What An Innovation Strategy Is (and Why You Need to Have One).
An overview of what implementing a digital innovative strategy looks like and some ideas and tools to develop a solid and successful one.
Being innovative is a key factor to success. However, innovation and digital transformation is still a challenge for many businesses: according to McKinsey, 84% of executives claim that their success depends on innovation but only 6% of them are satisfied with their digital innovation performance.
This data shows that many companies large and small try to innovate and somehow fail or don't obtain the results that they have hoped to get.
Why is innovation difficult to create, maintain and manage? Why do many organisations fail when it comes to their innovation pursuits? The main cause is a lack of innovation strategy.
In this article, we will provide an overview of what implementing an innovative strategy looks like and we will give you some ideas and tools to develop a solid and successful one.
Definition
Therefore, Innovation Strategy can be defined as a long-term plan aimed to reach a goal through the development of something new.
How to innovate and create your innovation strategy
Humans are creatures of habits but also love whatever can may their lives easier. Companies need to be ready to satisfy this need and they have to do it in a way that can benefit not only the clients, but also the organisation itself.
To do so, the company's top management needs to align the Innovation Strategy with the overall business' one, making sure that every business unit understands the overall goals and will proactively work to achieve them.
We identified 5 steps to start with when creating your innovation strategy.
1. Ask yourself what your organisation as a whole needs to achieve in 1 year, 3 years and 5 years. Then, define your business strategy and related plans for growth.
2. Identify how you think innovation and digital solutions can support the business strategy and the company's growth.
3. Know your market and your clients. When you innovate, you're generating value and you're trying to address your clients' pains / you're trying to make their lives easier. In order to do so, not only you need to know what segment of the market you're serving, but also you need to exactly comprehend what is it that your customers are looking for. Define what is the value you want to create for your clients and the way you're going to deliver it to them. Identify what are the variables you're planning to invest on the most and how you intend to proceed - we'll discuss your options in more depth in the following paragraph.
4. Define who is going to be responsible for the innovation strategy execution and make sure that your company has the right environment in place for innovation to thrive. Are your teams skilled enough to produce the innovation you have in mind? Is the company's culture open enough to make innovation happen? Do you need to hire an innovation agency or digital agency?
5. Execute your business innovation strategy making sure that the whole organisation is invested and aligned.
Types of digital innovation
As briefly mentioned in the previous paragraph - point no. 3 - there are a plethora of options you can choose from when you start creating your innovation strategy.
Nowadays, technology is probably the most effective innovation enabler, but it's not the only one. We strongly believe that technology is a positive force that drives change and leads to great results; however, as mentioned in the previous paragraph, companies have different options when it comes to developing and executing their innovation strategy.
To better understand what these options are and the possible solution offered, we are going to analyse 4 different types of innovation.
- Architectural innovation: processes or technologies that a company has already developed and implemented are applied to a different market. It typically results in an increase in number of clients and it's typically low risk.
- Incremental innovation: consists in continuous adjustments and improvements to already existing products or services.
- Radical innovation: a completely new product, service or business model enters the market and changes the environment forever. A great example of this type of innovation is Amazon.
- Disruptive innovation: a technology or a process whose application significantly affects the way a market or industry functions.
Remember that, to make the right decision in terms of WHAT you're going to innovate and HOW you're going to do it, you need to know your market. Don't forget to "validate" your decisions. Make research, ask questions and don't be afraid of reconsidering your thoughts. The innovation strategy is a long-term plan that needs to be coherent with your business model and goals and it is very important that you verify all your assumptions before you start executing your product innovation.
Plan Execution
1. Idea generation
Innovation starts with ideas and innovative thinking. In this phase you need to make sure to be as creative as possible, keeping in mind what your goals are and trying to address potential pain points. Innovation agencies can sometimes just work with you on this side and provide a different lens and creative angle on digital technology that may helo find new ideas.
2. Idea validation
At this point you want to make assumptions about what results will be, how your clients will react to the innovation, how it's going to attract new customers, how the innovation itself should be delivered. You will want to talk to as many people as possible trying to understand whether the ideas you came up with are relevant to them or you need to change direction.
3. Test and deliver
Time to test the assumptions you've made. There are many ways in which it can be done for your digital services: through prototypes, through marketing sites, through interviews and much more. The results of the testing phase will advise you on how to proceed during the implementation phase.
4. Measure systematically and adapt.
To understand whether your innovation strategy is producing the results you want to achieve, you need to continuously monitor it. Each goal requires specific metrics, therefore, you will have to identify what metrics and data are more relevant for you to check. In case your results are not matching the goals you had in mind, don't be afraid to adjust your strategy and modify what you think is not working as you planned.
Some examples of output metrics you might want to check are:
- Units sold/revenues generated by new products
- Number of units produced in X amount of time thanks to the new process
- ROI of innovation
- Number of positive feedbacks about the new product or service
Tools
Creating an innovation strategy and then practically implement it can be challenging, especially if this is the first time you do it.
We identified some tools that are going to help you be efficient and we grouped them according to the specific phase they're going to support you in digital transformation.
- IDEA GENERATION: Brainstorm cards will help you come up with a huge number of ideas. Start from the problem you want to solve/the need you want to fulfil with your innovation, then gather a client, some employees or friends and ask them to come up with ideas that can make you achieve your goal and ask them to write them on the cards. Many of the ideas won't probably be feasible or maybe they won't make sense, but this process will help you consider options you might haven't thought of.
- IDEA GENERATION / IDEA VALIDATION - Business Model Canvas is "a business tool used to visualise all the building blocks when you want to start a business, including customers, route to market, value proposition and finance". It will help you test your assumptions and identify the metrics you need to check to make sure that your strategy is working.
- IDEA VALIDATION - Validation board can be used to keep track of the assumptions you've made, and the results of the test done to validate those assumptions. Most digital technology ideas fail due to assumptions so this stage is critical.
- TESTING - Low-fidelity prototypes on tools like Figma or Invision will help you understand the viability of the innovation you're working on, and get valuable feedback from customers early. Product innovation is about iterations and learning using data and what your customers say, so get feedback early.
- TESTING - Marketing websites can give you important information regarding the individuals that are willing to buy your idea and being your early adopters.
Conclusions
Being able to change and adapt is and will be a critical factor for success in digital technology. Companies that are not prepared to adopt new innovation and product innovation models, risk to lose market share in favour of their more innovative competitors. Innovation needs to be considered as an opportunity that can enable companies small and large to improve their clients' lives while earning and maintaining a leading position in the market. Addressing this opportunity requires clear and smart choices: where to invest, how much to invest, who is going to be responsible for the innovation process and how the value will be delivered to the company's stakeholders.
Whether you decide to take this endeavour on yourself or work with an innovation agency, please make sure you take the time to understand your customers, your digital product, your ambitions and what you are aiming to get our of this digital transformation.
We hope we gave you some guidance and structure to feel more comfortable about starting or refining your innovation strategy and digital solutions. In case you needed some more support, feel free to drop us a line and we'll be happy to help.