Developing an innovation strategy is essential for turning great ideas into meaningful business results. In part two of our blog series (click here for part one), we dive into the critical steps for creating a tailored innovation strategy. With a thoughtful, aligned approach, your organization can turn creativity into competitive advantages.
“The heart and soul of the company is creativity and innovation.”
Bob Iger, CEO of the Walt Disney Company
As part one of this blog discusses, innovation strategy is essential for businesses to remain competitive and succeed. We also covered the various types of innovation and their examples. In part two, we’ll review the critical steps to develop an innovation strategy for your organization.
How to Develop an Innovation Strategy
The innovation process can be simultaneously exhilarating and intimidating. You and your team have an abundance of ideas, but how do you ensure you’re generating viable ones? Mimicking another company’s strategy isn’t the answer. As discussed in part one, no universal approach works for every business or situation. It’s a great idea to explore other companies’ strategies and what did and didn’t work for them, but don’t assume that what works for Apple or Tesla (some of today’s most successful innovators) will work for your business. Designing an innovation strategy that includes a solid framework and clear direction to match your specific competitive needs is crucial. Let’s break it down:
Establish Objectives
The first step is to define your innovation objectives. What is the ultimate goal? It could be expanding market share, improving operational efficiency or iterating incremental updates to an existing product or service. You may be trying to tap into a new market or develop a new product. In some cases, you might be aiming for multiple outcomes.
Also, consider how your innovation strategy will align with your long-term business model. Remember, a strategy is simply a commitment to organized, comprehensive, mutually supportive procedures or practices that achieve an explicit competitive goal. Successful strategies foster alignment among different organizational groups, clarify priorities and objectives and help direct efforts around them. Savvy businesses clearly define their overall business strategy and identify how departments (think operations, production, marketing, finance and research and development) will support it. An essential part of this process requires that you specify how your innovation efforts will do the same.
You can start with business model innovation, which involves generating new revenue streams by enhancing product value and distribution channels. At an operational level, the focus is on delivering value to consumers, creating a competitive advantage and increasing profitability. You can also leverage your existing business model by improving your core business rather than establishing new ones to create value. This innovation strategy involves continuous, incremental, and sustainable product or service improvements.
Conduct Market Research
Next, you’ll want to develop a deep understanding of your target market to reveal innovation opportunities and respond to consumer demand. To do this, you’ll need to keep up with the latest trends and have your finger on the pulse of what your customers want and need. To gain these insights, perform exercises such as market perception mapping, buying motivations and customer journey mapping. They will help you understand how your target market perceives your brand, what emotional factors motivate them to purchase and every engagement point they have with your product or service.
Your research should also include your competition. Start by identifying your competitors and conducting a SWOT analysis (strengths, weaknesses, opportunities and threats) on them. Then, analyze their digital presence to understand their website, content strategy and social media reach. Study their marketing strategy to uncover their tactics to attract, engage and retain customers. Once you know what they are doing and how they are doing it, you can innovate ways to do it better.
Define Your Value Proposition
While understanding your market is extremely important, your unique value proposition will ultimately determine the success of your innovation strategy. Your innovation strategy should address your product or service’s distinctive value to the market, allowing you to establish a competitive advantage. Identify the four key elements of a value proposition:
- Relevance is how the value proposition aligns with consumer needs.
- Benefit is the positive outcome your product or service will have on the consumer.
- Energy is the effort your consumer will or will not require to obtain results.
- Risk involves making your product or service as risk-free as possible.
Ask yourself how the innovation can add value for your consumers. Does the product or service ease particular pain points in their daily lives? Does your product or service enhance your customer’s personal brand? Can your customers obtain your product or service with less friction than your competitors? Will your customers feel little to no anxiety about purchasing your product or service?
Identify Your Innovation Strategy and the Required Resources
“Leaders identify the right type of strategy to solve the right type of problem, just by asking two questions: How well we can define the problem and how well we can define the skill domain(s) needed to solve it,” says Greg Satell, author of Mapping Innovation: A Playbook for Navigating a Disruptive Age.
Satell created an innovation matrix with four types of innovation to help people understand how to apply the solution that best fits their current problem:
- Sustaining innovation involves clearly defined problems that benefit from clearly defined skills. Most innovation happens here because people usually try to improve whatthey’re already doing.
- Breakthrough innovation happens when confronting a clearly defined problem that’s difficult to solve. In this case, it’s prudent to explore unconventional skill domains.
- Disruptive innovation is when skills are clearly defined, but the problem is not.
- Basic research is an exploratory, pioneering realm where nothing is clearly defined.
Review part one of this blog post to see the complete list of innovation types.
Now that you understand your objectives and goals and the type of innovation you’ll use to find solutions to your problems, you can begin designing the organizational structure of your strategy. These will include the methods, systems and resources necessary to support your innovation. Begin by ensuring everyone can reference the strategy, share ideas and stay updated on the progress. Invest in innovation management tools like IdeaScale, Brightidea or Ideanote to promote collaboration. All stakeholders must believe in the importance of innovation and invest in the strategy. Create a culture of innovation by allowing employees to think creatively and experiment.
Continually Evaluate Your Innovation Strategy
Some innovations will secure your organization’s role in the market, while others will dynamically alter the entire landscape, so tracking your innovations is crucial. Monitor essential aspects of your strategy, including how long it takes to develop and launch innovations compared to your competition, the scalability of your revenue streams and your team’s motivation levels. Knowing where to make adjustments will help you know when to stay the course or pivot.
Some businesses make the mistake of pursuing innovation as an afterthought or only when business is booming and resources are plentiful. But that approach is no longer enough in today’s hyper-competitive, global economy. Companies must prioritize innovation with deliberate effort and attention to compete and succeed. Take time now to develop a strategy for continued growth, which will ultimately reward you with less risky, more profitable innovation.
Anne Evenson is a native Austinite and a proud Veteran’s spouse with over 20 years of marketing, communications and program coordination experience in the public, private and nonprofit sectors. She is also a sculptor, jeweler and all-around dabbler in the arts and loves to help military-connected individuals discover their inner creativity.
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