Innovation Strategy
Tags: #🌲evergreen #💎hidden-gem
Links: Innovation | Business Strategy
Sources:
The set of policies that a company uses to develop innovations.
The Innovation Strategy outlines an Innovation System, which is a process that takes care of the following:
- searching for problems and solutions
- transform concepts into products
- select projects for funding
Problems with Innovation Strategies
Often companies fail to align their innovation strategy with the overall business strategy. This leads to a host of problems. Firstly, the company may end up with opposing drives that mean that the innovation arrives late or fail to generate value for the company while wasting resources.
Another issue is that companies may fail to adopt an effective strategy. They may try to implement and glue together many different approaches that don't lead anywhere. Morever, when trying out a strategy from another company, they use it without taking into account the differences in business goals and competitive landscape.
How will innovation create value for potential customers?
Every desired goal will require a different strategy that takes time to evolve. So it is important to make it define it as a first step.
How will the company capture value from innovations?
When an innovation appears it is usual that immitators quickly follow and capture market share. Likewise, other companies in the supply chain may end up capturing some value share.
Companies can address this in two ways. The first is to hold a strong position that prevents migration to rivals. This may involve levaraging Complementary Assets, unique capabilities and products. This can be captured as a Unique Value Proposition. Apple does this by making their products part of an ecosystem. Corning, on the other hand, makes contracts that inflict a cost when their customers switch to another supplier.
The other way is to keep innovating at a pace that immitators and competitors can't keep up.
What types of innovations will allow the company to create and capture value? How to allocate resouces for each type?
The idea here is to use the Innovation Landscape Map to characterize potential innovations and then make decisions on how to invest in each one.
Managing Innovation Strategy Trade-offs
Every innovation strategy has inherit trade-offs and thus require understanding and deliberate design.
On Crowdsourcing
A strategy often employed is to post a challenge on platforms like InnoCentive, often with a financial reward. Another form of using the crowd is to create an open-source project.
Even though research suggests that crowdsourcing leads to faster and more efficient problem solving, it is not perfect for every kind of problem. It works best when solutions that can be simply evaluated, otherwise it becomes costly. Moreover, you want modular problems so people don't need to understand the big picture.
On Co-creation with the User
Usually collaborating with the user can reveal a lot of insights. In some sense, it is at the heart of Human-centered Design. However, collaborating too closely can close doors to disruptive innovation. @Steve Jobs used to disregard market research for this reason.
The customer don't know what they want.
On Demand Pull vs Supply Push
Both perspectives have limitations. Demand pull can be constrained to existing needs and the customer's imagination. While supply-push can be useful when the market does not exist yet.
For some companies one strategy may be much better than the other. Some pharmaceutical companies don't try to predict the market because drug discovery takes too long for the information to be accurate.
On Phase-Gate Model
It usually works well when both the technology and the market are known (aka Routine Innovation). Thus, it is not ideal if you want to explore new markets and technologies.
The role of leadership
The leadership job is to create a high-level plan for allocating resources along the Innovation Landscape Map that reflects the strategy for creating value through innovation.