Managing Innovation - Innovation Strategy: Part 3

The components of an innovation strategy can include the following:

Goals: These are the general outcomes that the company is trying to achieve. These can represent the mission or vision statements that define what the company stands for and what it is trying to achieve. These need to be simple and clear so that staff within the company can understand the direction that the firm is trying to take so they can align their efforts to this.

Arena: This defines the general parameters of the environment in which the company intends to compete. The purpose of this section is to define the scope of the strategy. The arena covers a number of areas and should not simply be viewed as defining a market in which to compete. Other aspects that need to be considered is the technology and product positioning relative to competitors (e.g. low cost or high differential). The arena needs to be broad enough to ensure that there is sufficient space to grow but narrow enough to ensure effort is not dissipated too broadly. 

Mechanism:The mechanism defines how the company will approach innovation relative to competitoors in the market. The standard mechanisms (made famous by Miles & Snow) can include:

• Propector: These firms aim to become the first mover with new products and services and attempt to use first in the market as a means to secure an advantageous position in the market. 
• Analyzer: These are also known as the fast followers. They don't attempt to be first to market but instead attempt to follow quickly when trends are identified. They take the approach second but better and can capitalize on the mistakes of the prospectors.
• Defender: These can include companies which already have a sizable market share and are aiming to retain a stable niche in the market. Generally these companies look to grow through innovations in efficiency rather than new products.

Platform: Many innovations may be built on a platform. An example of this is Boeing's airframes that can be used for everything from carry presidents to carrying mail. There are very few companies don't utilize some form of common basis for their competition. Boeing is an extreme example, but consulting firms rely on the expertise of their staff, telcos generally build their business around their networks and investment in switching infrastructure. A platform centric approach builds a solid foundation product or service to which new developments can be added quickly. This has the bonus of low cost, high speed development as well as leveraging any branding value with the basic platform. The disadvantage is that a strong platform can be restricting or dangerous if the platform looks like it will be succeeded by new technology.

Collectively these elements give the firm a good understanding of where it will compete, how it will compete, and what will form the basic reusable components within their innovation strategy.

Managing Innovation - Innovation Strategy: Part 2

This post outlines the two key purposes of an innovation strategy.

The first of these is to connect the high level company strategy (x% of revenue from products less than y years old) to the decision criteria required to manage a portfolio of projects developing new products. The important thing to understand is that a good strategy requires a portfolio approach. At the most basic level, the process of managing product development is to a large degree a process of managing risk. Product development has a lot in common with investing. Diversification is the key and high return often comes with high risk.

The second key purpose of an innovation strategy is to focus effort. Companies have limited resources and therefore need to select what that expend effort on. Also, the innovation strategy helps to focus effort but creating a sense of direction for those people within the company charged with implementing the strategy.

The next post will explain the components that an Innovation Strategy may cover.