How To Implement A Successful Innovation Strategy
Innovation can be the driving force behind growth and can protect a company's future, so how can you implement a successful innovation strategy?
Innovation can provide the path to success for a new company, or breathe life into an old one. Successful innovation through new ideas, products, services, or processes often leads to more money and an increased market share.
But while most companies have a strategy behind their marketing, operations, or human resources, far fewer have an innovation strategy. Why?
BusinessBecause spoke with Mikkel Draebye, a professor of entrepreneurship and innovation who teaches on the Copenhagen Business School EMBA, to find out more about innovation strategies and how to implement one.
The need for an innovation strategy
All companies begin with innovation: entering the market with a new solution or an improvement on what’s currently available. Typically the companies most closely associated with innovation are the youngest.
But as companies grow, paradoxically it’s often the case that their innovative power begins to decline. That’s largely because growth means new processes and internal structures are put in place. Whether it’s a different hierarchy or even just new office space, these changes can provide a barrier to innovation.
“They become a little bit complacent, a little bit more focused on themselves and maybe milking what they already have. Looking at efficiency and optimizing their internal processes rather than looking at what we’d call innovation or creative destruction,” Mikkel explains.
This can impact the future of a company. The results can be drastic: Kodak, Blackberry, General Motors—history is littered with companies who once dominated their respective industries only to fall when they became too slow to keep up with more agile competitors.
For Nokia, which held 49.4% of the market share for mobile phones in 2007, the advent of the smartphone spelled downfall. The company failed to move into the rapidly emerging space while competitors capitalized on new opportunities. Nokia was bought out by Microsoft in 2013.
Such examples show it’s important to have a clear innovation strategy. Mikkel feels it’s as important as any other part of the business.
“Companies are much more mature when it comes to marketing strategies, sales strategies, operation strategies, or manufacturing strategies. But it’s also important to future proof the company by having an innovation strategy.”
What does an innovation strategy involve?
When considering your own innovation strategy, your approach should be dictated by the nature of your company, what it offers, and where changes are possible.
The most common form of innovation is known as ‘product innovation’. This refers to the creation of new products and services within your company’s portfolio.
Developing new products doesn’t mean you have to create the next iPhone—product innovation can be as simple as a drinks company offering a new flavour—but by adding a new product to your portfolio you can expand your reach within a market.
Processes are another key area within a company that are typically ripe for innovation. ‘Process innovation’ involves changing part of your company’s processes—administration or communication, for example—to improve performance.
Arguably the most famous example of process innovation is the assembly line. Developed in 1913 by Henry Ford, it enabled Ford to mass produce cars at a rate of one per 93 minutes where previously it took more than 12 hours.
A more tricky option is business model or ‘positioning innovation’. Altering your positioning—either through external partnerships or by changing your target audience—can open up opportunities to access new markets.
Airbnb, for example, was once a platform designed to help conference attendees find accommodation. It later repositioned itself as a player in the holiday and travel industry.
Perhaps the most obscure form is ‘paradigm innovation’—changing your company’s purpose or mission. Thinking about your company within a new paradigm can open a range of further innovation opportunities.
For example, IBM was once known as a product-maker, mainly computers, but by the mid-2000s the company had pivoted to become a leading consultancy and services provider, with hardware sales accounting for just 10% of its revenue.
Any of these innovation types can provide the foundation of your innovation strategy, opening up access to new markets and new revenue opportunities.
How to implement your innovation strategy
So how do you implement your strategy? Whether your company is more suited to product or paradigm innovation, it’s important to be considered in how you strategize.
You could choose to implement a radical innovation plan, with a strategy based on creating something entirely new and groundbreaking.
Alternatively you could build your innovation strategy incrementally, looking to develop smaller improvements in your products, processes, or services that can have an impact over a longer period of time.
Radical innovation has the enormous benefit of creating an entirely new market, but it also comes at a large cost—developing a groundbreaking innovation isn’t easy.
Mikkel advises a mixture: looking at your innovation strategy like a portfolio of investments where you spread the risk across both radical and incremental projects.
“If you want to create a portfolio or strategy of innovation in your company, it probably makes sense not to put all of your money in radical innovation because the risk of failure is much, much higher,” he explains.
It’s also important to approach it like any other strategy, with clearly defined targets and a person within your company who is responsible for overseeing your innovation goals.
As a costly, high-risk enterprise, you also need individuals at all levels of your company to buy into your innovation plans, he says. “This probably would require some kind of top-management support, I don’t think this can be done on an individual business unit level.
“As a business unit director who is only measured on your bottom line or cash flow for the quarter, you are never going to invest in innovation.”
If successful, developing a new innovation strategy could change the path of your company. That’s why it’s a key learning focus for executives in the CBS EMBA, who learn about it over a week of lectures dedicated to innovation planning.
The lectures are designed to show EMBA students that innovation is just as important as any other part of a company’s strategy, and effective planning can protect a company from changes that are yet to come.
Industries:Technology Manufacturing/Industry 4.0