The digital age has ushered in a relentless pace of change, forcing established companies to constantly adapt and innovate to survive. Innovation labs, accelerators, hackathons, and open innovation programs have become commonplace as companies strive to stay ahead of the curve.
Yet, despite these efforts, many companies struggle to translate innovative ideas into tangible results. Nimble startups often outrun corporate teams, and innovation labs frequently fail to deliver the scalable growth envisioned.
The culprit behind this persistent problem? A critical disconnect between strategy and innovation.
The Persistent Problem
Headlines are often filled with stories of established companies being outsmarted by young, innovative startups. From Kodak’s failure to adapt to the digital photography revolution to Blockbuster’s inability to compete with streaming services, the graveyard of once-dominant companies is a reminder of the consequences of innovation stagnation.
Even large investments in innovation labs haven’t guaranteed success. Many labs struggle to produce significant results. They often churn out ideas that fail to capture market needs or align with the company’s core business.
The root cause of these failures lies in the fundamental disconnect between the innovation efforts and the company’s overall strategy. Innovation, left unguided by a clear strategic vision, can become a scattershot approach. It can generate a plethora of ideas but fails to deliver impactful solutions.
The solution is building the missing link between strategy and innovation.
The Importance of Strategic Alignment
Take Apple under Steve Jobs’ leadership. Jobs famously steered Apple away from unfocused diversification. He instead focused on strategic innovation that revolutionised entire industries. The iPod, iPhone, and iPad were all born from a deep understanding of customer needs and a clear vision of how digital technology could transform the way we consume media.
Similarly, Google’s success hinges on its strategic insights that led to the development of the PageRank search algorithm and the creation of a disruptive advertising model.
This makes it clear that every innovation effort, from ideation to implementation, must be linked to two key pillars: defining strategic priorities and leveraging unique advantages.
Defining Strategic Priorities
The first step in bridging the gap between strategy and innovation involves establishing clear strategic priorities. Companies need to identify the problems and opportunities that matter most to their business and customers. This can be approached through two lenses: the problem lens and the opportunity lens.
Problem Lens
This approach focuses on solving specific customer or business problems. For instance, Walmart recognised the growing demand for online grocery shopping and the shortcomings of its existing online platform. This realisation became a strategic priority, leading to the development of a more user-friendly online grocery ordering system.
Opportunity Lens
This approach involves identifying opportunities to expand into new markets or provide unexpected benefits to customers. Amazon’s decision to explore cloud computing exemplifies this approach. This led to the birth of Amazon Web Services. By leveraging its existing infrastructure and expertise, Amazon identified a significant market opportunity beyond its core retail business. They grabbed this opportunity and turned it into a significant branch of their services.
Leveraging Unique Advantages
The second key pillar for strategic innovation is understanding and capitalising on a company’s unique advantages. These advantages can take various forms, from physical assets and data to brand reputation and intellectual property. Identifying these strengths allows companies to build a right-to-win against competitors attempting similar innovations.
Disney, for example, boasts a unique advantage in its iconic characters and stories. They used these iconic characters to expand across various business models, from films to streaming services, theme parks, and merchandise.
Walmart’s physical stores reach 90% of the U.S. population. So, they have a unique advantage in terms of proximity to consumers. This advantage informs its digital business models, such as mini fulfilment centres and in-store digital advertising networks.
Embedding Strategy into the Innovation Process
Simply defining strategic priorities and identifying unique advantages isn’t enough. To truly embed strategy into the innovation process, companies need to integrate these principles into every step, from ideation to execution. Here’s a five-step approach to achieve this:
- Setting Strategy at Different Levels
A multi-functional team at the C-suite level should collaborate to define strategic priorities based on unique advantages, competitive landscape, and customer insights. This strategy should be cascaded down to individual business units and functions, ensuring everyone understands the overall direction. Regularly revisit and update the strategy to reflect changing market dynamics and evolving competitive threats.
- Communicating Strategy to Employees
Transparency is key. Share the defined strategic priorities and unique advantages with all employees, not just those directly involved in innovation initiatives. Use various communication channels – virtual forums, strategy workshops, and town halls – to ensure everyone aligns their efforts with the overall vision.
- Greenlighting Projects Based on Strategic Fit
Not every innovative idea deserves funding. Evaluate proposed innovations against two key criteria: alignment with strategic priorities and the potential to leverage the company’s unique advantages. Move forward only with projects that demonstrably address defined challenges or opportunities and provide a clear competitive edge.
- Validating Through Experimentation
Instead of relying on assumptions, conduct low-cost experiments to validate key business model hypotheses. This could involve testing different customer acquisition strategies, pricing models, or product features. Gather data on customer adoption, market fit, and the potential for profitability. This will help identify the most promising innovations.
- Scaling Successful Innovations
Don’t be afraid to kill ideas that aren’t performing as expected. Reallocate resources to projects that show promise. Utilise iterative funding cycles where teams must demonstrate progress and validate their approach before receiving additional investment. This ensures resources are focused on high-potential ideas and minimises wasted effort on failing ventures.
Conclusion
Blindly pursuing novelty without a clear roadmap for success is a recipe for failure. The missing link? Strategy. Aligning innovation efforts with clearly defined strategic priorities and leveraging a company’s unique advantages is paramount for driving impactful and sustainable growth. By implementing the five-step approach outlined above, companies can bridge the gap between strategy and innovation.
This strategic alignment ensures that innovation efforts do not merely chase trends but solve real problems and create valuable opportunities. Ultimately, by integrating strategy with innovation, companies can outcompete rivals, achieve meaningful growth, and thrive in the ever-evolving digital landscape.
