Do You Need an Innovation Strategy?
We are all strategic thinkers.
We think strategically about how to get a promotion, how to pack for vacation, how to arrange our living room furniture.
My girlfriend and I have hatched elaborate strategies to catch the solitary mosquito in our house that plagues us every night. Never has so much brain power been spent on a battle so futile.
The term “strategy” wasn’t used outside the military sense until the 18th century, and “innovation strategy” is barely a generation old. But now everyone has a strategy for everything. In making the word so ubiquitous, we have broadened its scope, lessening its power and dulling our own thinking. But by better understanding the specifics of what strategy really is — and what it is not — we can hone in on the elements that help improve our own strategic thinking process.
Much of the modern conversation around decision-making is a tug-of-war between Malcolm Gladwell’s emphasis on quick decisions vs the slow thinking approach that teaches us to resist our “automatic tendencies.” In the realm of innovation strategy, we walk a fine line between making the right decision and making it quickly. On any given day, our entire business model could collapse because of the right decision made too late, or the wrong decision made too early.On any given day, our entire business model could collapse because of the right decision made too late, or the wrong decision made too early. Click To Tweet
This is why it’s helpful to have a pre-strategy template that helps us figure out if it’s time to design and implement a strategy, and what we are missing if it’s not. And the first thing to inventory is your goal.
Do you have a goal?
The unambitious do not need strategy.
We do not need a strategy to play catch with a friend. We are not creating anything. We are not racing against something. We are not keeping score. Our goal is to create a nice memory, and we have succeeded by doing.
But adults are rarely in a situation where we aren’t trying to achieve a goal. We are driven to accomplish, and that ambition begets a strategic mindset. We go hiking to reach the peak, so we plan the optimal route and schedule. We take photos to capture memories, so we figure out the best angles and lighting to make those memories special. We are a goal-oriented species, and there’s rarely a moment when we aren’t strategizing how to do something, even if it’s on a barely conscious level.
Without a goal, there is no point to having a strategy. That is pretty obvious. But particularly where innovation strategy is concerned, it’s important to realize when you don’t have a clear goal, or when that goal is in flux. In situations where your environment is rapidly changing, you should constantly question your strategy. An important element to any strategy is the ability to sense and respond to the unpredictable chaos.
Do you already control everything?
The omnipotent do not need strategy.
Strategy is pointless when we have a monopoly on power. Playing tennis against an opponent requires strategy; playing tennis against a backboard does not.
Strategy is something we apply to the areas where we lack complete control, such as market forces, government regulations, and our competitors’ offerings. A chess player can’t control their opponents’ actions; a poker player can’t choose their cards. But both can control their own decisions. Strategy is how they minimize the impact of the things they can’t control, and maximize the impact of things they can.
Even when victory becomes unattainable, we use strategy to limit our losses. We fold losing hands. We push our chess opponent towards a draw. We give up on our business dominating the market and seek to be acquired by a stronger competitor.
Large organizations spend a tremendous amount of effort thinking about areas where they are dominant. They focus on the core business and how to improve their execution in a known market with a known product. Of course! This is where they make money. But this isn’t where anyone should focus their innovation strategy and investment. Instead, they should be thinking about the small gaps in their strengths where competitors may seek to displace them.
Blockbuster famously withdrew resources from their streaming video product in 2013 to refocus on their core business of DVD rentals and late fees. They had been poised to dominate the new streaming market, even having the chance to purchase Netflix, but they made a strategic blunder by ignoring the streaming gap, giving Netflix the opening they needed to infiltrate Blockbuster’s customer base.
SAP focused on its core Enterprise Resource Planning (ERP) software and allowed Salesforce to target the more niche Customer Relationship Management (CRM) segment. Now Salesforce is swiftly becoming an ERP itself, and SAP is being forced to respond and adapt after giving up its superior position.
Innovation strategy requires us to actively seek out areas where we are weak rather than just tweaking the areas where we are strong. Actively searching for and identifying our weaknesses gives us the opportunity to choose between avoiding conflict (by abandoning that area of the market) or fortifying our position (by devoting resources to making that weakness a strength).
If you are not actively searching for your weaknesses, other entrepreneurs out there surely are. The entrepreneur’s playbook is to look for any angle they can exploit to carve a small niche out of a dominant competitor by resegmenting the market. That is how David beats Goliath and how Dollar Shave Club beats Gillette. You should be doing the same.
Conducting usability tests on your competitors’ products is a powerful way to examine their weaknesses and gives you a framework to figure out how to employ your strengths against them. Competitive usability testing can often reveal a critical lack of capabilities, or use cases that the competitor is not focused on. If someone had conducted this analysis in 2013, the slogan might have been “Blockbuster and chill.”
Do you already know everything?
The omniscient do not need strategy.
A poker player needs a strategy because they don’t know what cards are coming up, or what cards the other players are holding. If they somehow had this information, their need for strategy would be greatly reduced — the only remaining “unknown” is what decisions the other players will make.
But poker is a game built on making the most of incomplete information, and the less information a given player has, the greater the need for strategy.
If we don’t know everything, then innovation strategy requires us to actively seek out information at all times. With limited resources, we must focus only on the data we can turn into useful information.
Acquiring random bits of data with no strategy to assimilate it and put it into action leads to being overwhelmed by data that we cannot process. Large organizations spend millions of dollars on research reports that they rarely read, seldom understand, and almost never act upon.
A good strategy includes actionable information. Knowing without doing leaves holes in your game plan for your opponents to exploit.A good strategy includes actionable information. Knowing without doing leaves holes in your game plan for your opponents to exploit. Click To Tweet
I once called a customer support line to deal with a technical issue. An email I had sent into the CRM had disappeared and seemed to be unrecoverable. Their response? “We have that exact same problem!”
I was surprised but hopeful. Surely if their own team were having the issue, then a solution was already underway. So I asked when it would be fixed.
“We don’t know, we’re not allowed to talk to the engineering department,” they told me. “I’m not sure they even know about this.”
Organizations need to actively seek out useful information, and then use it. More than just marketing reports and suggestion boxes, a good innovation strategy maximizes the flow of useful information across the organization. As Rita McGrath says, “Information flows from the edges.” Particularly with large organizations, it is the team members on the fringes who can spot the trends before the CEO.
Can you already do everything?
If you could do everything, you wouldn’t need a strategy.
Companies that try and do everything for everyone wind up doing everything pretty poorly. Unless you have unlimited resources to prevent upcoming entrepreneurs from establishing a foothold in your market share, you’ll need to prioritize. But because the market is constantly shifting, you need a resource allocation strategy to address emerging threats and opportunities. Meanwhile, entrepreneurs will be looking to sneak in through a hole in the dominant player’s game plan.
No company has the bandwidth, resources, insight, and sheer will to act on every possible course of action at once. Having market dominance or a big advantage doesn’t mean you don’t have competition on the horizon. It means you have to constantly review your strategy and prioritize your resource allocation to address the most relevant emerging threats.
When you DO need innovation strategy
We often feel like we have complete control, complete knowledge, or complete capabilities in a particular situation, and we are usually wrong. There is always some little thing that we don’t control, don’t know, or can’t do.
A chess player may get a migraine during a tournament and lose to an inferior player. A poker player may accidentally see their opponents’ cards and bet with their stronger information, unaware that their opponent is setting a trap.
Good innovation strategy accounts for the areas we don’t control, the information we don’t have, and the capabilities we don’t possess. Strategy is about leading with your strengths while shoring up your weaknesses, and knowing when to pivot when the information changes.
Strategy is the act of achieving goals in situations of uncertainty with limited resources. In innovation strategy, the time horizon is long enough that the uncertainty is practically bursting at the seams. Even the goals of innovation are unclear and constantly changing, nevermind the process.
So if you are heading into an innovation project and have complete control, complete information, and complete capabilities, congratulations! You don’t need an innovation strategy. But watch your back — overconfidence always leaves room in the market for other entrepreneurs hungry for your share.
- Innovation strategy is useful when we have a goal, don’t control everything, don’t know everything, and can’t do everything.
- Good strategy is constantly processing new information, focusing on what information is useful.
- Companies should always be ready when new information calls for a pivot.
Do you need help developing your innovation strategy?