Why You Need an Innovation Strategy: 3 Reasons

New.

Only 4% of executives have not defined innovation as a priority of strategy according to a 2010 report of McKinsey Global survey.

And it makes total sense. Why wouldn’t you want to explore more opportunities to create value? Why would you not want to be seen as an innovative brand or service creating that sought-after branding? Why not take the chance at creating sustainable competitive advantages on the assembly line?

Easy.

Reality will hit you hard once you realize that all that lovely stuff you learned about innovation - yeah, it’s not THAT easy to implement.

See, companies need to make a buck at the end of the day. While aspects of Corporate Social Responsibility (CSR) and Shared Value (SV) are taking effect, ultimately, making that extra dollar is often awfully more pleasing in the short term than investing your cash into ambiguous operations that you have no clue where they would go (exploitation vs. exploration). Alfred Rappaport goes as far as defining the ultimate goal in his 1986 book Creating Shareholder Value.

Do you know how much money tech companies spend to advance their products and services? Of course, you and I know it is not a piece of cake. But when I stumbled upon a related report of THE Consultancy from 2020, I was unaware that it was… well… THIS much (see graphic below). Keep in mind that this is the percentage concerning total revenue, not profit.

Source: University-Industry Collaboration - The Vital Role of Tech Companies, THE Consultancy, (2020)

So, even though this is the everchanging, fast-paced tech industry that renders your new shiny iPhone old in a blink of an eye, one should get that this innovation thing is quite important. In the end, you can’t do what you do right now for the next 30 years, can you?

Strategy vs. Innovation Strategy

Innovation is best explained as something customers see value in and are willing to pay for. On the other hand, strategy is the plan to capture value by utilizing marketing, finance, R&D, and so on in an organization. So to be clear on this one: Innovation Strategy is not a precise execution plan such as forming a special R&D department, for example, rather than aligning the overall strategy to your competitive goals contributing to your target across the board.

Businesses that consistently embrace and harvest value from innovation understand that this is not the result of sheer luck. Instead, they are aware that it is partly the result of adequate procedures and environments.

An Innovation Strategy precisely aids in aligning and prepping that environment and way of operation.

Importance?

Reasons having an Innovation Strategy is crucial to business include:

Goal Clarification

Having an Innovation Strategy in place helps an organization understand and focus on its overarching goals, focusing efforts towards common goals.

Alignment

Plan in place? Good. When appropriately communicated, your Innovation Strategy can now aid parts of the organization understand the overall goal, helping to pull on the same string and not run into different directions. So don’t let that rope drop.

Consistent Value Creation

Organizations tend to decrease in their innovation efforts over time, even if they started as well-respected innovation superheroes. One reason for this is that new competitors or increased competition in the market will likely take market share with time. Having a plan in place strengthens the organization's likelihood to be on its toes to net get too comfortable on that sofa of sweet profits instead of shifting into the direction of innovation focus.

Example: Corning

That phone in your pocket: How much have you thought about that shiny front glass on top of it?

Never?

Think about it: How come it does not as easily crack as that beer bottle your dropped last weekend? Of course, its not made of steel, but it seems that this glass is quite tough. It also doesn’t appear to have any scratches on top of the glass compared to when you look at your glass keyring photos. How come?

Quite some development has gone into R&D for protective and more tough glasses. And Corning is on the forefront of this trend taking about 40% market share of the smartphone display industry in 2016, providing the majority of high-end phone glass displays that we come to love. Even if they don’t sustain everything.

Most probably are rocking glass produced by Corning: The phones of my friends Marvin and Zorawar during a rainy day of a road trip in the city of Strathalbyn, SA, Australia.
Source: Simon Beuse, 2020

Their Innovation Strategy? As Gary P. Pisano from Harvard Business Review criticizes, but still recognizes:

Corning is driving a demand-pull approach (finding customers’ highly challenging problems and then figuring out how the company’s cutting-edge technologies can solve them).

Starting as early as 1879, Corning was able to pull many breakthrough innovations in the glass industry. Supporting glass envelopes for Thomas Edison’s lightbulbs, creating glass for railroad lighting systems withstanding high temperatures, the process for mass-producing television picture tubes, creating low-loss optical fiber used in the telecommunications industry, … the list goes on (HBR, 2015).

Sustaining innovation for this long is not only hard - it is extremely hard to execute. An Innovation Strategy will help.

More

I am planning to get more into this topic on this blog. Are you enjoying reading up on those success stories from firms such as Corning, but also examples of firms that did not do so well? Do you have an Innovation Strategy in place? What are your experiences with Innovation Strategy?

As always, I would love to hear from you via a comment down below or via direct message.