An innovation strategy is a common innovation mission and a detailed plan that aims to create new value, for which customers are willing to pay. It includes a set of policies or behaviors geared toward achieving future organizational growth.
The most innovative businesses understand that big, new ideas don’t just happen. Instead, innovations arise out of environments and procedures that are deliberately designed to facilitate their development.
Why innovation strategy is important
An effective innovation strategy can:
- Clarify priorities and goals. An innovation strategy outlines the goals of the organization’s innovation activities and helps focus efforts on reaching those goals.
- Foster alignment. With a plan in place, diverse groups within an organization will all be working toward common goals rather than pursuing their own individual priorities.
- Keep a business from resting on its laurels. Even businesses that start out as innovators must continue to innovate in a strategic way, as copycats and innovative competitors are likely to take market share over time.
- Help a business achieve long-term success. Without ongoing innovation, a company is unlikely to gain (or maintain) competitive advantage or keep customers engaged over the long term.
Types of innovation strategy
Some innovations are based on technology development, while others are based on innovative business processes. Both types are valuable and important. An innovation strategy should include the types of innovation that are priorities for the business. Researchers say there are four main types of innovation:
This is an innovation that builds on a company’s existing capabilities and serves its existing customer base, such as a new version of an existing product.
A disruptive innovation is one that presents a new business model that challenges or disrupts competitors’ business models. Amazon’s decision to offer free shipping, for example, pressured other e-commerce companies to offer free or reduced shipping.
Radical innovation requires a technological innovation that can still fit within the existing business model. Companies like Infarm, which grows produce inside supermarkets with remotely controlled farming technology, uses the legacy supermarket model to provide fresh local produce to customers.
A combination of both new technology and a change in business model, architectural innovation can be the most challenging to undertake.
4 steps for developing an innovation strategy
Align innovation with business strategy
Successful innovation efforts must be in step with your overall business strategy. To set the stage for effective innovation, individuals across the organization must understand the corporate goals.
That includes understanding the market in which the business plans to work, as the best innovations respond to the needs of customers or potential customers. Your innovation strategy must also be informed by an understanding of your competitors.
Also, keep in mind that all the best products and business models travel through a predictable, S-curve cycle of growth. A successful innovation won’t experience growth forever. When the new begins to wear off and diminishing returns set in, that’s the time to introduce the next innovation–and your strategy should plan for that.
Determine your value proposition
Your innovation strategy should answer the questions of what unique value you will bring to your market and what types of innovations will allow you to capture that value and build a competitive advantage.
To answer those questions, a company must understand its core capabilities.
Can you create value by saving customers money and time? By making them willing to pay more for your product or service? By providing a greater benefit to society? By making your product better performing, more convenient, more durable or less expensive than the current options?
Learn the unmet needs of your customers
The most successful innovations will meet needs of the customers you want to serve–and to develop those innovations, your business must understand the needs, sometimes even before the customers realize they have those needs.
Your employees are often closest to your customers, and they can be an important part of the strategy to discover unmet needs.
Consider crowdsourcing input from employees to help uncover their knowledge of customer needs. This can be a valuable approach to gathering information about where to focus your innovation efforts.
Assess and adjust
The best strategy plans are always flexible. Take time to assess the effectiveness of your innovation strategy by crowdsourcing among employees. This step can provide you with a sustainable feedback loop to gauge the validity of your plan and adapt it as necessary.
As customer needs and market needs change, be willing to adapt your innovation strategy to better fit reality. Continue crowdsourcing for employee input and adjust your strategy to meet current needs.
Innovation strategy examples
Apple builds innovations by acquiring startups and partnering with other companies to develop new products, such as a partnership with Volkswagen to produce driverless shuttle vans for employees. The company also has an internal accelerator that leverages Apple employees to push forward new research projects, such as Titan, an electric car project.
For almost 200 years, Corning has repeatedly introduced new innovations and transformed its business model. It continues to succeed by investing in ongoing research at its R&D laboratory, where researchers from diverse disciplinary backgrounds can collaborate, applying science to industrial problems.
Polaris implemented an automated system for crowdsourcing new ideas from employees, making the process of ideation to execution 80 percent faster. The crowdsourcing innovation initiative has resulted in four cutting-edge vehicles, such as the Polaris Slingshot, that are all bestsellers and award winners in the ATV market.
In addition to an innovation lab that creates new hardware devices such as the Kindle and Echo, Amazon also encourages all employees to pitch innovative ideas. For example, an employee spontaneously pitched the idea for Amazon Prime in a memo, and leaders provided internal funding to make it happen.
Google offers innovation classes for employees and runs an R&D facility that has launched products like self-driving cars and Google Glass. But the company also looks to bring in innovations from external sources, with GV, its own venture capital fund for innovative startups, and an incubator for promising entrepreneurs.
Realize the results of your innovation strategy
Brand-name companies aren’t the only ones who can benefit from an effective innovation strategy. Businesses at every stage can more effectively accomplish future growth by developing an innovation strategy that fits their unique goals and competencies. Learn more about how an effective strategy can help a business realize the ongoing rewards of innovation.