Developing an innovation strategy
There are many different types of innovation (refer Why Innovate) and the type of innovation employed will be determined by the innovation strategy. The innovation strategy is in-turn determined by the growth phase of your company, where it is heading and the desired outcome of the innovation.
Growth Phase of your company
Mehrdad Baghai, Stephen Coley and David White in their book “The Alchemy of Growth”1 define the three horizons for growth. The three horizons provide a framework to think about growth in a way that balances the competing demands of focusing on the present whilst investing for the future. The three horizons are not giant leaps but incremental steps in growing your business.
- Horizon 1 – is about extending and defending your core business. The focus is on operational improvements for short term performance.
- Horizon 2 – is about bringing ideas to fruition and building emerging businesses.
- Horizon 3 – is about creating viable options for future businesses.
As your business grows you will need to extend and defend your core business from competitors. However as more competitors enter the market you will need to look for alternate business opportunities. Finally you need to establish an environment where ideas are nurtured for future business development. The horizons are repeated over time as your future business options become core businesses.
The stage of your business will impact on your ability to achieve your desired outcome. For example you may wish to create a large research and development section in your company to generate new ideas for the future, however the current culture is at horizon 1: focused on operation improvements to the core business. It will take significant resources and time to develop an environment that will foster research and development within your company. Therefore your innovation strategy should take into account what phase of growth you are in and where you are heading.
Your innovation strategy is determined by what you want to achieve from the innovation process. Whether that be:
- Develop a new product – you may see an opportunity for a radical change in the type of products currently offered on the market.
- Protect market share – in a dynamic global environment continuous innovation is required in many instances just to maintain market share.
- Expand market share – you may want to expand market share through e.g. offering existing products in a different market.
- Sell or license to another organisation – you may be looking at an exit strategy whereby once the innovation is developed you do not have the capabilities or resources to gain full value from the innovation and seek to sell or license the innovation.
- Create greater staff retention – a commitment to innovation can motivate and retain skilled staff through providing staff with a challenging and creative environment.
- Improve operational efficiency – you may wish to reduce costs through streamlining your operations.
- Increased recognition in the marketplace – you may wish to increase your profile in the marketplace through an innovative marketing strategy.
The type of innovation and the level of risk you attribute to that innovation will vary depending on whether you are seeking to double your business or maintain your current level of revenue or profit. Your company may in-fact pursue multiple outcomes and therefore will require multiple strategies.
Once you have determined your intended outcome and how this fits within the growth phase of your company, start to think about the type of innovation strategy that will best achieve your outcome.
1 Baghai M., Coley S., White D., The Alchemy of Growth. Perseus Publishing 2000