Managing Innovation - Innovation Strategy: Part 1

There are three main ways that organizations grow, these are acquisition, organic growth, and innovation.

Acquisition is the process of buying sources of revenue, in most cases sources of revenue are customers but sometimes acquisition includes capability that the acquiring organisation doesn't have.Effectively this method of growth is the same as investing in the share market - spend money on a going concern to make money.

Organic growth is perhaps the most common method for growing a company. Organic growth is where a company attempts to increase the number of customers who purchase that companies existing goods or services.

Innovation is the third method of growing. This is where the company produces new goods and services and makes these available to the market. One view of innovation is that changes and modifications to existing products and services is also growth through innovation. Basically where an organization is providing a good or service that is not previously available, then this can be perceived as innovative growth. This means that the line between organic growth and innovation can be a grey area. For example, for some a price change can be viewed as a product change while for others this would be seen as organic growth. Your strategy really needs to be clear about what constitutes innovation.

There are various views on how to measure innovation but at a strategic level, this becomes very simple. View the three methods of growing revenue as bars in a graph. A innovation strategy is be interested in how high the innovation bar is in proportion to the remaining methods of growing revenue. In short what is of interest to an innovation strategy is the percentage of new revenue that comes from new products and services.This is the starting point for an innovation strategy as it determines how much (or little) effort is put into innovation.

The detail of the strategy will be interested in what constitutes those new products and services. The next section will cover some of the details that an innovation strategy should include.