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Innovation Strategy

How innovative is your organisation? The most innovative companies actually plan to innovate. Innovation Leaders help companies put Innovation into their strategy and operational planning at every level within a business. We reduce the risk of new ideas and innovations being a distraction and focus on them being a source of competitive advantage.  Innovation needs to start with strategy. This planning provides a context or focus for all innovation activities, enabling ideas to be generated that address critical business issues.

Successful managers and leaders link core business processes to their planning processes. Innovation is no exception. Separating innovation from business strategy risks diverting key resources and reduces the focus of an organisation. Innovation must be part of your business strategy. You determine the extent and type of innovation by examining business performance and by assessing your organisation’s tolerance for risk.

There are, broadly, three types of innovation strategy – no matter what business or sector you are in. These are illustrated in the matrix below. In the green areas organisations can probably innovate with their existing resources and skills. They are doing no more than focusing upon modifying existing products and services and/or extending the customer base they are selling to. Although this a limited area of innovation it can still be a risk for organisations if not implemented correctly.

Even for organisations wishing to pursue a consolidation strategy – i.e. selling current products to current markets (top left hand of the below matrix) innovation can play a vital part. Innovation activities in this instance can be focused on internal process improvement activities. Some of the most successful companies in the world have never moved outside of this product-market! They are just world class at it and innovation plays a vital part.

In other strategies, companies breaking into new markets or geographies with their existing product range might need to acquire new skills, capabilities, languages, manufacturing assets etc. Similar risks are found for those companies developing new products for their existing, loyal, customer base. This is often known as a New Product Development (NPD) Strategy. Both these approaches are shown in the blue areas of the below matrix. The risk for these strategies is higher, but the reward is greater and innovation plays a greater intrinsic role.

Where is Innovation taking you?

Truly innovative strategies , the red areas above, throw up much higher risk mainly because the products and/or markets are new to the business. They probably will require acquisition of new resources, capabilities, skills, ideas and even possibly leadership! These are commonly called ‘diversification strategies’. A strategic change in the business at this level might even require a new business model; mergers, acquisitions or licensing might be the most appropriate routes.

Our Innovation Maturity Audit starts with Planning and Leadership. Often companies and Senior Management Teams (SMT) talk up the importance of innovation to the business yet when we ask for examples of how innovation is demonstrated as being a strategic priority there is often a lack of clarity and detail.

The single most visible example of innovation as being strategically important is the appointment of an Innovation Executive in charge of all planning activities and the cascade of KPIs relating to innovation throughout the business. Without these it is doubtful that the organisation understands the extent and direction of innovation activities.

The extent of innovation is also dependent upon your appetite for risk. Different types of innovation strategies have different risks. A balanced innovation portfolio includes a balance of risks. Innovation Leaders understand the complexities of managing a portfolio of innovations and how they effect business strategy. Contact us to discuss how we can help you.

Integrated Innovation Framework

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