More than 80% of leaders at large corporations believe innovation is crucial for business growth. And yet, many companies have no innovation strategy.
Technology and digital disruption continue to advance at breakneck speed, leading all industries into a future where business agility counts just as much as having an experienced C-suite.
It doesn't matter what industry you operate in now—the choice is the same for all companies:
Innovate or get left behind.
Without a solid plan that maps out how you will achieve your goals and establish a sustainable business built to adapt to a rapidly-changing digital landscape, you're bound to struggle.
In this article, we'll find out what an innovation strategy is, why it matters, and then we'll give you the ideas and inspiration to start innovating at your company.
What is an Innovation Strategy?
An innovation strategy is a clearly-defined plan of structured steps a person or team must perform to achieve the growth and future sustainability goals of an organization.
Innovation aims to create original value, such as new solutions to adapt in changing industries or solve impeding social, health, or economic challenges. A strategy is a plan that details precisely how you will bring your vision into reality.
Essentially, a strategy acts as a heuristic that we can rely on when facing tough decisions. Ergo, an innovation strategy provides people with a framework for critical decision-making relative to company innovation, such as:
- In what areas will we invest?
- How much will we invest?
- Who will make investment decisions?
- What capabilities will we need to develop to support our investments?
- What capabilities can we not build, which we must then acquire or form a partnership to provide?
All of these questions are long-term decisions. When devising an innovation strategy, we must consider our goals and the potential for change over several years.
Why Are Innovation Strategies Important?
Typically, the most effective business models, markets, and products follow a similar growth cycle, often visualized as an S-curve, where diminishing returns set in sometime after the initial growth trajectory.
This slowdown in growth is inevitable, and yet, many companies are taken off-guard. We can't simply ignore these decisions. If you decide to wait until there is a lull in growth or sales until you gather more information, it may be too late.
In 2008, Blockbuster CEO Jim Keyes said, "Neither RedBox nor Netflix are even on the radar screen in terms of competition."
This bold claim came even though Blockbuster had lost 75% of its market value between 2003 and 2005.
By 2010, the DVD rental store declared bankruptcy, succumbing to the indomitable rise of Netflix and the streaming television era.
Kodak fell to a similar demise. As smartphones became ubiquitous, Kodak could no longer compete, and in 2012, the company once synonymous with photography filed for bankruptcy and vanished from the camera industry.
These are, of course, highly visible and consumerist examples, but the same dilemmas befall more naunced areas is every industry, whether it be in healthtech, security, sustainability, or infrastructure.
Nothing grows forever, and you can never really know when the inflection point will hit, which is why it is best to always be ready. In other words, you should make innovation a continuous process. Otherwise, it's only a matter of time before revenue starts tumbling.
Benefits of an Innovation Strategy
Holding on to traditional practices just because "that's what we've always done" is not a strategy for success. That rigid approach is guaranteed to fail in the face of disruption, as proven by Kodak and Blockbuster.
With that in mind, here are four benefits of an innovation strategy:
Improve existing products
When selling any product or service, you must consider the three levers of the value proposition:
- Benefits and features
- Target customers
A good innovation strategy will experiment with these levers, helping sales and marketing teams to reinvent or revert the value proposition of existing products. In doing so, innovation helps to bring more value to the customer, and ultimately, more revenue for the business.
Develop new products
For many, the most appealing benefit of a business innovation strategy is its capacity to generate entirely new ideas. Innovation can birth new products and services to add to your existing lines, or it may open the doors to target new markets, or solve growing societal problems.
By analyzing the customer journey of different consumer types, you can develop a better understanding of purchasing behaviors. This research helps companies identify the key factors that motivate people to make purchases and discover new opportunities by finding markets or products that need improvement.
The three variables of profit are price, demand, and costs. For any business strategy to be deemed successful, it must increase profit by reducing costs or raising prices or demand.
Earnings innovation encourages businesses to seek out ways of maximizing their profit. Quite often, the most effective way to do this is by expanding your customer base.
Whether you're creating a new product or improving your existing ones, the impact on your earnings should be a top priority of your business innovation strategy.
Increasing revenue is not the only way to drive profits, as you can also use innovation to reduce costs. When you apply new practices and process throughout the organization, you can optimize internal operations in many ways, such as:
- Switching from legacy offline systems to cloud storage
- Moving to paperless systems for all records and communication
- Using live chatbots instead of human customer support staff
Through constant innovation, it's possible to streamline workflows and teams so that you spend less on administration and more on activities that generate a higher return on investment (ROI).
9 Key Pillars of a Business Innovation Strategy
Creating an innovation strategy is a vital step that gives your team the understanding and directional insight into how individual, departmental, and organizational goals come together to deliver the business objectives.
Here are 9 pillars of an innovation strategy that enable a company to maximize its potential:
You can execute an innovation strategy using one of two models—business model innovation or leveraging existing business model.
- Business model innovation is the process an organization uses to adapt its business model to deliver more value to its customers. By making changes to its value proposition and the underlying business model, a company can gain a competitive advantage.
- Leveraging Existing Business Model focuses on continuous improvement of core business, rather than seeking to build new business models.
Once you have decided on your preferred model, you can experiment with the concepts below:
Intrapreneurship is the practice of enabling employees to act as entrepreneurs while they work within a company.
By empowering individuals to think, act, and create their own ideas, a company benefits from a widespread internal culture of ongoing innovation. An organization can provide resources and support to intrapreneurs, helping them launch startups within the organization.
3. Corporate accelerator
A corporate accelerator is an innovation event or program funded by a large enterprise, which typically offers aspiring entrepreneurs the chance to acquire seed capital, mentorship, and important connections.
These programs usually culminate with a demonstration day, where startups pitch their ideas to the host corporation for the chance to secure investment or a partnership.
By including a corporate accelerator in your innovation strategy, you get the chance to build your network with promising new talent in your industry. Moreover, there is an excellent chance you will discover startups and concepts that align with your own business needs and goals.
4. Innovation labs
An innovation lab is a business department that provides a base and supporting resources for startups or R&D teams to work on new ideas that could disrupt the current market.
While these labs may operate independently from the parent company, it's also possible to house an innovation lab within the main company building and staff it with existing employees.
5. Open innovation program
The traditional model of research and development relies on internal resources and expertise. Existing employees work together to generate, manage, and sustain new business ideas and retain all information within the company, usually within the R&D department.
Open innovation takes a novel approach by opening the company's doors to external input, welcoming experts, researchers, and bright minds from outside the company to come and share their ideas.
6. External accelerators
An external accelerator is a little different from an in-house corporate accelerator, as your company will not cover the full costs of running the program. As such, this is a low-risk tactic in an innovation strategy, with the potential to deliver fantastic rewards. Like a corporare accelerator, purview to new startups and concepts that align with business needs and goals are exhibithed, but additionally there's the benefit of opening your eyes to advantageous approaches that were not intially apart of your goals.
By becoming involved, you can actively participate in advancing startups and focusing on particular solutions that appeal to your business, making this type of accelerator a worthwhile venture.
The ideas are just the beginning, but it's only through interaction and discussion with subject matter experts, researchers, and other innovators that you can successfully bring ideas to life.
Having more conversations around an idea with various outside sources makes it easier to identify potential issues and iterate a basic idea until it is something genuinely worth producing.
You should seek praise and criticism at this stage, as it's important to challenge the concept and debate the pros and cons in-depth.
Approximately 4 of every 5 employees has an idea to improve the company. Finding ideas is not a challenge—gathering, analyzing, and implementing the best ideas is the struggle for many companies.
Many companies fail because they lack an effective system to take a simple idea and turn it into a practical process that will deliver results. In other words, they don't have an innovation strategy.
It's important to explain your ideation processes to all employees to be aware of how the company captures ideas. When you have this system in place and encourage people to contribute, it's easier to collect and organize new ideas.
You can't manage what you don't measure. And so, one of the most important pillars of your innovation strategy is a plan for how you will measure success.
Think about your goals and the most relevant metrics to track. For example, if your goal is brand awareness, you could track social shares, website traffic, and email subscribers.
With every new idea, monitor its progress, and gauge performance by taking periodic measurements of your key metrics. It's not always easy to measure innovation, but doing so from the start allows you to determine whether your efforts are successful.
Innovation Strategy Examples
We can see innovation strategy examples in every industry, as companies strive to get an edge in increasingly competitive marketplaces.
As the rise of café culture birthed hipster pop-ups and independent shops, the dominant chains began to lose ground. Keen to avoid a Kodak moment, Howard Schultz jumped to action. The Starbucks CEO invited store managers from all over the world to come together for a conference to redesign the café experience.
As a leader in technology and sustainability, Bühler invests up to 5% of its turnover every year in research and development. To optimize these efforts, in 2016 Bühler identified five core topics that are decisive for driving change:
- Food and Feed Safety: spend 50% of food relevant R&D projects with focus to improve food and feed safety
- Energy, Waste and Water Reduction: reduction by 50% in the value chains of their customers by 2030
- Mobility: make lighter cars with die-casting solutions and create more efficient batteries for electric vehicles
- Nutrition: spend 20% of food relevant R&D projects with focus to improve nutrition
- Digitalization: improve transparency through digitalization and collaboration
By working with an external accelerator, in the case MassChallenge, Bühler received early access to emerging, high-impact technologies and startups across their five core initiatives.
In 2018, Bühler teamed up with Givaudan to support Legria, a new natural sweetener made from waste streams, supporting their waste reduction initiative. The new business model was made more public-appealing by having two companies in support of it, however maintaining economic independence of each other.
The dating app, Tinder, was the first of its kind to gamify dating. The development team approached potential users at college sororities, recruiting signups from a largely female audience before pitching the app to men in the same colleges' fraternities.
With a personal touch, the company's clever innovation strategy quickly grew the app's user base, as many college students joined because they knew other people on the app.
Sometimes, people can be concerned about offending with their reviews online, and therefore, they may not be totally honest.
Airbnb set 14-day deadlines and implemented a double-blind review process, so neither party can view the other's review until both have been completed. This change paved the way for more spontaneous reviews and more candid, detailed feedback.
Airbnb turned reviews into a bonafide trust factor on their site with this simple move, which people use to make booking decisions. In the long-term, the strategy has helped grow the authority of the website and company.
The growth of the software-as-a-service (SaaS) industry tempted many customers away from traditional hardware technology companies. In the cloud age, IBM knew change was needed and decided to take a startup-like approach to innovation.
In 2014, IBM launched a growth hacking team to explore new ideas and tap into new markets through data-driven creativity. Now, the legacy tech corporation operates with a collection of lean, startup-sized teams within its workforce, encouraging team members to work in an innovation lab style to test new marketing strategies.
Our vision for a better company, product, or value for the customer may feel clear, but how we get there isn't always so simple. Faced with market trends, changes in consumer preferences, new technology, and disruptive competitors, companies will need a blueprint to stay on track.
An innovation strategy goes beyond simple tactics like campaign ideas and marketing ploys to develop the company's mission, vision, and unique value proposition against this ever-evolving landscape.
Nowadays, it's no longer an option.
"Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat." - Sun Tzu
MassChallenge gives partners the tools to meet this moment head on while realizing results that make the difference for their businesses. See how companies like MassMutual, Barry Callebaut, Columbia Threadneedle, and Elta Systems have partnered with MassChallenge to drive their innovation.
Join the MassChallenge program today to give your corporation the edge in the startup era.