Question: What is the real goal of Innovation strategies for most businesses?
Answer: Profitable and sustainable Business Growth
Innovation can be a confusing subject to raise in discussions, meetings or social settings. There are all sorts of misconceptions and opinions surrounding innovation, so no wonder people have difficulty defining it and figuring out how innovation can be applied in their lives. To academic researchers, innovation and creativity go hand in hand to further develop knowledge and find new technologies and ways of doing things. Some researchers couldn’t care less about the commercial value of their ideas, that may be a side benefit but not their goal.
However, for most businesses Innovation means:
- Finding ways to be more efficient and remove unnecessary waste of all types
- Developing new and better products or services they can sell
- Disrupting competitors or incumbents in key markets
- Finding and entering new markets
- Building entirely new businesses
- And more…
The main Innovation theme for most businesses is Profitable Growth that:
- Generates new profit pools
- Increases demand for products and services
- Attracts new customers
- Opens new markets
- Sustains the business for years to come
How to Link Innovation and Profitable Growth
One of the better ways of linking these two is to use the Three Horizons for Growth model developed by Steve Coley at McKinsey. This model describes the Three Horizons in the following manner:
- Horizon #1: The Core Business that is most associated with the company in its current state. This typically is an established business that requires most of the attention of the company’s employees and generates the bulk of the sales volume, cash flow and profit. The focus in Horizon #1 is on “Extending & Defending” the core business and on superior execution.
- Horizon #2: Includes all Emerging Opportunities that could be a variety of new business opportunities that the company has developed, licensed or generated from partnerships and strategic alliances. The focus in Horizon #2 is on leveraging “Positional Advantage” and forcing these opportunities to further prove themselves and gain steam, possibly to become part of the core business in the future.
- Horizon #3: Represents innovative new ideas for profitable growth in the future. Focus here is on clustering ideas into themes, sorting out the good and great ideas and feeding them so they can emerge from the Horizon #3 incubator to become Emerging Opportunities.
In my view the key to linking Innovation and Profitable Growth is in realizing that the Three Horizons are an evolutionary and continuous process that needs to continually generate breakthrough ideas by leveraging an Innovation Strategy which ultimately become part of a company’s sustainable Growth Plan.
Here’s a link to a McKinsey article that describes the Three Horizons:
Charlie Alter owns Bentbrook Advisors LLC based in Sylvania, Ohio. He specializes in Growth Strategy, Innovation and Coaching and can be reached at firstname.lastname@example.org visit http://bentbrookadvisors.com/ for more information on his business advisory practice.