Tuesday, May 17, 2011

No Strategy, No worthwhile Innovation

I've written previously that many organizations confuse innovation and strategy.  Strategy consists of the vision your executives have for the business over the longer term.  Strategy includes how the firm will acquire the necessary inputs and resources it will need to thrive, and encompasses the changes that the firm will make in its products, services and served markets in order to continue to grow and differentiate from competition.

Or, at least, that's what they tell you in the MBA program.  Innovation, on the other hand, is a tool or capability that helps identify new markets or opportunities and encompasses the tasks (idea generation, validation, prototyping and commercialization) to bring a new product or service to market, to serve existing or prospective customers.  Note that innovation, at least in the definition I've provided, isn't necessarily dependent on strategy.  And clearly, anyone or any firm can innovate.  Dreaming up new ideas, new products or services isn't really all that hard.  But what makes innovation so unusual is when a new product or service aligns with a customer need and those two things happen in a firm that can create the product and address the customer need.  And that alignment happens because of vision and strategy.  Far too often, innovation creates interesting products that don't provide a necessary benefit to customers, or products or services that don't align to corporate strengths.  And that is a signal that innovation is out of step with strategy, or that there is no clear strategy.

Every firm starts out with a strategy.  Entrepreneurs attack a need they believe is overlooked or unfulfilled.  Over time, as businesses grow and the range of products and services increase, and the number of offerings to defend increases, it becomes more difficult for a firm to communicate with great clarity its strategy, since strategy says as much about what you "won't" do as it does what you will do.  Further, as the market becomes comfortable with a steady, consistent earnings model from your business, creating new products and services, or even introducing new strategies, takes a back seat to maintaining a consistent earnings engine.  The longer this focus ensues, the more importance to maintaining status quo, so the strategy becomes more about maintaining status quo than about creating new visions or new products or attacking new markets.

What happens, then, when an executive decides he or she has no recourse but to innovate?  Without a clear strategy, or with a clear strategy that is focused on maintaining a steady earnings engine, it is exceptionally difficult to know which markets, opportunities, products or technologies are valuable and interesting.  Without clear strategy, many innovators simply spin their wheels.  Is it any wonder that many of the firms we consider good innovators are also good strategists?  Steve Jobs, when he returned to Apple, cut a huge swath of products that Apple had offered, narrowing the focus of the firm.  He was responding to Fredrick the Second's axiom of war that "he who defends everything defends nothing".  Apple stepped on the innovation gas when Jobs reduced the breadth of the product offering and created a clear strategy.

You don't need a clear strategy to innovate, but if that's your condition you'll find many ideas that are interesting but ultimately aren't valuable.  Good strategy defines scope and targets for innovators to achieve.  Good strategy, well-communicated accelerates innovation and helps innovators achieve better results.
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posted by Jeffrey Phillips at 4:28 AM


Anonymous Paul Weismantel said...

Great point, overlooked in a startling number of firms. Curious as to your view on another boundary, that being what a company is good at? Even armed with a strategy, I see many leaders aspirations sometimes getting ahead of the capabilities of the organizations they run.

8:36 AM  
Anonymous Anonymous said...

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