The Road to Innovation Begins with Strategy

Published on August 18, 2016 |

It’s one thing to encourage innovative thinking among employees, but sustaining a company-wide innovation program is a much bigger task. Gaining a better understanding of the various approaches to innovation is the first step to actually building a strategy that will ignite creative development and support it across your company.

If you ever question whether innovation is important to your business, consider brands like Blockbuster® and Polaroid®. The once-dominant companies failed to engage in meaningful innovation practices and missed huge opportunities to stay relevant amidst streaming video and digital photography. They are not alone. In reality, innovation remains elusive to most businesses. Google^™, Facebook®, and Apple® are often touted as titans of innovation, but what is supporting their efforts beyond creativity pods, juice bars, and ping pong tables? The answer is strategy.

Put simply, an innovation strategy stipulates the specific steps or processes a business adopts to convey how new ideas and approaches will be discovered, how they’ll be tested and developed, the criteria for further development, and how they’ll be funded. It isn’t a fruit salad of best practices collected over time, but rather a customized set of interdependent processes based on the unique positioning of your business.

Technological Innovation vs. Business Model Innovation

While we tend to consider technology the mother of innovation, it is actually only one aspect in a complex matrix of innovative approaches. Technological innovation refers primarily to a change in the materials and methods used to make or distribute a product or service. While a discovery in the science behind a brand will lead to development of new products and services, the company’s business model may not change at all. In that case, its structure, methods, distribution, and customer base would all stay the same. Alternatively, if a brand were to use existing technology but change its business structure to deliver a product or service in a new way to a new customer, that would be considered a business model innovation. 

Four Strategic Approaches to Innovation

Using these two overarching categories, recent research in the area of innovation has produced a simpler way to understand the various approaches. Based on the degree to which an innovation involves a change in technology versus the degree to which it involves a change in business strategy, there are four distinct approaches. Let’s take a look:

Routine Innovation

Many times, routine innovation is the default setting for companies, because it is the simplest, quickest, and least risky approach. Using current technology and an existing business model, routine innovation essentially generates better versions of existing products and services to the same or similar customers. Example: The Apple® iPhone® 6s is released with new features.

Disruptive Innovation

Disruptive innovation is about delivering the same product or service in a revolutionary way, turning your business model on its ear. Although the approach employs existing technologies, it operates within a completely new business paradigm. Example: Uber® uses existing mobile technology to transform traditional taxi services.

Radical Innovation

Companies that harness scientific and technological discoveries to develop new products are using a radical innovation approach. Operating under an existing business model, the company will seek out cutting-edge technologies to provide added value or products to its current offering. Example: Bristol-Myers Squibb now manufactures cancer products using biotechnology.

Architectural Innovation

Using both new technology and an entirely new business model, the architectural innovation approach is the extreme opposite of routine innovation. In this most transformative approach, companies are overhauled in every aspect. Example: Kodak® transformed its print photography business model to align with the new technology of digital photography.

Choosing an Innovation Strategy

Experts agree that it’s not a matter of limiting your company to one type of innovation approach. Rather, they can be complementary to one another, with two or more working well at different times for different products or marketplace dynamics. The key is to balance the various approaches with the current needs and capabilities of the company.

Overcoming Barriers to Innovation

The two most often-quoted obstacles to a successful innovation program are an ill-suited organizational structure or misalignment with business strategy. These tactics can overcome such barriers: Treat innovation like you would any other function in your overall business strategy. Similar to how major disciplines like financing and marketing align with business objectives, innovation, too, should be assigned its own resources, processes, and clear set of goals.

Innovation requires communication and interdependence across departments. Align all teams around a goal via expressed procedures, processes, and metrics. Assign or hire an innovation champion whose job it is to ensure proper communication and execution.

Many times the R&D or tech departments are left to be the chief innovators, while other teams must buy in on the back end. In that case, conflicting priorities among teams will lead everyone to pull in separate directions. Make sure the priorities of each department are in step with the overall innovation strategy.

In the end, it’s important to remember that the goal of innovation isn’t change in and of itself. Rather, it’s ultimately seeking to create value—whether that’s increased revenues, reduced costs, larger market share, or even broader social change. The right approach can help you get there.