5 steps to develop innovation strategy for your company
A growing number of firms recognize the need for innovative planning and actively implement it. This is due to growing competition: you cannot recon only for today, you have to constantly look for and introduce innovations, anticipate and plan possible changes in order to survive and win in the competition. According to McKinsey, at least 84% of executives say innovation is important to their growth strategy.
The choice of type and the creation of a strategy is the key to the success of innovation. The design of innovative transformations provides a certain sequence in the selection and implementation of an innovative strategy: from setting goals to its practical implementation. Today we’ll talk about the development of this stage of innovation, but first, let's figure out what the term ‘innovation strategy’ implies?
An innovative development strategy is a set of goals and objectives, decision-making rules and ways of transferring a company from an old position to a new state based on the introduction of innovations - technological, product, organizational, managerial, economic, social - and positioning the company in competitive markets for goods and services.
The whole variety of innovative strategies can be combined to three conditional groups:
Offensive — aimed at developing new technological solutions for implementing a growth strategy in the form of market penetration or diversification. This type of innovation strategy is typical for firms that base their activities on the principles of entrepreneurial competition. It has a high risk and a high possible payback. It requires leaders of a certain classification in the implementation of scientific and technological innovations, the ability to give out new market prospects and changes, to quickly implement them in goods or services. In most cases, a focus on research in combination with the use of new technologies is required.
Companies that use it: technology startups: Uber, Spotify
Defensive — aims to maintain the company's competitive position in existing markets. The main function of such a strategy is to activate the cost-benefit ratio in the innovation process. This type of innovation strategy also involves high risk and is suitable for firms that can profit in a competitive environment. To do this, you need to win a significant market share and maintain a profit margin through low production costs. As the experience of large companies shows, success is expected by those firms that have strong positions in production and marketing. At the same time, it is necessary to maintain sufficient scientific and technical potential in order to quickly respond to innovations introduced by a competitor.
Companies that use it: medium and large technology companies: Google, Apple
Imitation strategy — used by firms with strong market and technological positions. The imitation strategy is used by firms that are not pioneers in the launch of certain innovations on the market. At the same time, the basic consumer properties (but not necessarily technical features) of the innovations launched on the market by small innovative firms or leading firms are copied. Alternatively, a new technology is acquired from others, for example, through the purchase of licenses. A license can cost much less, be acquired faster and act more reliably than its own developments and inventions. This is a rather successful strategy, but to adapt the original and creating a monopoly situation invention, high special qualifications and tireless maintenance of the achieved level are necessary.
Companies that use it: companies with strong market positions: Samsung, Sony, Xiaomi
The types of strategies are shown in more detail in the image below:
It is worth noting that in the information age, innovation activity is strongly focused on digital technologies, the processes of their development and implementation. The study of digital innovation requires, on the one hand, a solid knowledge base in the field of technology and software production, and on the other hand, an understanding of innovation management and business processes. This fact should be taken into account when starting the development of an innovative strategy.
Let’s proceed directly to the steps to develop and implement an innovative strategy.
1. Define goals and strategic approach to innovation
The first step in the process of developing an innovative strategy is to determine what exactly you are striving for. In other words, you need to conduct analytical work, assess the current state of affairs in your company, and then clearly state the innovative goals and directions of your innovative strategy.
Define: what do you want to achieve through innovation? Think about your long-term business goals and things that are likely to promote your business even after a while.
2. Know Your Market: Explore Customers and Competitors
The second step in creating an innovative strategy is to study the target market and target audience segment for which your product/service is valuable.
In order to be able to effectively innovate and meet the needs of your customers, you need to understand what your customers really want and remove all unnecessary. To be able to do this, it is important to clearly know what is happening in the market, its dynamics and trends.
Since competitive needs are individual and often very specific, it is not recommended to fully copy the strategy that worked for the other player on your field, it rather makes sense to learn valuable lessons.
Speaking of valuable lessons. Read our article 5 Lessons every product owner should learn from recent failed innovations.
3. Determine the value of your offer
The next and probably the most important step is to determine what makes your offer unique and valuable. How exactly are you going to win? What innovations will allow the company to use this value and achieve a competitive advantage?
Since the goal of innovation is to create a competitive advantage, you should focus on creating value that either saves your money and time of your customers, or makes them want to pay more for your offer, provides greater social benefits, makes your product more efficient or more convenient to use or more durable and affordable than the one available on the market.
To be able to create a unique value proposition, you need the ability to identify and use new empty markets. Provision of advantage is achieved due to the fact that competition does not matter. To succeed, you only need to adapt existing products or services by differentiating and reducing costs.
4. Create your own innovative methods and systems
In order to be able to implement their innovative strategy in a scalable and integrated way, you must find out what innovative methods and systems you need in order to be able to connect the elements of the innovation infrastructure together. What will be the most important systems supporting and helping to measure the results of an innovation strategy?
British economist Christopher Freeman defines innovation systems as "a network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and disseminate new technologies."
They include the following elements:
- The role of R&D companies, especially regarding technology.
- The role of education and training related to innovation.
- Conglomerate structure of industry.
- Production, marketing and finance systems.
Use the above and then no competitors will fright you.
5. Implement your strategy
After you have chosen your strategic approach to innovation and compared all the most important elements related to it, it is time to implement your innovative strategy.
To keep innovation a strategic priority, focus on your goals and systematically implement your innovation strategy. At this stage, it is advisable to begin the development of technological solutions, which will become the main trump card of your innovative strategy, but do not rush:
“Choosing what kind of value your innovation will create and then sticking to that is critical, because the capabilities required for each are quite different and take time to accumulate” — Gary Pisano, Harvard Professor of Business Administration
Your strategic long-term goals will shape the course of action and will support your innovative work. Having boundaries and focusing on the ultimate goal is the only sure way to achieve this. In addition, the customizability of your solution should be another important point, as this will provide flexibility for implementing an innovative strategy.
To succeed in developing the best innovation strategy, you need to identify and compare the best possible strategic decisions needed to win. However, making this choice is only half the battle, as it is no less important to test the approach in real conditions, but you will read about it in our other articles, for example, in this Tech innovations: why custom software is a MUST or this Business innovations: what should we expect in 2020, or maybe even this one Idea Development: How to Create and Implement Innovative Ideas. Good luck!