If we are to discover a prosperous future path, innovation is no longer optional.

With a potential recession in sight and inflation, layoffs, and other geopolitical issues challenging the ability to protect traditional forms of competitive advantage, innovation is our only option.

What are the biggest challenges heading into 2023? How to address innovation within the current market conditions? Where to start when it comes to leading organizations forward?

During our recent The Innovator’s Handbook 2023 launch event, Rita McGrath (Best-selling author and Professor at Columbia Business School) and Alexa Dembek (Chief Technology & Sustainability Officer at DuPont) explored what it takes to define a strategy for innovation when time horizons get shorter and shorter and opportunities and threats are everywhere. Here's a summary of their conversation.

How To Define A Strategy For Innovation In 2023

“A few decades ago,” – says Rita – “the perception was that your industry determined your fate. Back then, people thought that finding an attractive position in an attractive industry and throwing up entry barriers was enough to ensure a long-term, sustainable competitive advantage”.

Those days are over. What we've learned since then is that, just like everything else, competitive advantages have a life cycle. And Rita and Alexa have no doubts: corporates can’t survive nor protect and increase their competitive advantage unless they sharpen the ability to innovate and integrate strategy with innovation.

“The existing business pays your salary. Innovation pays your pension”.

However, Rita believes we're still at a very primitive stage when it comes to leveraging the power of innovation to take us into the future. In fact, only recently we’ve started to realize that defining a strategy for innovation is not only about having great ideas; instead, it's about building a sustainable innovation process proficiency. Still, too often, the existing business's weight, power, and depth get in the way of doing innovation properly.

So, how to define a successful strategy for innovation at the dawn of the new year?

1. Stay Focused On What You Can Control

The world is changing and that means there are so many headwinds as well as delightful business opportunities. Can we change fast enough with the external world? What do we need to do to accomplish the objectives of our organization? These (and more) questions will likely keep innovators up at night.

As innovators, we have a responsibility to equip our companies with a solid strategy to survive these turbulent times. According to Alexa, defining an innovation strategy starts with staying centered and focused on what we can control, which means being able to answer some crucial questions, including (but not limited to):

· Where are we headed?
· How can we stay relevant in the future and maximize our value?
· Where does innovation matter?
· How can we delight our customers?
· Where do we need to drive renewal?
· Where do we need to drive new growth?
· What habits do we need to change or adopt?
· How do we ensure that our colleagues feel part of this journey?

"By focusing on what you can control, by having a mindset of abundance, you won't be able to do everything you want to do, but you can do a lot".

2. Measure Your Innovation Headroom

Answering these questions will allow us to assess the innovation headroom and rebalance our investment portfolios accordingly. Identifying innovation headroom means understanding where the company still has room for growth, what small bets we need to stop making, and how competitive the company is overall. Investments and resources can thus be reallocated. In a nutshell, a mature business unit or project with no innovation headroom shouldn't be kept alive.

“Focus on growth, not projects. Or rather, fall in love only with projects that are likely to deliver growth”.

3. Create An Inclusive Culture And Promote Cognitive Diversity

The best way to solve problems is to have multiple collisions of diverse perspectives. In a corporate context, “diversity” means so many different things: it can be age-based, regionally-based, and so much more. Yet to Alexa, the most important form to have and nurture is cognitive diversity- which is also the hardest to measure. To her, getting people who think completely differently in a room to challenge paradigms is the cornerstone of any company’s success.

How to manage all those perspectives toward an outcome? – you might wonder. There isn't a clear algorithm for how to set up a trusting environment where all forms of diversity are welcomed. It’s up to leaders, through informal mechanisms, to invite debate and diverse thinking, to bring on challenges, and to value talent, diversity, and well-being. "I'm from Chicago," – says Alexa – "and Chicago doesn't have only one culture. All the sub-communities with their own cultures are critical to this city's one-of-a-kind character. The same holds true for companies: we need to bring all the different voices in".

“It can't just be the math. The financials are the outcome of a healthy, inclusive culture. And an inclusive culture is key to future value creation. Today you can't do anything without it. And so, celebrate debate and collision of thoughts. That's how we get better. It's not always fun, but it’s important and enlightening”.

Rita echoes Alexa and says that the different ways leaders could use to bring out the diverse voices – for example, the ‘nominal group technique’ and the ‘no interruption rule’ – are surprisingly simple if they're willing to take the time to invest in them. Creating such a culture doesn't have to be a daunting task. Implementing basic ideas in running meetings and bringing people together may be sufficient in most cases. “I would not want to be a homogenous competitor competing with a company that's figured out diversity”, she wraps up.

4. Assign Slack Resources To Innovation Teams

Rita claims that having too many resources is really dangerous for innovation. This might sound counterintuitive, but in the very earliest stages, teams only need access to slack resources; otherwise, they'll feel pressured to produce results immediately. And, in Rita’s words, “that cuts short the learning and what might be a great innovation going forward”.

"We always think of innovation as inventing new stuff. Yet we don't always have to create the next big thing to be innovative".

Giving them a few resources goes hand in hand with having them focused on innovation only. In fact, innovation can't be a side activity. It requires a full commitment, effort, and dedicated teams. Nevertheless, many companies, to use an expression of Rita, "spread people out like peanut butter". As a result, any given person has too many tasks on their agenda, including innovation tasks. And this will ultimately lead any innovation strategy to failure.

5. Rely On An “Organizational Sherpa”

It’s no secret, it can be difficult for companies to innovate. Sometimes leaders are petrified in their day-to-day, they might not know how to innovate, or how to manage their people for innovation purposes. What’s needed in this case is an “organizational sherpa”, as Rita calls it. Simply put, just like a sherpa knows how to climb Mount Everest, the organizational sherpa knows what it means when the corporate wind blows one way or another.

Sherpas are influential, powerful people who have friends across the organization, senior-level credibility, and are deeply respected. They know how to influence the organization and are seen as spokespeople for the organization's well-being.

What are the best ways to find such a sherpa? There is usually no need to look elsewhere- they may already be in the company. In many cases, senior executives are excellent sherpas. Hence, business leaders' involvement, accountability, and time spent on innovation could ultimately determine whether an innovation strategy succeeds.