In my last column I discussed an interesting way to think about Linking Innovation and Profitable Growth, since generating new profit pools is the main goal for most innovation efforts in business. Today, I’d like to take this thinking a step further and discuss how Innovation connects to Business Strategy.
Which Comes First Innovation or Strategy?
This is sort of the chicken and egg discussion about these two important topics. But it is clear from my experiences working with numerous companies over the last 30 years that either Innovation or Strategy can lead the process.
In defense of the Strategy First approach, many companies believe that their Innovation efforts are more productive and efficient if they are connected in a meaningful way to the company’s overall Business Strategy.
Conversely, in the Innovation First approach, companies that are stronger on the creative side could argue that they will first generate a large number of ideas for new products or services, pare them down somehow and then link these ideas to an emerging Business Strategy.
Let’s take a more detailed look at each approach.
If a company is well established, is doing reasonably well and is profitable, then this more traditional approach is likely the work best. The main issue here is that the company is unlikely to change much no matter what type of innovation process is used. It makes more sense for these companies to give clear direction to Innovation Teams in terms of the following strategic focal points:
- Specific existing or new markets the company has determined are strategically important
- Key customers that have new desires or needs
- Primary product lines that need to be improved
- New product clusters that represent opportunities
- Priorities to improve key processes using new ideas or approaches
- Emerging businesses that need more ideas for markets or products
This is the more traditional approach to linking Strategy to Innovation. I would call this Directed Innovation that is linked directly to a company’s already developed business strategy. The risk with this approach is that it may not be creative enough to generate Breakthrough or truly Disruptive ideas that energize Profitable Growth.
For companies that are Innovation / Idea Engines and are also very creative, this approach probably makes the most sense. Typically these companies are less traditional and rely heavily on new products, new services or creating entirely new businesses. Many of these companies do have a well developed sense of Strategic Direction but their strategic plans are more fluid and opportunistic. Generating a large number of ideas is nothing new for these companies.
This approach is clearly the new world for company innovation. The risk with this approach is that ideas may be followed that are tangental to the company’s primary direction, may conflict with the company’s core values, core purpose or model for generating profit and growth. Tangental ideas may also distract the company from more immediate opportunities or strategic priorities as well.
Determining the Right Approach
Either approach can be followed successfully but companies need to be selective in terms of the approach that is likely to work best for them and also be aware of the risks and pitfalls that either approach may bring.