A topic that seems to be popping up everywhere right now, particularly in the turbulent world we find ourselves in. A world which presents both threats and opportunities on a near-daily basis.
One thing about innovation that needs to be known is that it’s essential you know how to make it pay off for for your company, for your customers, for your stakeholders and for your employees. Having spent more than 11 years in the construction industry I have seen firms plan, implement and utilise innovation activities in various ways, both from within organisations and as an outside observer.
From bitter personal experience, innovation can sometimes feel like little more than a corporate buzzword, leaving you sapped of all energy and enthusiasm, and resulting in very little positive change. Fortunately, I have also experienced the other end of the spectrum where innovation was the lifeblood of the organisation and became the driving force behind value creation, loyal customers and engaged employees. I prefer being involved in the latter, wouldn’t you?
So, why is there a difference? The first thing to acknowledge is that innovation is not simply a flash of divine inspiration. The textbooks will tell you that innovation is creativity which is successfully exploited. Yes, that’s right, creativity needs to be successfully exploited, otherwise, it’s just an idea. The key message here is that innovation doesn’t happen simply by accident. It needs intention as well as inspiration.
Yet, how do we give intention to innovation?
In my experience, the most important aspect of successful innovation is to link it to your strategy. And I don’t mean a cursory nod to one another, they need to be bosom buddies, near inseparable. We’ve seen this work in all of the most successful businesses across the world, regardless of sector, industrial age, position in the value chain or ownership structure.
Whether it’s Ford, Apple, Shell, GE or Gore, the link between innovation and strategy has, at one time or another, been incredibly strong. The relationship between innovation and strategy, and it really is a relationship, works both ways.
Let me explain. If your business has a clear strategic direction and core strengths, you can use them to direct your innovation activities. You’re able to seek to develop new products, services and ways of working that utilise what you are good at and help you along in your chosen direction. This will allow you to uncover complementary innovations that firmly fit with the underlying vision of your company and support its ultimate aims. That’s not to say that all innovations will be successful and hugely profitable, but the chances of success are greatly improved.
When firms don’t use their strategy to direct innovation, their new products and services may not align with the core strengths of the firm, resulting in offerings that can become confused and contradictory. Whilst this might not lead to the ultimate failure of the organisation, it clearly won’t help to retain and attract new customers and employees.
The beauty of the relationship between strategy and innovation is that it’s a two-way street.
As well as strategic intent being used to direct innovation activities, new innovations can inform and challenge strategic thinking. For example, a firm may have a clear strategy which does not consider a particular product or customer group to be fruitful. However, an innovative idea could germinate the seeds of a new business stream in this area.
Does the firm ignore the idea because it doesn’t feature in their strategy? Of course not, otherwise it might miss out on significant opportunities. Instead, it looks to understand how the new idea might fit with its core strengths and capabilities, and assess how it could support the firm to move forward in its chosen direction. Yes, there may be some overlap or seeming contradiction with part of its offering, but the firm can make an informed choice about how to adjust and forge ahead.
The challenge of creating a strong relationship between innovation and strategy is crucial because the world doesn’t ever standstill. We, our companies, competitors, customers and stakeholders are always changing. We need to be open to these sometimes subtle, sometimes dramatic changes, in order to make the most of the opportunities around us.
So, there should be a constant, iterative conversation between innovation and strategy, and whilst I am far from an advocate of short-term strategies (in fact I am completely the opposite), they need to inform one another.
Which one is more dominant, innovation or strategy?
Well, that’s anybody’s guess. As someone who once taught me liked to say, ‘it depends’. It depends on you, on the company, the idea, the situation, the opportunity, the market… the number of variables it depends on is endless. There are far too many innovation and strategy approaches, models and frameworks to consider the nuanced inter-relation between each of them.
What is most important is to actively consider the implications of innovation on strategy at a high level, and vice versa. Going into too much detail will simply lead to a short-term and blinkered approach which won’t create much value.
However, developing and maintaining the relationship between innovation and strategy could help you achieve astounding results, but will require a huge amount of consideration, effort, communication, and guts.
There is no secret recipe, there is no silver bullet. I promised to explain how you can give intention to innovation, I never said it was going to be easy. But remember, nothing worth having ever comes easy.