Building effective innovation strategies
Companies investing in innovation strategies:
innovation opportunities offered by the transition to net zero.
Disruptive innovations rarely happen accidentally. Successful innovations are the result of effective innovation strategies. An innovation strategy is a detailed strategy outlining how to integrate new technologies into a company’s product and service lines.
Successful innovation strategies are what separates tomorrow’s leading companies, from those that get left behind. As new technologies proliferate, so do the opportunities for new players to enter the market and get ahead. This could help explain why long-term market dominance is hard for many companies to achieve. On average, companies today spend over 30 percent less time on The Standard and Poor 500 Index than they did 60 years ago. The pace of change continues to increase, opening the door to new products and services.
Companies that see themselves as “pioneers” or “first-movers” put innovation strategy at their core. To be the first through the door, you have to get many things right. The followers can copy the pioneers, erring on the side of caution. But companies that are fast-followers have the biggest potential upside. These organisations can learn from the mistakes of the pioneers, but they must move fast to stay ahead of the other followers.
IPhones sold in a decade
of Nestlé’s growth comes from products launched in the past three years
Microsoft's investment into OpenAI
Behind every innovative product or service is a robust innovation strategy. Take Apple, which invented the iPhone, which went onto sell 1.2 billion units in the space over a decade. The product was revolutionary, but one that reflected changing consumer tastes and technological developments of the time. Consumers were already seeking new gadgets they could use at home and on the move. The Walkman had already proved an instant success, ushering a new era of pocket-sized devices. So combining phone calls, computers, internet connectivity, and flatscreen TVs into one device doesn’t seem such a leap in this context.
At the same time, enabling technologies were emerging. Li-ion battery technologies were shrinking and achieving improvements in energy density. While new communication standards were driving developments in 2G and 3G communication technologies, LCD screens were becoming cheaper and thinner, and touchscreens more sensitive due to better electrode printing technologies. Apple’s innovation strategy team was able to connect the dots between emerging innovations and what functions they could enable. While Apple’s success is partly luck, it is largely down to a well-planned and executed innovation strategy.
Innovation is an internal engine powering change in every organisation. Often, management and strategy teams have clear ideas where they want to take the company, but don’t really care how innovation will help them to achieve it.
On the other side, the Research and Development (R&D) department wants its inventions out in the market, regardless of customer demand. The goal of the innovation strategy is to ensure the innovation engine runs smoothly and channels the right innovation in the right direction.
Innovation programmes lack strategic direction, when compared to innovation strategies. Moreover, an M&A strategy is no replacement for an innovation strategy. With an M&A strategy, the direction is established, but improvements to the offering are derivative. This works for followers, but not for the fast-followers, nor pioneers. In this context, ensuring your framework aligns all three areas effectively is what makes a good innovation strategy.
There is no one framework that fits all, and every company has to work out what works in their own context. At CamIn, we work with clients to help them develop their innovation strategies. A good place to start is with defining and prioritising goals. This is dictated by the strategy team and is based on the overall company direction. Goals are broadly split into three categories: internal optimisation, improved products/services, and new product/services.
Next, understand what exactly what are the key success factors to achieve these goals. If you are launching a new product, what customer demands are you trying to satisfy? What value chain you want to occupy, what capabilities do you have access to, and what budget you have? It is essential to analyse the innovation space and understand what new innovations are emerging, alongside their strengths and weaknesses, what new capabilities they enable, and when they can be commercialised. The next step is to shortlist use cases that will help you achieve your goals and connect the enabled functionalities with your goals. It's important to ensure the enabling technologies will become viable within your desired timeframe. Once this is agreed on, work on your development strategy and set a roadmap for developing the use case into a product or a process for internal optimisation.
