Why an innovation strategy is essential for modern business

By Alice McGee

Posted on

No one can deny the importance of developing a strong business strategy, but what about an innovation strategy? Arguably where you spend time and money is strategy, but investing in innovation programs alone does not guarantee success. Embedding the best innovation practices in your business is unlikely to produce value without an overarching and carefully-reviewed plan. In this blog, we look at what innovation strategies are, the different types of innovation strategies, and why they are so critical for successful innovation programs and healthy and sustainable businesses.

What is an Innovation Strategy?

Business strategies lay out a comprehensive plan to maintain or adjust a company’s position within an industry or market. Innovation strategies should be just as calculated and bridge the gap between high-level mission, vision, purpose, and day-to-day activities by clarifying how new value should be created for the customer in line with strategic objectives.

Innovation strategies can fall into four main categories: radical, architectural, disruptive, or routine. Radical innovation strategies may be the first ‘type’ that comes to mind, and focuses on developing breakthrough technologies (think the development of CRISPR technology).

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Architectural strategies focus on finding novel applications of new technologies (think the application of Quantum computing on the Financial Services industry), whereas disruptive innovation focuses on identifying ways to use existing resources in novel ways (think Uber). Perhaps the least talked about strategy type is routine innovation. Here, the focus is on finding ways to improve existing products and processes to keep competitors at bay. For example, Aviva’s innovation program aimed at improving customer experience.

An appropriate mix of these innovation strategies should be employed to develop a healthy business model. The best mix will depend on business strategy, which in turn should take into account competitive forces and market positioning.

Why you need an Innovation Strategy

Having an innovation strategy that aligns with your larger strategic goals ensures you develop ideas that strengthen your business model, can be directly linked back to revenue creation, and brings value to your customer. It also helps avoid the pitfall of ‘performative innovation’. Sporadic innovation activities are unlikely to result in valuable ideas that meet your strategic goals and these ideas are even less likely to get implemented.

Creating True Value:

Creating and monitoring innovation strategies is also essential to creating a sustainable business model that can withstand market forces by ensuring you continually build on and guard your competitive advantage. This can only be completed by working on projects that take varying lengths of time to complete and have increasing value associated with them. In other words, you have projects that fall into horizon 1, 2, and 3. 

Abandoning projects that fall into horizon 2 or 3 – that is projects that take longer to complete but will result in greater value in the long run – could make the difference between maintaining your competitive advantage or losing customers. However, a clearly defined innovation strategy that highlights calculated risk could protect these important projects from stakeholders that question their worth.

Ensuring Long Term Success:

Communicating clear innovation strategies that link back to the same high level goals ensures everyone across your ‘crowd’ can get involved and innovation efforts are coordinated for maximum effect.

Strategy-lead innovation is more inclusive than traditional siloed innovation programs that mainly sit within R&D teams. Democratizing innovation across different departments and levels has a beneficial impact on employee satisfaction and wellbeing. Although Innovation strategies are set by senior leaders, they are designed to be implemented across the whole organization.

Fostering Alignment:

Attempts to achieve innovation goals will also be complementary if dictated by the same set of strategies. This will not only reduce wasted effort, but departments will no longer be working at cross purposes, governed by their own perceived innovation priorities and experience with certain methodologies.

For example, a technical team may perceive radical innovation as the only step forward and could spend large amounts of time developing functionality that is easily imitated by competitors. On the other hand, a customer team may champion routine innovation to improve how customers interact with functionality that stands to get replaced anyway. Although radical and incremental innovation can work well alongside each other, they must be coordinated.

When working to a set of clearly defined strategies that can be interpreted in the same way regardless of your department or level of experience, diverse backgrounds and skills are used as a strength rather than fuelling opposing forces. In November 2021, Multiconsult Norway launched its idea management platform to 2,500 Norwegian employees to gather ideas across several levels and regions of the company. This was a vast improvement from the 100+ disconnected innovation initiatives that were previously being undertaken simultaneously.

“In order to work with our employees on innovation efforts, we needed a centralized system to hear their ideas. Powered by Wazoku, our platform allows us to truly engage with our Multiconsult employees, across all regions and levels, to work towards innovating at scale through the company.”
// Kristin Olsson Augestad – Executive Vice President (Oslo) at Multiconsult 

In this blog, we’ve defined innovation strategies as the bridge between high-level goals and day-to-day activities. We have looked at the four main strategy types; radical, architectural, disruptive, or routine.

We looked at how an appropriate mix of these innovation strategies should be deployed to develop a healthy business model, and we concluded with why innovation strategies are essential in creating value for your customers, maintaining your competitive advantage, and coordinating innovation programs.

By Alice McGee

Alice spends her time at Wazoku tending to our customer's platform needs. In her spare time, she's a keen cellist and you should hit her up if you're in need of a great 70s Rock playlist!