How to Make Innovation Strategy Work

For organizations, innovation is in many ways similar to change. Both are inevitable, and both are things that people and organization try to manage to their own advantage.

Innovation is driven by many factors that are, at least partly, beyond the control of individual people and organizations. These include demographic shifts, political and economic changes, technological advances and demands from new and ageing generations. At the same time, innovation is essential for companies that wish to grow and succeed in an increasingly competitive marketplace.

Innovation and creativity have an almost symbiotic relationship. If creativity is the development of ideas, then innovation is the implementation of these ideas in a new process, practice or production. Without innovation, creativity is often wasted.

In this article, we will be examining how organizations and individuals can respond to the pressure to innovate, and at which processes and behaviours are essential for success.

Four components of innovation

In the following pages, we will look at four key components that organizations need to implement if they are to innovate successfully: analysis, strategy, leadership and communication.

1. Analysing the environment

Business innovation, which many believe comes from an almost mystical moment of creativity, normally begins with a far less exciting moment of analysis of a business environment. Analytical procedures can be used to investigate current business models and the likely impact of political, social, economic and technological trends (PEST).

For some industries, innovation may mean little more than optimization of the current procedures, such as finding new ways to manufacture the same product more cheaply. For other industries, innovation may mean something much more disruptive.

Indeed, the term “disruptive innovation” describes the ever-present challenge to current business models from new players, for example, those with new versions of a product or service. The taxi service Uber is one such example. With its clever use of technology, it is threatening the survival of the traditional business model of the taxi industry, providing not only lower prices but also extra convenience for customers. Another example of disruptive innovation is e-learning, which threatens traditional teaching models that involve face-to-face interaction.

In addition to analysing the market for direct signs of new competitors, large corporations are looking for deeper signals of innovation, for example, by watching the venture capital firms that fund start-ups. Their invesment portfolios offer clues to the future.

2. Engaging strategically

Once analysis is complete, strategy can be defined. The way organizations think about about innovation can be divided into two main strategies: organic engagement and non-organic engagement.

Organizations that engage organically aim to create processes inside their own structures that can deliver innovation. The existence of large research and development departments is a classic manifestation of this desire to internalize, despite the cost and risk of failure. Sometimes, semiautonomous innovation centres are created, which are geographically and culturally apart from the parent company so as to allow independent thinking, but which are close enough to remain aligned with the organizational strategy.

Alternatively, an organization can use a strategy of non-organic engagement. This means looking externally to find structures that can deliver innovation. This could be through mergers and acquisitions, or by partnering with centres of expertise and therefore keeping in touch with the latest trends and developments. In the pharmaceutical industry, for example, universities and independent research clinics often serve as the knowledge incubators for new drugs and treatments.

A third possibility is an ecosystem strategy for innovation. Here companies form open, collaborative relationships with their stakeholders (suppliers and customers) to co-create innovation in key areas of shared interest, particularly logistics and IT. Integrating these systems across companies can lead to significant synergies and savings.

3. Leading effectively

Leadership is about inspiring the people around you, leveraging problems as opportunities, and building sustainable processes to support the growth of your organization and its people. 

Successful innovation requires effective leadership, with those who are most senior in organizations taking responsibility and not simply facilitating others to do so. It is essential for senior managers to stabilize the level of uncertainty in organizations, particularly at times when business is difficult. Feeling of uncertainty can reduce people’s openness to new ideas and their ability to think creatively. This can paralyse organizations at exactly the time when they require maximum innovation.

4. Communicating creatively

Organizations need productive and creative communication in order to create opportunities for innovation. In practice, this means adopting four key behaviours:

Communicate with many people

Many organizations recognize that the silo nature of their structures, separating different functions and management levels, works against creative thinking. Creative communicators abandon the four walls of traditional meeting rooms. Instead, they seek out a range of different people in a range of different moments and contexts. They visit suppliers to their own and other industries, and they visit their own customers as well as those from other industries.

Communicate openly

Those seeking to generate ideas need to talk and listen openly. They need to ask questions constantly and to be open to questions. They need to challenge assumptions and not to disagree too quickly with challenges from others. They also need to listen in silence as others articulate what might seem to be nonsense, but may contain the germ of brilliance.

Connect ideas

Most innovations emerge from connecting already existing ideas. Therefore, you should aim to connect existing ideas, to add new ideas to them, to overlap ideas and so on. Playing in new ways with ideas and processes is essential for innovation. The key innovation in the case of Uber, for example, was to connect existing technologies (GPS and telephone services) with prepayment devices and app functionality.

Drive to a decision

Ultimately, innovation needs to get done. Those people who commit to experimenting and to risking potential failure are invaluable to organizations. Organizations need also effective mechanisms for taking decisions – knowing what information is needed, who should be involved, when to review decisions and what to do if the decisions turns out to be wrong. And this means communicating more openly about decision-making because if we want to innovate, we need to take decisions, not postpone them.

Key Tips

• Analyse your existing business environment carefully before considering which innovation might be beneficial.
• Think about whether your organization should create innovations internally, externally, or as a mixture of both.
• If you are a leader in the organization, take personal responsibility for creating an innovation-friendly environment.
• Communicate with as many people as possible about innovation, talk about it openly, connect ideas and discuss effective decision-making.