What is an innovation strategy?

Major organizational changes or exciting new ideas rarely come out of the blue. Businesses geared toward success understand that thriving organizations are those constantly looking for ways to innovate. To produce powerful changes and major innovations, businesses must create a culture of new ideas.

An innovation strategy can be a valuable part of a company's growth plan, facilitating bold moves and out-of-the-box actions to stay ahead of the competition.

Innovation strategy is a commitment to a common mission. It involves a structured set of activities designed to support a business's growth and encourage creativity. It's not always easy to get everyone pointing in the same direction, but by embracing innovative thinking through a clearly outlined strategy, you'll be encouraging everyone in your company to reach for the stars.

Innovation strategy is the plan a business uses to map out its mission, vision, and value proposition in each customer market. It is a roadmap for the ideal future of a business. The strategy includes policies and behaviors necessary to reach that future.

There are different types of innovation strategies, for example, those for technology-founded businesses and others highlighting innovative business processes. Regardless of your industry, an innovation strategy can provide you with solid ideas to follow and concrete goals to work toward, while encouraging team members at every level to deliver creative solutions.

Having an innovation strategy in place can be incredibly beneficial for teams of any size. An innovation strategy clarifies a company's priorities and goals so that managers, stakeholders, and team members at all levels can have a reference point.

By outlining a company's goals, team members will focus their efforts on reaching those goals, rather than repeatedly seeking clarification. A clear innovation strategy can also foster greater team alignment, so employees can work together to achieve common goals rather than tackling individual priorities.

Additionally, an innovation strategy can help keep a business from resting on its laurels. It's normal for a business to get complacent after several "wins" and continued revenue growth. By frequently referring to its innovation strategy, a business will be constantly thinking of new and innovative ways to serve clients. This can help a company achieve sustainable, long-term success.

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There are multiple benefits of establishing an innovation strategy, beyond enabling team alignment and encouraging leaders to avoid complacency. Remaining agile and creative in the face of constant technological advances can prime any company for long-term success and give them incredible staying power.

The following three benefits demonstrate the importance of a clear innovation strategy.

Improved existing products

A few upgrades or tweaks can turn a good product or solution into a great one. A good innovation strategy encourages teams to experiment with the three levers of the value proposition:

• Target customers

• Price

• Benefits and features

A product team can use the innovation strategy as a guideline for tweaking their product or service, bringing more value to the customer, and thinking differently about how their solutions can be marketed.

Optimized revenues

For a business to be successful, revenue must be higher than spend on salaries and other business expenses. While every business wants to maximize profit, it can be hard to think of different ways to achieve this.

An innovation strategy can help you think of new ways to earn revenue, whether that’s expanding your customer base or improving one of your flagship products or solutions.

Development of new products

Innovation can lead to brand-new opportunities. For many businesses, having an innovation strategy opens the door to creating entirely new products or solutions, some of which can help reach fresh markets and customers.

While new products aren't always necessary, a creative mindset and a clear innovation strategy help ensure nothing is left on the table and that you and your team are always thinking of exciting ways to serve customers.

There are four general types of innovation. Depending on your business, one particular type might make more sense than another, though they are all valuable.

Routine innovation

Routine innovation builds on a company's existing capabilities and strengths. Using routine innovation, team members can look for new ways to serve customers using existing products or services, or with a new version of a particular product.

Disruptive innovation

Disruptive innovation is about challenging the status quo. Not only can disruptive innovation shake up your company's way of doing business, but it can also provide a challenge to competitors. Any business can benefit from disruptive innovation, regardless of industry.

Radical innovation

If you're ready to change things up but not quite prepared for the structural alterations that disruptive innovation can cause, radical innovation could be a good innovation strategy option. 

Radical innovation requires technological or commercial changes, but these changes can be applied within the company's existing model. This approach represents a distinct leap forward that has the power to reshape existing norms. Radical innovation can be a game-changer for businesses and their customers.

Architectural innovation

Architectural innovation can be the hardest type of innovation to implement. This is because architectural innovation can involve both a change in the existing business model and the introduction of new technology.

While architectural innovation retains the innate knowledge of a company, it reinvents the approach to idea creation and execution.

It can be a challenge to build and maintain the capacity for innovation. Coordinating the team, establishing new processes, and reinforcing the need for new idea-generation techniques takes time and resources.

However, with the right plan and a clear approach, developing an innovation strategy can help you:

• Better understand your core capabilities

• Grow market share

• Win more business

Analyze your current strategy

Before you start to implement an innovation strategy, take a hard look at your current business plan. You'll need to understand your target audience and current market and get a solid idea of what your competitors are doing to win business.

Competitor analysis can provide valuable insight into your business plan as a whole. Analyzing your current strategy includes talking with stakeholders, leaders in your organization, and team members to understand what your company goals and values mean to them.

Research customer needs

An innovation strategy can't help you succeed if you don't know what your customers want. Research customer needs before settling on a strategy type.

The best innovations (and the ones that boost a business to achieve greater profits) are those that serve the unmet needs of customers. If you aren't regularly in touch with customers, talk to the employees who are, and try to gain a sense of what your clients want and need.

You might also consider soliciting customer feedback directly via a survey, feedback form, or individual or group interviews. If you can't crowdsource information from employees, getting direct feedback from those who purchase your products and services can help you craft the most effective innovation strategy.

Evolve your value proposition

Every innovation strategy should include details about the unique value proposition you bring to the industry and your customers.

Take a good look at your core capabilities as a company and ask questions that allow you to think differently about the value you bring to clients. Will a new product or service help your customers save time or money? How can you make your current solutions more affordable or effective?

These kinds of questions invite brainstorming from members of your team and will guide you in creating the basic tenets of an innovation strategy.

Formalize innovation methods

Once you've developed an idea of how to proceed, discuss your innovation strategy with stakeholders and team members. Before you can start making changes, formalize your strategy. This keeps everyone accountable and provides a baseline from which new ideas and concepts can be developed.

Keep in mind that the best new business processes, including innovation strategies, allow for some flexibility. As the needs of your customers change, and as the market continues to grow and evolve, be willing to adjust your innovation strategy accordingly. By staying flexible, you'll be better equipped to serve your customers and capture market share.

In crafting your innovation strategy, look to large companies that have managed to change up their processes. These innovation strategy examples can help you think differently when designing your own.

• Amazon's renowned innovation lab is an industry leader in conceiving new ideas. One of the most original elements of Amazon's strategy is that the company actively encourages employee participation, asking them to pitch ideas for consideration.

• Coffee giant Starbucks is constantly thinking of new ways to serve customers. Brand localization is one of the brand's best examples of innovation strategy. While Starbucks is a global chain, customers around the world who walk into their local Starbucks store are greeted with local aesthetics, including art and music. This helps customers feel at home in the store and more connected to their community.

• The COVID-19 pandemic could have easily shuttered travel sites like Airbnb. Instead, it encouraged the company to explore innovations in customer experience, with several new features to make it easier to travel with flexibility. In 2021, Airbnb launched three new ways to book a stay through its app: Flexible Dates, Flexible Matching, and Flexible Destinations. These features allow customers to book without committing to set dates or destinations, thereby reaching a whole new market of customers who aren't blessed with unlimited vacation days or resources.

• Tech company Apple’s commitment to innovation extends to brand-new technology launches every few years. By introducing new models of the same basic phone, Apple ensures that customers always stay tuned for the latest and greatest. Apple's bespoke tech service team also helps customers feel part of an exclusive club that is ready and available to handle any phone or mobile device issue.

Massive businesses aren't the only ones who can launch effective innovation strategies. Regardless of the size of your business, and no matter what industry you work in, creating and launching a clear innovation strategy can help you at every level, from serving your existing customers to reaching new markets and enabling more precise team alignment.

Some companies design innovation strategies with their in-house team, including a project manager, technology and development teams, and members of leadership. Others opt to bring in an innovation strategist.

This person evaluates existing processes and capabilities, helping that business create an innovation strategy that works for them. Strategists are outside contractors who either work across industries or specialize in one industry.

There are several reasons why companies might hire a strategy and innovation consultant to help them create an innovation strategy. First, they might not have the bandwidth for in-house employees to come up with an innovation strategy.

Second, since strategy and innovation consultants are experts in their field with experience creating strategies across industries, companies might want to leverage this experience to their benefit. Having in-house employees design an innovation strategy might be a low-cost option in the short term, but effective strategies that can provide long-term benefits are often best done by an expert.

If you aren't sure what option is best for your company, consider hosting a brainstorming session to analyze employee capabilities. You can also interview strategy and innovation consultants to determine the one who is the best fit for your company.