Innovation works even in the worst of times.
According to a recent McKinsey report, those who take on this challenge during adversity outperform other companies by 10% during the crisis and 30% post-crisis.
Realizing those returns requires a sound innovation strategy, and the capabilities required to deliver it. In their Innov8rs Connect Unconference session, Innovation360 Australia's Peter Glasheen and AJ Kennedy provided guidance how to choose and lead the right innovation strategy.
Choosing and communicating the right innovation strategy for your company’s needs begins with your company’s aspirations. Aspirations can be the type of innovation you want to undertake: incremental or radical. It could also be an aspiration for profit or growth, as driving technology, seeking the real needs of users or having an intimate knowledge of the current market, trends, customers and competitors.
A balanced approach between the extremes makes your company more adaptable across its business horizons and helps you ‘build the now’ and ‘search for the new’ at the same time.
A snippet from Peter Glasheen & AJ Kennedy’s session during the Innov8rs Connect Unconference, June-September 2020. To watch the full session recording, join Innov8rs Community with a Content or Premium Pass.
Types Of Innovation Strategy
The answer to ‘why are we innovating’ comes from the mixture of strategies that your company employs. There are three different types of innovation strategies we commonly encounter:
- Need seekers
- Market readers
- Technology drivers
Technology drivers strive for breakthroughs and incremental change aided by new technology. Market readers take advantage of proven, data-driven market trends and an understanding of customers and competitors. Need seekers look for new opportunities by understanding the end-user and rapid, go-to markets. A number of top companies employ a mix of these strategies. Apple is an excellent example of a company that employees the need seeker mentality. Samsung excels at reading the market, while Google is, without surprise, a technology driver.
Innovation Strategy Design
Your innovation strategy and corporate strategy need to be aligned, as well as coherent.
To be successful, an innovation strategy must contain the following:
- A clearly articulated and concise corporate strategy that outlines your overriding goal, scope of activities and competitive advantage
- A 360 assessment that covers what management, employees and externals perceive
- A clear purpose, vision and mission
- Identified goals for innovation
- Capabilities identified and strategies aligned
Together, these factors form a coherent innovation strategy from which you can establish strategic initiatives as necessary. It is also important to understand how to manage your innovation across different business horizons:
- Horizon 1 is your core business, the ‘’Build the now’ part of the organization
- Horizon 2 is growth, meant to create new products and solutions in the coming years
- Horizon 3 is the future, learning and gaining insights that help you change the status quo of your industry
Leadership For Different Horizons
Your organization may need to ‘build the now’ by continually improving your existing business, or ‘search for’ and create ‘the new’ business with either short-term or long-term goals. On that sliding scale, 5 distinct innovation leadership styles tend to succeed, as we’ve learned from Pierre Loewe, Peter Williamson and Robert Chapman Wood.
1. The Spiral Staircase
Under this umbrella, the focus is on the customer and satisfying current needs. Using an internal existing team, you are gradually and in small steps climbing upwards without losing sight of the overall goal. The strategy will be defined by steady movement and regular incremental innovation successes. When added, these can have large impact, so this style is more than continuous improvement, and when taken to a very high level could end up in the creation of a new business – think of how well Amazon got at some internal functions that then turned into AWS.
British Airways is another perfect example of this leadership style. The airline gained an edge in a hyper-competitive market by leveraging its internal brand managers to improve customer satisfaction, including the innovative option of customizing seats for each customer.
2. The Cauldron
In many ways, the cauldron is the opposite of the spiral staircase. In this scenario, common especially for startups and entrepreneurial leadership styles or where transformation is required.The business model is under constant challenge by new ideas that might disrupt the core. Anytime something bubbles to the surface, it’s examined, leading to change and innovation at potentially rapid pace.
Think about Google’s approach to gaining market leadership and continually disrupting a number of industries today. You’d expect nothing less from a company whose business model is as ambitious as ’organizing the world’s information’.
3. The Fertile Field
Within this style and strategy, the organization attempts to use its existing capabilities and resources in new and innovative ways – rather than investing dramatically by pushing significant funds and time into new resources and capabilities. It’s a process that lends itself to consistent growth due to the limited risks involved in using ‘existing resources’ and a tendency to focus on adjacent innovation or exploitation of the core.
Shell has distinguished itself in the oil and gas industry through this type of approach. Especially it’s recent history is full of case studies showcasing how good executives and decision-makers are at leveraging the resources they have for innovation and future growth.
4. The PacMan
This style is, in many ways, self-explanatory. It’s an acquisition strategy at heart. Innovation occurs through outsourcing innovation, financing and acquiring startups, and other ways to acquire new resources and capabilities in the marketplace to drive future growth and the next big thing.
Cisco is one of the most famous examples of growth using this approach. After its founding in 1984, it famously grew out of a number of small tech acquisitions that kept it at the cutting edge of innovation and technology. Its acquisition of BabbleLabs in August 2020 to improve the audio quality of its own virtual meeting solutions is just the most recent example.
5. The Explorer
We end with the explorer, a strategy in which we’re constantly looking at future possibilities. Under this leadership style, the organization explores possibilities and invests time and money into them without the demands or expectations (and limitations) of short-term profits.
Smartphones are common these days, but they weren’t when Motorola began its research into mobile telephones. In fact, that company spent 10 to 15 years developing its first mobile phone when the market didn’t even exist. It’s the perfect example of a conglomerate leveraging the Explorer model to prepare for long-term market leadership.
Leading Innovation Across Horizons
In an ideal world, every organization can invest resources into each of the above five leadership styles for innovation. But with limited resources and funding, you need to make the right choices.
Most organizations will leverage a similar mix of leadership styles to manage and encourage innovation. That typically fits into one of three horizons:
Horizon 1: Spiral Staircase. You’re looking to build and improve on the now, within your existing core business.
Horizon 2: Cauldron, Fertile Field, and/or PacMan. You’re looking to search for the new, with a focus on growth.
Horizon 3: Explorer. The search for the new is more long-term, focusing on future business rather than immediate growth.
Within these styles, and with the right mix, you’re well on your way to successfully innovating within your unique environment.