What is innovation in business? Something that can change anything. With the right innovation strategy and management process, you can achieve unimaginable business growth.
On this page you will learn:
What is innovation strategy?
As any other type of business strategy, innovation strategy is a plan. It is made by companies in order to develop their products or services in a way that is unique to a particular business area.
It is not a secret that the most successful and profitable companies in the world are those that offers the most innovative products and solutions.
Innovation is what makes these companies leaders! Creativity and good business ideas are a great power!
But just an idea and creative thinking are not enough. You need perfect innovation strategy, planning, and management in order to turn an idea into a profitable business.
When you considering to make a strategy for innovation, there is a list of questions and issues you will face. For example:
- Where do you start?
- What competencies and qualifications need the staff?
- What budget you need?
- Are your resources enough for starting? and etc.
The answer to these questions depends on the business area and company you are in. There is no one innovation strategy that is a one-size fit.
However, there are some simple things you have to consider before starting your product innovation planning. They will help you to build an effective innovation strategy and management.
- What value your innovation will create for the customers? An innovation can create value in many ways. It might make a product easier to use, more reliable and or more convenient, cheaper, and etc. Defining what kind of value your innovative product will create and then sticking to that is critical for innovation strategy, because the resources required for each are very different and might take a lot of time to accumulate.
- Define the type of innovation. There are three main innovation types (that we will describe below): Breakthrough, Sustaining, and Disruptive. Your strategy depends on which type you want to create and develop.
- Determine the criteria that will define if your innovation strategy is successful or not. There are two main types of criteria: qualitative and quantitative. Examples of qualitative are customer satisfaction and generating competitor advantages. Quantitive criteria are more measurable. Examples here are incomes, expenses, market share and etc.
- Be prepare for mistakes. You have to know that failures are a part of every business process. Don’t scare. Learn from the mistakes quickly, and move on.
Innovation Strategies And Types of Innovation
When you have a business idea, you want it to be productive and to achieve particular company goals.
You may come up with a brilliant idea but if it doesn’t fit the goals of the overall business, it will be a lost of time and resources.
Your innovation strategy also is determined by what you want to achieve from the innovation process.
Let’s see different types of innovation and the strategic opportunities each one of them provides:
When people hear the word “innovation”, generally in their mind is breakthrough innovation.
What is a breakthrough innovation type?
This is a product or other kind of solution that can’t be compared with another existing type. This is something revolutionary new! In the business aspect, these types of innovation require new technologies and create new markets!
Generally, breakthrough innovation requires a lot of time and a large amount of capital. This is the most difficult type of innovation to create and implement even for the biggest companies.
The main characteristic of the breakthrough type is that it is not customer-oriented. The innovation is not a product driven by customer needs and expectations. Mostly, it is something that comes from the company needs and ideas.
With this in mind, when you create a strategy for breakthrough innovation, you have to beware of the following common problems:
- Insufficient resources
Breakthrough innovation creates something absolutely new without analog in the market. These means also expensive and innovative technology to produce that kind of product. So if you have a breakthrough idea, you have to find a way to generate a lot of capital.
- Insufficient understanding of the end user profile and needs.
As we mention above, breakthrough products are not a result of customer needs or marketing researchers. This means you may not have enough information about how the end user will react to the new product. And this is really a big problem because this product may turn into an error with a huge loss for the company. When you create an innovation strategy for a breakout product, always find a way to research potential customer reactions.
- Insufficient competencies and knowledge
Insufficient technical competencies and knowledge are common problems when it comes to breakthrough ideas. By default, breakthrough innovation involves science and high technology, with all the risk that this can bring. Before build your strategy, make sure you have the staff who is enough competent to create the product.
Some of the most notable examples of breakthrough innovations include LED lights, Transistors and LCD screens.
Sustaining innovation is a result of listening to the needs of customers in an existing market. There is a clearly defined problem or need and a good understanding of how to solve it.
Sustaining innovation products and services are incremental. They help organizations to stay in the market.
From the innovation management point of view, it is the easiest type to handle. This is because of the fact that the new product is based on the company’s existing technological competencies and fits with its existing business model.
Be very familiar with the customer profile and needs. To create a competitive innovative product you have to know in details your customer profile. Make sure you know everything about the customers expectations and you know exactly how they will accept the new product. Do the necessary marketing researchers.
Sustaining innovations are very important for the stable growth – it generates cash and customer satisfactions.
Good examples here are new versions of Microsoft Windows and the Apple iPhone. Other examples in the computer world are smaller and cheaper laptops and notebooks.
The theory of disruptive innovation was invented by Clayton Christensen, of Harvard Business School, in his book “The Innovator’s Dilemma”.
Disruptive innovations create new markets by finding new categories of customers. This type of innovations improves a product or service in ways that the market does not expect. Disruptive Innovation is a simple, low-cost solution to customer’s problem.
To create a disruptive innovation, companies:
- find and use new technologies;
- develop new business models;
- exploiting old technologies in new ways.
Disruptive innovations offer other value – generally, they are more convenient, simpler and less expensive products that appeal to new or less-demanding customers.
Disruptive products are for innovative companies that seeking to create new businesses. Sustaining innovations are successfully created by the current leaders of the industry.
When you build your disruptive innovation strategy keep in mind these things:
- Focus on simplification of the product or service.
Disruptive innovation is all about simplification and convenience. Simple solution for your customers is what you have to create and achieve.
- Cut the costs
Disruptive innovation is also about making an affordable price for the end user. When you build your innovation strategy think about possible ways to reduce the costs and to make a low-price product or service. There are many possible ways to cut the costs depending on the business area and type of the production process. Talk with financial, logistic or marketing department to discuss where is possible to make reductions.
- Observe the competitors very carefully
Pay attention especially to large industry incumbents. What is their behavior on the market? Are they motivated to flee or to fight? Disruption works due to the fact that it is much easier to defeat competitors when they are motivated to flee rather than fight.
More clear information for disruptive innovation with examples you can find on the Professor Clayton Christensen website.
Definitely, how you spend your efforts, time, and money is your strategy. You need well-organized process and a high-level plan in order to turn a fantastic idea into a successful business.
Let’s see what are the main innovation process steps and actions you must pass through:
Step 1: Define the Problem
The innovation process starts with a problem and the goal is to find an innovative solution to that problem.
As you know, all businesses have problems. There are many types of problems related to different issues such as increasing sales, improving the production process, satisfying the particular customer needs and etc.
Building a successful innovation strategy begin with defining the core problem.
Mostly the majority of innovation are driven by customer needs and desires.
Knowing the customer’s needs drives business growth.
Strategies for identifying customer needs are an integral part of a company’s marketing management. Companies that create innovative products without researching of customer needs run a high risk of failure.
- Research – do market research on the areas that you target to identify trends or behavior.
- Customer Feedback – will allow you to find out customers’ attitudes toward your ideas for the new product.
- Social Media – enables you to track discussions on possible innovations to your products
- Collaboration – building collaboration with clients into your innovative product development strategy ensures that the products you want to create or improve will satisfy customers’ needs.
Step 2: Generate Ideas
Nowadays, the business needs to be on the lookout for new ideas that can drive innovation.
The ability to think creatively and to find ways of generating new ideas is an important skill with a vital role for the whole innovation process and management.
How to generate new ideas?
First, you have to be open to forging new connections, think differently and consider new opportunities.
Second, you have to choose methods of generating new ideas.
- Focus Groups – a group of people providing information in a structured format. A moderator leads the group through an open and in-depth discussion instead of simply asking questions.
- Brainstorming – the most popular method that encourages people to come up with ideas that sometimes sounds a little bit crazy. We discussed this method in more details in our previous decision-making process.
- Problem Inventory Analysis – a method for generating new ideas and solutions by focusing on existing problems. The participants are provided with a list of problems in a general product category. This method is effective when the innovation is about improving a service or product.
Step 3: Evaluate the Ideas
Having a long list of ideas is a great opportunity to find the innovative solution you are searching for. On the other hand, many ideas create an issue. You need a proper evaluation.
Innovation management is not just about generating good business ideas. It is also about reviewing ideas to find out those of them that have the best chance to become a successful innovation.
How to select the best innovative ideas to carry through to implementation?
- Set evaluation criteria
Define the evaluation criteria before you begin evaluating ideas to determine which of them are the most acceptable and which ideas can be easily put to the side. There are many possible criteria. For example, costs needed for the idea, time for realizing, customer satisfaction and etc. Choose those of them that are important for the innovation success.
- Ensure the complex ideas are estimated by people with appropriate knowledge and competencies.
This is a crucial point for the overall innovation process and management. Some ideas, especially highly innovative need a review by a specialist in a particular area.
Methods for evaluation.
It is a good practice to use appropriate methods to evaluate your innovative ideas. In the theory, there are a lot of ways and methods. Here are some of the most popular of them:
- SWOT analysis – an analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT) is an old marketing approach with great results when it comes to analyze.
- Evaluation matrix – used to evaluate a list of ideas against prioritized criteria.
This process is simple to apply and aids the team in making objective decisions.
- Pass / fail evaluation – it is used in case of a really large number of ideas (for example one hundred) that need to be reviewed.
Step 4: Choose the best idea / ideas
After you evaluate your ideas properly, it is easy to choose the best one.
The best innovative idea is that one that best fits your criteria and shows great results on your method for estimation.
Here are some useful tips that will help you to select the best innovative idea:
- List down the most appropriate and preferred ideas from the previous step. After that answer the following questions:
- Which are the risks involved in each of them?
- What problems may create each of the preferred ideas?
- Do you have the resources needed to implement the ideas?
- Which options meet the deadline?
Sometimes, it is better to choose a combination of innovative ideas. It depends on your goals.
Step 5: Develop the idea
Developing an idea is important and sometimes very complicated process.
- Test in the business environment
- Marketing and sales
This step in an integrated process that includes a long list of specialists (designers, marketing and sales specialists, brand managers and etc.) with particular knowledge. This is a whole new topic and area.
Step 6: Implement the idea
Now, you are ready to manufacture your innovative product and to turn the developed idea into an implementation that will bring value to your business and company.
In this step your idea becomes innovation!
As you know the implementation is a whole big process with many steps and details. Actually, this process depends on what you did in the previous step – developing the idea.
If you develop your idea in a productive way that includes all details, the implementation will be easier to you.
Depending on the particular idea and business area, the implementation might include a wide range of actions and details. Here we will mention some of the most important and most likely to happen.
- Get personnel and management involved
Some business ideas are so big and revolutionary for the company that they require to include all the staff. Other ideas are smaller and involved less number of people. Decide who will be involved in the process and who have to know the details. For example, you can get sales and logistic managers involved in the process, concerning how the major changes will affect their departments.
- Train the staff
As this is an innovative idea, it is something new and different for your company. Some of the staff have to learn new skills and to take new responsibilities, other people have to be alerted for the changes.
- Make a business plan
You know that the things won’t happen without a good business plan. Making a business plan is vital. It has to include concept, financials, requirements, strategies and etc.
- Consider outside factors and details
Implementing a new idea for your business could affect your vendors or partners. As you plan your implementation strategy, consider how changes will affect the partners you do business with. Discuss your ideas with your vendors or clients to find out if you need to make any changes to your plans.
It is a time to see your idea in action!
This is the most exciting part of the innovation process and management! 🙂
You have to experience the results of your idea and find out whether or not the innovative product is successful.
The most important here is the monitoring part. The monitoring allows you to review progress.
Good innovation management practices include deep monitoring on both a short- and long-term basis. An effective monitoring process provides ongoing information that improve significantly idea implementation.
Main steps of the monitoring process include:
- Collect data during the process of implementation to see the current results.
- Compare the collected data with the goals and required results for the particular moments.
- Decide what actions have to be done to improve the process.
The innovation process might be shorter or longer depending on the ideas, goals, business area and resources.
Innovation management is one of the most challenging processes for all organizations, but world’s business history show us great examples of successful innovative companies that change not only their own future but the future of all of us
If you want to create an innovative product that aims to bring your company growth, learn from the leaders.
It can be given a lot of examples of successful innovative companies worldwide but here we will mention some of the most innovative and remarkable of them.
- Microsoft Corp.
- The Walt Disney Company
- General Electric