Innovation Strategy Made Easy – This Is How It Works!

The innovation strategy allows everyone to pull together

Everyone wants innovation.

Many already have an innovation strategy. For new, inspiring products, new business models and sources of revenue. For patents, technology innovations and technology leadership. And for new business areas in other sectors or inspiring services for the customers of the future.

But innovation is a difficult topic. The more you try to force innovation, the less progress is made. Teams go round in circles. Frustrating brainstorming sessions. 1000 ideas and no innovation.

Established industrial companies in particular are facing this challenge. With changing markets and ever-increasing competition, where previously there was a profitable unique position for years. The pressure is growing to develop further as a company and open up new business.

An innovation strategy is actually quite simple!

The innovation strategy answers a very clear question:

How do we ensure that we inspire customers a little more than the competition with new offers? And how do we maintain this lead in the long term?

At its core, every strategy says what you don’t want to do [Michael Porter]. This applies equally and even more strongly to the innovation strategy. This is because the innovation strategy needs even greater focus than any other strategy. Because too many ideas sound exciting too quickly and in the end there is no energy left to bring even a single topic to the finish line. What Dave Kelley says is true: innovators and start-ups don’t starve. They are drowning in ideas.

What steps are necessary to develop an innovation strategy?

1. identify relevant stakeholders and gather their perspectives on innovation

The following points summarize well which stakeholders need to be gathered:

• Who has a strong opinion on innovation and the future of the company?
• Who must support the innovation strategy and subsequent implementation and provide resources and capacities?
• Who are potential disruptors and opinion leaders, both positive and negative, that are better to have on your side?
• Who has relevant experience with innovation, for example from previous employment or from founding their own company? If not available within the company, an external innovation consultancy can take on this role.

Short one-on-one meetings with stakeholders work best to gather insights and interests for the future innovation strategy .

2. work out common motivation for innovation and discuss and resolve contradictory positions

The insights gained from the stakeholder interviews form the initial basis for a joint innovation strategy. The following questions help to capture the most important findings and open points from the different perspectives:

• What do all parties want equally?
• Which interests differ and cannot be brought together by simple reformulations?
• What questions must the innovation strategy answer for the company from the perspective of each individual?
• Which additional stakeholders are addressed as relevant and should possibly be involved?
• What risks do the interviewees point out?
• What are valuable ideas that should be discussed later in the joint meeting with the company management?

With a little experience in innovation management and the development of innovation strategies, it is possible to recognize the motivation behind the pursuit of motivation on this basis. In most cases, the picture is already very clear. Sometimes there are two or three different “schools” in the organization that see different reasons why innovation is necessary.

Common points can be formulated as an initial basis and bring the team onto a common track. With this starting point, the open points can be openly discussed, explained and resolved in a joint meeting.

3. jointly specify and define objectives for the innovation efforts

If the motivation for innovation is clear, the objective can be formulated together. A vision for innovation is created. Depending on the corporate culture, this vision may already contain clear, quantitative goals. If the company is less process-oriented and quantitative, the vision can also be formulated in a more abstract way. It is important that all parties “sign up” to this vision as part of the innovation strategy . At least metaphorically. But the actual, physical signature can also be a good tool for actually committing all parties to the agreements made.

4. derive suitable procedures for innovation from the strengths and weaknesses of the company and the given market situation

In combination with your own objectives and ambitions, existing strengths and weaknesses provide the decisive pointers for a suitable approach. Important questions are, for example

• Do we believe we can maintain and expand our position in our current market? Or are the current market and the current industry more of a dead end?
• What capacities and resources do we have at our disposal to drive innovation forward and what possible approaches to innovation can be considered or are rather excluded?
• Is the current business model set and should it be supported with additional products and services? Or would it make sense to supplement it with additional business models in the current situation?

A good overview of possible approaches in principle is helpful. Without experience of different innovation approaches and their strengths and weaknesses, companies quickly fall back into the approach they are already familiar with from their day-to-day business. And this is rarely the best choice for creating innovations.

5. define responsibilities and metrics that show whether the strategy is moving the company forward

Innovation is sometimes the responsibility of a separate business unit that is only responsible for innovation. Sometimes an existing business unit is also responsible for innovation and is therefore responsible for the innovation strategy and its implementation. Typical candidates for innovation responsibility are

• Head of Innovation (own division or staff unit)
• Head of Product Management (partly located in Marketing)
• Head of Technology or Research & Development
• Direct responsibility in management

A few clear target metrics help to identify whether the company is moving in the right direction without building overly complex control tools. Common metrics for innovation that are related to the innovation strategy are:

• Proportion of sales generated with innovation and new products (e.g. all products and services that have been on the market for less than 2 years)
• Proportion of completed products that were not customer orders but represent the company’s own product portfolio (particularly relevant in the case of a high proportion of customer-specific developments)
• Number of inventions that are reflected in patent applications AND the active product portfolio (especially for companies that pursue technology leadership)
• Lead times for innovation projects from the initial idea to market launch
• Degree of target achievement of the turnover, sales, margins or returns predicted for the innovations

What happens next with the innovation strategy?

Now it is up to the person responsible to consider what the implementation should look like in concrete terms. Some measures can be initiated directly. For example, communicating the new innovation strategy. Then the development of an innovation process, the assessment of current innovation capabilities or the development of expertise in innovation methods can be useful. Organizational changes and the procurement of software solutions are also conceivable as soon as the appropriate innovation process has been established. Even if impatience is high, it often takes some time before innovative ideas for new products and services can actually be developed.

Examples of innovation strategies

The question that an innovation strategy must answer is not complicated. And the answer does not have to be complicated either. At a high level, innovation strategies can be as follows:

1. We launch 100 new products on the market every year. The product innovations should be brought to market quickly and not be expensive to develop. If 3 of these new products are a success and are added to the portfolio as existing products, then we are satisfied.
2. We observe which innovations the competition brings to the market. We take up what appeals, develop it two steps further and take over the market with the help of our supremacy in terms of capacity, market access and financial strength.
3. We develop innovation exclusively within the framework of customer orders. In the case of challenging orders, we finance the development through the project and use this development as a springboard. On the basis of the customer project, we develop innovative products that can be sold on the broader market because the solution is needed by more than just this one customer.

Of course, implementation requires further details. In addition to the general direction of travel, the innovation strategy also defines, for example

• targeted level of innovation
• Acceptable time-to-market
• Target sectors and exclusion sectors for future innovations
• Occasions and regularity of innovation efforts

How do companies develop a suitable innovation strategy?

Two days are enough to develop an innovation strategy for any organization. The decisive success factor for any strategy is that the strategy is actually implemented. To achieve this, everyone who is necessary for implementation must be on board. And all those in the company who have the power to prevent implementation. This applies above all to the following parties

Which parties need to support the innovation strategy and should be involved in its development?

The perfect setup is the entire company management. This means the management and all those responsible for the functional areas. In individual cases, this can be a very large group, for example if the team consists of 20 sales managers with management authority and there is no central sales management. This must be weighed up on a case-by-case basis. The following parties are typically involved as a minimum:

• Company management:
  Company management determines what has priority. If the company management says “the customer always comes first, and when the phone rings and the customer calls, innovation will have to wait”, then short-term sales will always put the brakes on medium and long-term innovation topics. However, if it is clearly communicated that the customer of tomorrow is at least as important as the customer of today, then the innovation strategy has a chance. Only then!
• Sales:
  Anything that is not sold and brought to market with commitment by sales will never have a chance of being a successful innovation. Unless the future sales channel bypasses sales in the form of D2C or an online store. However, such directions should be discussed as part of strategy development , and the market assessment of the sales department is indispensable.
• Technology/development:
  Ideas for solutions, technical implementations and details in the product are developed in the technology department. This is where a large part of the effort lies. Even if less technology and development is actually required in the early phases of innovation than is often assumed.
• Marketing:
  Understanding markets, target groups and future markets is often a home game for the marketing department. There is a lot to do here, especially at the beginning of innovation projects. Innovation approaches are increasingly moving away from technology-driven projects (technology push) towards market-oriented developments (market pull). The detailed determination of whether technology push is the most suitable project is something that needs to be jointly agreed as part of the innovation strategy .

Depending on the company structure, additional functional areas may be required. If the company is a chemical production facility in which the plants run and produce full-time, then production must be involved. Without the involvement of production, the innovation team will not be able to obtain production capacity for testing later on.

TOM SPIKE works with you to develop the right innovation strategy

Together with your specialists and managers, we develop your innovation strategy. As a prelude to the further development of specific innovation projects or as an independent building block for your management system. As an innovation consultancy, we have comparative values and reference projects from numerous industries to facilitate your strategy development and experienced moderators who ensure the best joint result for all decision-makers and stakeholders in the company. In the long-established Basecamp workshops or individually tailored to the needs of the company.