How to Create A Successful Innovation Strategy? | Lean Apps GmbH

How to Create A Successful Innovation Strategy?

19 November 2020

It’s not just your company that is struggling with innovation. According to a McKinsey poll, 94% of the managers across companies surveyed said that they were dissatisfied with their company’s innovation performance.

One of the biggest reasons for failure of innovation is a lack of or unclear company and innovation strategy.

In most companies, those responsible for innovation do not know which topics have priority or simply what to look for when coming up with ideas. The basic knowledge of the direction in which a company wants to develop is missing.


When you don’t have a clear strategy, your innovation efforts may look like the board above. Every division might start its own innovation effort, moving in its own direction, without knowing what value their initiatives bring.

Ask five people in a company what innovation means, and you are likely to get five different responses.

Is coming up with a new shade of post-it notes innovation? Is putting the same sauce in a new squeeze bottle innovation? Is coming up with the original iPhone innovation? Innovation can look and mean different things in a company.

So the first thing is to agree on a single definition of innovation across your company. And that can only happen when you have a clear company strategy. Because the starting point for any innovation activity has to be your company strategy.

Every innovation has to be in line with the company strategy and contribute to achieving company’s goals.

So if you have a clear company strategy in place, defining your innovation strategy becomes easy.

What is an ideal innovation strategy though? A strategy that answers these three big questions is on to a killer start:


  1. Where are you now?
  2. Where do you want to be?
  3. How will you get there?

An innovation strategy should state a common mission and the key activities that will help you get there. It has to be a bridge between your high level company strategy and the day-to-day team activities i.e. how they translate to achieving the overall company’s innovation goals.

The best innovation strategies are those that are simple and clear. Everyone in the company can understand them.

And the upper management has a complete buy-in.

Everyone knows where they are and where they are going.

A great innovation strategy usually contains the following ingredients:

  • A powerful innovation mission statement
  • List of activities with the highest impact on your business
  • The “how” of your new innovation initiatives
  • Challenges and opportunities to be encountered
  • Resources needed to succeed with innovation strategy

Here’s a step-by-step breakdown on how to develop an innovation strategy by bringing in all the ingredients mentioned above:


Start with Innovation Assessment

This is the ‘where are you now?’ part of the strategy. In this, you find out what already works in your company for innovation. You will have to find out all the innovation initiatives that are running and see which of those initiatives are really producing value and what needs further improvement. This is where you list down the activities that have the highest impact on your business.

Basically, you try and gain an understanding of how and why innovation is currently functioning within your company. What are your existing barriers/challenges to reach your innovation goals?

Innovation is all about understanding the market and technologies that could disrupt the market. Start by answering the following questions:

  1. What are the new, most hyped technologies?
  2. What are the technologies that could affect or disrupt your industry?
  3. How is the current market changing? Are there any new customer behaviours developing? (for example due to COVID-19)
  4. Are there any new markets you would want to target? (new customer segments or new geographies?)
  5. Are there any threats you have from the market? (competition, new startups?)

Find your innovation objective/goal

This is the ‘where you want to go’ part of the strategy. And this will shape your innovation mission statement. In this, you will look at two different dimensions:

First dimension is to define the main motivation behind the innovation for the company.

There can be 3 different motivations:


Strategic Motivation

Here your motivation would be looking at long term goals that will help the company grow in future.

  • It could be bringing in cultural DNA change within the company to bring back innovation mojo
  • It could be to educate employees on new processes of innovation – so that they have all the tools and resources to innovate
  • It could be to re-define current business model in light of new technologies and market changes
  • It could be creating a new business model for the company so that company can diversify its portfolio and NOT be dependent on only one business model

The most important goal here is to prepare the organization from inside and outside for future changes in technologies and markets. In the short-term this might not produce any financial returns.


Financial Motivation

Here your motivation would be to increase revenues and profits for the company or in some cases cut costs for the current business. These initiatives would not necessarily have any impact on company culture but can generate a good boost to current business.


Hybrid Motivation (Strategic and Financial)

Here you balance both your strategic and financial goals. These initiatives are strategic and work on changing the company culture with the goal to create new business models with clear financial objectives.


The second dimension is to decide where would your innovation initiative sit within the company?

  • Internal – This means you want to generate innovation within the company. For example, by setting up intrapreneurship, innovation labs or internal hackathons.
  • External – This means you want to build it externally via strategic partnership, acquisitions or investments. For example, external startup collaboration, strategic investor or only financial investor.

Or it could be a mix of both based on the objectives


Find your innovation type

This is the ‘how will you get there?’ part of the strategy. This is where you map your company’s objectives with the types of innovation you want to execute. We’ve broadly divided them into six categories, three of them being internal and three external:


This structure is motivated by the paper by Prof. Dr. Tobias Gutmann:


1. Internal + Strategic 

If your objective is strategic, and you want to run innovation inside your company, then you should be looking at the following initiatives:

Hackathon and Bootcamps Ask yourself: How might we engage our internal employees in coming up with new innovative ideas?

Example: MIT COVID-19 Hackathon and Microsoft Hackathon

Intrapreneurship Ask yourself: How might we provide an ecosystem to our employees to test new business ideas and launch new products in the market?

Example: – Airbus Bizlab and Bayer – Catalyst Fund


2. Internal + Financial

If your objective is financial, and you want to run innovation inside your company, then you should be looking at the following initiatives:

Exploiter Ask yourself: How might we use existing resources of the company in new business creation?

Example: Excellence program from BASF

Re-packager Ask yourself: How might we change our product or sell our existing IPs to offer this to a new customer segment?

Example: Siemens Technology Accelerator


3. Internal + Hybrid

If your objective is both strategic and financial, and you want to run innovation inside your company, then you should be looking at the following initiatives:

Train workforce Ask yourself: How might we increase the knowledge of innovation practices within our company so that employees can startup applying that within their work?

Example: Training on Lean Startup practices and Design Thinking

Venture Builder Ask yourself: How might we create an ecosystem to involve our employees in building new business models which become their own company (or spin offs) and give us good returns in future?

Example: Watt X (Viessmann) and ING Labs


4. External + Strategic

If your objective is strategic, and you want to run innovation outside your company, then you should be looking at the following initiative:

Open Innovation Ask yourself: How might we engage with external startups in our industry to learn from them and keep an eye on disruptions happening in our industry?

BMW start up garage and Bayer – Grant4Apps


5. External + Financial

If your objective is financial, and you want to run innovation outside your company, then you should be looking at the following initiative:

Financial Investor Ask yourself: How might we use our extra cash to invest in interesting companies that will give us good financial returns?

Example: SAP Sapphire Ventures


6. External + Hybrid

If your objective is both strategic and financial, and you want to run innovation outside your company, then you should be looking at the following initiative:

Strategic Investor Ask yourself: How might we invest in startups that are strategically aligned to our company strategy, so that we can be part of the new disruptions happening in our industry?

Example: BASF Venture capitalING Ventures

Now depending on your resources, you can aim to bring about one or all 4 types of innovation mentioned below in your company:

Incremental Innovation: It’s the kind of innovation that builds upon your existing technical competencies. And it always fits with your existing business model. In fact, about 75% of companies succeed at Incremental innovation.

Ask yourself: How might we make our existing product or service more efficient, more valuable for our customers?

Example: Amazon continuously improved its warehousing and logistics to make it possible to ship goods in 1-day and this incremental innovation made their core business really strong.


Adjacent Innovation: It’s the kind of innovation that requires entering a new market or connecting with new customers by leveraging on what your company already does well.

Ask yourself: How might we reshape our existing products/services in a new space? or How might we create a new product/service for our existing customers?

Example: Apple created a cheaper iPhone – iPhone SE – leveraging existing knowledge and resources to create a new product and to capture a new customer segment, that want an apple product but don’t want to burn a whole in their pocket


Transformative/Disruptive Innovation: It’s the kind of innovation that requires an entirely new business model that mostly has no connection with the company’s core business model. Such innovations deserve a spin off or the birth of a new company eventually.

Ask yourself: How might we generate new business models that can establish new revenue channels for us?

Example: When Netflix entered the home entertainment industry as a mail-order DVD rental service, it was looking to disrupt physical stores. But by launching its streaming services, Netflix disrupted not only the terrestrial and cable TV industry but also transformed the entire movie going experience.


Radical Innovation: It’s the kind of innovation that requires a new technology – which eventually creates new market and new business model. These innovation disrupt complete industries.

Example: Tesla creating an autonomous cars – requires a new technology and disrupted the whole auto industry

If you want to create your company’s Innovation Strategy or are dissatisfied with the performance of your existing one, download our Innovation Strategy Canvas 

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    About the author: Narjeet works with product leaders and innovation team in helping them take an idea to customer discovery to solution and product-market-fit. He helps companies in Lean experimentation, Design Sprints, Agile product development and Growth Hacking. He is passionate about digital healthcare - because that's where his digital skills can make maximum impact.

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