What is innovation strategy? Discover best practices, definitions, tools, and examples
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What is innovation strategy?
An innovation strategy in business is defined as a commitment to a common innovation mission and a structured set of activities designed to support the future growth of an organization.
No two innovation strategies are the same. But they should all, at the very least, outline the goal of an organization’s innovation activities and define the key initiatives that will help it achieve that goal.
Buy-in from stakeholders is essential for even the best innovation strategy to succeed. All those who will contribute to its implementation need to understand and support it.
If everyone has the same map (and can read it), they’ll be able to work towards the destination without arguing about the directions.
For this reason, good innovation strategies are simple, clear, and easily understood by everybody involved – they’re not full of jargon and complicated innovation theory, but concise, actionable, and accessible for the entire team.
6 elements of a great innovation strategy
We’ve been developing action plans for innovation alongside some of the largest organizations in the world for more than a decade. Over time, we’ve sharpened our approach into an intensive program innovation strategy sprint. This customizable session looks different each time we run it, but the resulting output almost always includes these 6 key elements which we’ve determined are essential for an innovation strategy to succeed:
- A powerful growth mission
All innovation strategies should be anchored to a clear innovation mission statement and framework.
- A focused innovation portfolio
For the plan to be actionable, it needs to mention the key activities that will be funded to achieve the innovation mission.
- An actionable innovation plan
A blueprint for the execution of the new innovation initiatives.
- An innovation culture map
The innovation-culture benchmark needed to uncover challenges and opportunities going forward.
- A structured innovation capability approach
An innovation strategy must define the people, processes, programs, and targets/metrics required to measure success.
- A playbook for innovation (optional)
Tools, methods, and processes that will be used to achieve the innovation plan.
How to develop an innovation strategy
Be clear about your ambitions
If an innovation strategy is a path, the organization’s ambitions are its destination. To begin building the right action plan, you’ll first need to clearly define your business goals and articulate why you want to innovate in the first place. Ask such strategic questions as:
- Do you want to achieve short-term quick wins or long-term cultural transformation?
- Are you focusing on incremental innovation or do you want to innovate radically?
- How would you describe your current business innovation strategy?
Your answers will form the foundation of your innovation strategy. The more precise you are, the more successful your approach will be.
Figure out where you are now
A good innovation strategy will clearly define your strategic growth ambition, tactical resources, and operational capabilities. Outline what you have available by answering such questions as:
- What are your current innovation capabilities?
- How committed is your leadership team to executing an innovation strategy?
- Should innovative initiatives be approached bottom-up or top-down?
- Which key assets and resources will be available to help execute the strategy?
You may determine that you lack the innovation skills and mindset required for certain short-term goals. Setting up an innovation culture takes time – but it’s worth it. Widespread innovation capabilities can mean the difference between achieving your goals and seeing your strategy lose momentum before it’s even off the ground.
Make your innovation strategy actionable
Your innovation strategy should form the bridge between your high-level corporate mission, vision, and intent, and the day-to-day team activities. Who will actually be responsible for making things happen? Capture and structure that information with a clear, approved governance plan. We have a wide range of free innovation strategy tools to help you do just that. Keep reading to find out how to use them.
Innovation strategy process and tools
1. Start with an innovation audit
To determine what already works well and what needs further improvement, you’ll first need to audit the effectiveness of your current innovation capabilities and identify areas for improvement. An innovation audit is the way to go. You’ll need to use both quantitative and qualitative research methods.
2. Innovation landscape tool
Define how far away from home you are currently playing in pursuit of innovation outcomes.
Use the innovation landscape tool to determine the innovation types you’re aiming for now and in the future. This will help inform your resource allocation decisions. Are you investing too much or too little in the right innovation types for growth?
3. The 3 horizons model
Align on when you can expect so see business impact/return on your innovation investments.
The 3 horizons of model tool allows you to explore and define time-based growth expectations. Use it to indicate and communicate when return on your innovation (ROI) will materialize.
4. Innovation landscapes tool
Use the innovation landscape tool again to figure out how far away from home you want to play in a balanced risk/uncertainty portfolio.
5. Innovation mission map
Define your strategic innovation intent (in line with corporate vision, culture, and values).
Use the innovation mission map to outline where you want to go and why (in line with the corporate vision and mission), and analyze key internal and external drivers influencing your innovation strategy.
6. Innovation matrix
16 innovation initiatives you can choose to build your balanced innovation portfolio in support of the mission, and vision.
7. Innovation blueprint(s)
Define all the details for each initiative, including scoping, people, resources, funding, KPIs, and teams.
Blueprints flesh out all the ‘how’ details for each of your chosen innovation initiatives, from KPIs and metrics to teaming and organizational structures. Gain buy-in and iterate based on sponsor feedback and input.
Types of innovation strategies
Clever organizations never just go for one specific strategy (such as investing in iterative rather architectural innovation). So as not to put all their eggs in one basket, the best innovators often build a balanced portfolio of projects comprising a mix of horizon 1, 2, and 3 programs.
As a rule of thumb, they split up the budget as follows:
- 70% goes to optimizing what works through small, iterative improvements to existing offerings. Typically, companies will see results from these innovations in a horizon 1 timeframe.
- 20% is invested in pursuing adjacent or radical innovation which will typically produce results in a horizon 2 timeframe of 2-5 years.
- 10% goes towards uncovering breakthrough or disruptive innovation which is hard to come by and often takes 5-12 years (horizon 3).
The most innovative businesses often put even more emphasis on horizon 2 and 3 innovations. Those organizations might have a split closer to 60% – 25% – 15%.
How to implement your innovation strategy
Use the innovation matrix tool to pick the best initiatives for your goals
Often, organizations scatter resources between different business strategies and multiple innovation formats. The innovation matrix is a strategy framework enables you to map the 16 different programs your organization can run to achieve its innovation mission.
Innovation programs you can run
- Venture fund
- Structural Partnership
- External incubator
- Innovation Lab
- Internal Incubator
- Innovation Strategy
- Co-creation session
- Center of excellence
- External accelerator
- Co-experimentation track
- Internal accelerator
- Community of practice
- Design sprint
- Innovation transform
Along with the various initiatives and their benefits, it will enable you to define the best strategy for your internal governance model.
4 main innovation program categories
Experimentation with new innovation formats is most effective when done within one part of the organization. This allows you to do decentralized learning before scaling it inside the full organization. Lead: Internal innovation manager.
Exploring connections with the outside world needs to happen outside of the core organization. When working together new resources, processes and profit models need to be explored. Lead: Open innovation manager.
Building capabilities is often an integrated effort that impacts the full organization. Sharing a common practice is most effective when done in the central organization. Lead: Transformation officer.
Hunting for new business is most effective when done disconnected from the core organization. Only key people from the organization should act as an investment committee. Lead: Strategy officer.
Innovation strategy examples
Start with an innovation strategy sprint
In less than a week, our customizable strategy sprint will help you develop a growth plan from scratch. Working alongside key stakeholders at your business and our innovation strategy experts, you’ll set the right priorities, create innovation metrics to track your progress, and build a clear action plan that everyone’s on board with.
This format will help you review the capability building initiatives you run and choose innovation programs that will speed things up. It’s ideal for you if you’re looking to challenge your business’s innovation portfolio, uncover new opportunities, and:
- Develop an action plan in just a few days
- Set clear KPIs
- Get buy-in from stakeholders
- Simplify your plan
- Innovation governance model design