In today’s fast-paced digital era, established companies must innovate to sustain growth.
To achieve this goal many have established innovation labs, accelerators, hackathons, and open innovation programs.
However, despite the abundance of creative ideas, these efforts often fail to produce meaningful growth.
This persistent issue stems from a fundamental disconnect between strategy and innovation.
Innovation in corporate settings cannot mimic the independent, blue-sky thinking of startups.
Instead, it must be tightly coupled with the company’s strategic goals.
To drive meaningful growth, innovation efforts need to be aligned with two critical pillars of strategy: a clear set of growth priorities and an understanding of the company’s unique advantages.
First, define the strategic priorities that matter most to the business
The first step in aligning innovation with strategy is defining the strategic priorities that matter most to the business. In his book The Digital Transformation Roadmap, David L, Rogers suggests two effective lenses for this:
- Problem Lens
This involves identifying critical problems that need solving, either for customers or the business itself.
For instance, Walmart identified online grocery ordering as a key customer problem, given its importance to their business and the poor quality of the existing customer experience in this category. - Opportunity Lens
This focuses on identifying potential opportunities to expand into new markets or enhance customer experiences.
A notable example is Amazon’s move into cloud computing, leading to the creation of Amazon Web Services.
Similarly, Walmart explored the opportunity of using a virtual assistant for shopping, aiming to delight customers and shift habits away from competitors like Amazon Prime.
Another essential element of a strategic innovation effort is recognizing the company’s unique advantages.
These could be physical assets, data, network effects, intellectual property, brand reputation, or other strengths that give a competitive edge.
For example, Disney leverages its iconic stories and characters across multiple business models, from films to theme parks.
Walmart’s unique advantage lies in the proximity of its retail stores to most U.S. consumers.
This physical footprint supports various digital business models, such as mini fulfillment centers and a digital advertising network linked to in-store displays.
How to effectively link strategy and innovation
To effectively link strategy and innovation, companies must embed these strategic principles throughout their innovation processes.
This involves 5 critical steps:
- Set Strategy at Different Levels
Assemble a multi-functional C-suite team to assess the company’s unique advantages and define strategic priorities.
These priorities should be communicated and tailored to each business unit and function within the organization. - Communicate Strategy
Ensure that all employees, especially those in innovation roles, understand the strategic priorities. Use forums, workshops, and communication channels to share this information widely. - Greenlight Projects Based on Strategic Fit
Evaluate every proposed innovation for its alignment with strategic priorities and its potential to leverage the company’s unique advantages.
Only those projects that fit should be greenlit for further development. - Validate Through Experimentation
For approved projects, conduct quick, low-cost experiments to validate business model hypotheses and assess customer adoption, scalability, and competitive advantage. - Scale Up or Shutter Projects
Iteratively fund projects based on their progress and market validation. Scale up those that show promise and shut down those that do not, sharing learnings across the organization.
To achieve meaningful growth, corporate innovation must be strategically aligned with the company’s goals and strengths.
The five-step approach to linking strategy and innovation can help any business leverage its unique advantages to drive growth at scale.
By ensuring that every innovation effort is guided by strategic priorities and rooted in the company’s core strengths, businesses can transform creative ideas into substantial growth opportunities.
Dagorà is the place where innovation happens.
Get in touch: https://dagora.ch/contacts/
Source: Rogers, D.L., The Missing Link Between Strategy and Innovation, 2024
