How to Develop an Innovation Strategy
The myth in popular culture is that innovation is the byproduct of a random spark of inspiration. Lightning strikes. Someone has a eureka moment. The world is forever changed. Sounds quite easy, if mostly unachievable by mere mortals.The truth is that innovation is more often the result of a resolute commitment of time and resources—and a solid innovation process. Committing the resources is simply a matter of availability and will. Creating a strategy can be more complicated. There are, however, some basic questions that every company should ask and answer to begin solidifying a viable innovation strategy that the entire company can rally around.
What would change the value equation of our industry and our customers?
This is an intentionally broad question, but it is at the root of any successful innovation strategy. For a business, innovation isn’t about change for change’s sake, it’s about taking steps today to secure the greatest share of revenues and profits in the future. And the first step gaining a glimpse of what that future looks like is to imagine what the market would look like if you, through your product development efforts, could radically alter the cost structures for the business or its customers, or both. What would the market look like if you could radically alter the product lifespan? What if you radically changed the scale of your solution? Delivery times?It’s not that you need to answer exactly how you will accomplish this, for now. But rather, you need to decide, as a company, what of those changes could have the greatest impact on the landscape of your industry. Further, whatever you choose to focus on needs to be something you believe is at least somewhat achievable with the application of time and resources.
How could our business model be disrupted?
One of the best ways to start answering this question is to look at your own and the market leader’s greatest strengths and start to ask how a new entrant might turn that into a weakness. 10 years ago, few would have predicted that the world’s largest taxi company (Uber) would own no taxis, or that the world’s largest retailer (Alibaba) would hold no inventory, or that the world’s fastest growing hotelier wouldn’t own or manage a single room (Airbnb). But those companies looked at the market leader’s greatest strength and made it a weakness.
What parts of today’s business are we willing to sacrifice for tomorrow’s innovation?
In his seminal work, “The Innovator’s Dilemma”, Harvard Business School professor, Clayton Christensen, outlines the ways highly successful companies end up ceding markets to disruptors they could have easily stopped in their tracks had the company been willing to suffer through the opportunity costs of innovation. The point being, sometimes you innovate and sometimes you have innovation thrust upon you. And it pays to understand in advance how the business could function, thrive or survive with various lines of business or product lines removed.
What capital are we willing to invest/risk?
It should come as no surprise, but innovation is rarely inexpensive. In fact, it’s usually costly, even comparatively wasteful by normal business investment standards. Where investments in the day-to-day operations are expected to produce standard linear returns, investments in innovation should be thought of more like a venture capital model—most of them will return nothing, but the home run ideas deliver 10X returns. It’s not math most companies are used to or comfortable with. But failures are as much or more a part of fruitful innovation programs as the successes. A great example of this mentality is Apple. It is widely reported that Apple kills off far more of its R&D projects than it ever sends to market. And that willingness to experiment has obviously served them well.
If it ain’t broke, why fix it?
It’s tempting to think that wildly successful businesses are somehow immune to radical disruption, but none truly are. Traditional relationship businesses could be easily overwhelmed by conversational AI. Delivery, distribution and logistics are in the crosshairs of self-driving vehicles. Accounting, auditing and title insurance businesses could suddenly find themselves anachronistic leftovers by blockchain technology. Just as traditional media planning and strategy has succumbed to programmatic models, even formerly technology-resistant creative professions will find themselves pressured by bots that can literally start running the infinite monkey’s algorithm until they hit upon the marketing equivalent of Shakespeare. This is not a gloom and doom prophecy. It’s the call of opportunity resulting from new disruptive technologies. We just have to keep open minds.