the drivers of innovation. I conclude with a quote by Michael LeBoeuf: “A satisfied customer is the best business strategy of all.”