Innovation is the lifeblood of any successful business. It’s how you create new value for your customers, differentiate yourself from your competitors, and stay ahead of the curve in a fast-changing world. But innovation doesn’t happen by accident. It requires a clear and coherent strategy that guides your decisions and actions.
In this article, we will explain what innovation strategy is, why it matters for your business, and how to create one that aligns with your goals and vision. We will also provide some examples of successful innovation strategies from different industries and sectors.
What is an innovation strategy?
An innovation strategy is a plan that outlines how you will use innovation to achieve your business objectives. It defines your innovation goals, the types of innovation you will pursue, the resources you will allocate, the processes you will follow, and the metrics you will use to measure your progress and performance.
An innovation strategy is not a generic or one-size-fits-all solution. It should be tailored to your specific business context, needs, and aspirations. It should also be flexible and adaptable to changing circumstances and opportunities.
An innovation strategy is not a standalone document or initiative. It should be integrated with your overall business strategy and vision. It should also be aligned with your organizational culture, values, and capabilities.
Why do you need an innovation strategy?
An innovation strategy is essential for several reasons:
- It helps you focus on the most important problems and opportunities for your business and customers. Without a clear direction and purpose, you may end up wasting time and resources on irrelevant or low-impact innovations.
- It helps you prioritize and allocate your resources effectively and efficiently. Without a clear plan and budget, you may end up spreading your resources too thin or investing in the wrong innovations.
- It helps you align your innovation efforts with your overall business strategy and vision. Without a clear connection and alignment, you may end up creating innovations that are inconsistent or incompatible with your core values and objectives.
- It helps you create a culture of innovation that fosters creativity, collaboration, and learning. Without a clear culture and mindset, you may end up stifling or discouraging innovation within your organization.
- It helps you track and evaluate your innovation results and impact. Without clear metrics and feedback, you may end up missing or ignoring the opportunities for improvement or scaling.
How to create an innovation strategy?
Creating an innovation strategy is not a one-time event. It’s an ongoing process that requires constant review and adaptation. Here are some steps to help you get started:
1. Assess your current situation
The first step in creating an innovation strategy is to analyze your internal and external environment, including your strengths, weaknesses, opportunities, threats, competitors, customers, and trends. You can use various tools and frameworks to conduct this analysis, such as SWOT analysis, PESTEL analysis, Porter’s five forces analysis, or value chain analysis.
The goal of this step is to identify the gaps and challenges that you need to address with innovation, as well as the potential sources and drivers of innovation that you can leverage or exploit.
2. Define your innovation objectives
The second step in creating an innovation strategy is to set SMART (specific, measurable, achievable, relevant, and time-bound) goals for your innovation outcomes, such as increasing revenue, reducing costs, improving customer satisfaction, or entering new markets.
The goal of this step is to clarify what you want to achieve with innovation, why it matters for your business, and how you will measure your success.
3. Identify your innovation focus areas
The third step in creating an innovation strategy is to choose the areas where you want to innovate, such as products, services, processes, business models, or customer experiences. You can use different frameworks to categorize your innovation types, such as incremental vs radical, sustaining vs disruptive, or core vs adjacent vs transformational.
The goal of this step is to determine what kind of value proposition you want to offer to your customers through innovation, how different or novel it is from your existing offerings or competitors’ offerings, and how much risk or uncertainty it involves.
4. Develop your innovation portfolio
The fourth step in creating an innovation strategy is to select and prioritize the specific innovation projects or initiatives that will help you achieve your objectives and focus areas. You can use tools such as the Innovation Matrix or the Innovation Ambition Matrix to balance your portfolio between different levels of risk and reward.
The goal of this step is to create a diversified portfolio of innovations that covers both short-term and long-term goals, both incremental and radical innovations, and both existing and new markets.
5. Allocate your innovation resources
The fifth step in creating an innovation strategy is to determine how much time, money, people, and other resources you will invest in each project or initiative. You can use tools such as the Innovation Budget or the Innovation Scorecard to allocate your resources strategically and transparently.
The goal of this step is to ensure that you have enough resources to support your innovation portfolio, that you allocate them according to your priorities and expected returns, and that you monitor and control them effectively.
6. Implement your innovation processes
The sixth step in creating an innovation strategy is to establish the methods and tools you will use to manage your innovation activities, such as ideation, prototyping, testing, scaling, or commercialization. You can use tools such as the Design Thinking Process or the Lean Startup Methodology to guide your innovation processes.
The goal of this step is to ensure that you have a systematic and consistent approach to innovation, that you involve the right stakeholders and customers in the process, and that you learn from your failures and successes.
7. Monitor and evaluate your innovation performance
The seventh and final step in creating an innovation strategy is to define the indicators and measures you will use to track and assess your innovation results and impact. You can use tools such as the Innovation Dashboard or the Innovation Metrics to monitor and evaluate your performance.
The goal of this step is to ensure that you have a clear and timely feedback loop for innovation, that you measure what matters for your business, and that you use the data to improve your innovation strategy and processes.
Examples of successful innovation strategies
To illustrate how different businesses can create and execute effective innovation strategies, here are some examples from different industries and sectors:
- Apple is widely recognized as one of the most innovative companies in the world. Its innovation strategy is based on creating breakthrough products that combine design, technology, and user experience. Some of its iconic innovations include the iPod, iPhone, iPad, iTunes, App Store, Apple Watch, AirPods, and Apple TV. Apple’s innovation strategy is driven by its vision to “make the best products on earth”, its culture of secrecy and excellence, its focus on customer needs and feedback, its investment in research and development, its integration of hardware and software, and its ability to create loyal fans and advocates.
- Netflix is another example of a highly innovative company that disrupted the entertainment industry. Its innovation strategy is based on offering personalized and convenient streaming services that cater to different tastes and preferences. Some of its key innovations include the DVD-by-mail service, the subscription model, the recommendation algorithm, the original content production, the global expansion, and the interactive content. Netflix’s innovation strategy is driven by its vision to “become the best global entertainment distribution service”, its culture of freedom and responsibility, its focus on customer satisfaction and retention, its investment in data and analytics, its experimentation and testing, and its ability to adapt to changing consumer behavior.
- Tesla is another example of a disruptive innovator that revolutionized the automotive industry. Its innovation strategy is based on creating electric vehicles that are sustainable, high-performance, and desirable. Some of its notable innovations include the Model S, Model 3, Model X, Model Y, Cybertruck, Roadster, Powerwall, Solar Roof, Autopilot, Supercharger network, Gigafactory, Battery Day announcements, Starlink internet service, Neuralink brain-computer interface, Hyperloop transportation system, The Boring Company tunneling project etc. Tesla’s innovation strategy is driven by its vision to “accelerate the world’s transition to sustainable energy”, its culture of ambition and risk-taking, its focus on customer feedback and referrals, its investment in engineering and manufacturing, its vertical integration and diversification, and its ability to inspire and influence others.
- Adidas is a global leader in the sports and lifestyle apparel industry. Its innovation strategy is based on creating products that enhance the performance, comfort, and style of its customers. Some of its key innovations include the Boost technology, which uses thermoplastic polyurethane (TPU) pellets to provide superior cushioning and energy return; the Primeknit technology, which uses digital knitting to create seamless and lightweight fabrics; and the Futurecraft Loop, which is a 100% recyclable running shoe made from a single material and no glue.
- Uniqlo is a Japanese clothing retailer that offers high-quality and affordable basics. Its innovation strategy is based on developing functional and versatile fabrics that cater to different needs and preferences. Some of its popular innovations include:
- the Heattech, which is a thin and warm fabric that generates heat from the body’s moisture; the Airism, which is a breathable and moisture-wicking fabric that keeps the wearer cool and comfortable; the Ultra Light Down, which is a lightweight and compact down jacket that provides warmth and insulation.
An innovation strategy is a plan that outlines how you will use innovation to achieve your business objectives. It defines your innovation goals, the types of innovation you will pursue, and the resources you will allocate. It also defines the processes you will follow, and the metrics you will use to measure your progress and performance.
An innovation strategy is essential for several reasons:
- It helps you focus on the most important problems and opportunities for your business and customers.
- It helps you prioritize and allocate your resources effectively and efficiently.
- It helps you align your innovation efforts with your overall business strategy and vision.
- It helps you create a culture of innovation that fosters creativity, collaboration, learning.
- It helps you track evaluate your innovation results impact.
An innovation strategy is not a static document that sits on a shelf. It’s a dynamic guide that evolves with your business and environment. By creating and executing an effective innovation strategy, you can unleash your creative potential and drive sustainable growth for your business.