As you begin the new year, one of the essential items on your to-do list should be your innovation agenda. After all, innovation is a powerful lever in your hands. It determines the future of your business in 2017 and far beyond it. As a result, developing your innovation agenda for 2017 should be on your mind this week.
Do you rely on emergent innovation strategies?
How do you build your innovation agenda? One way is to allow emergent innovation strategies to define your list. But then you are ceding a lot of power to forces that may or may not work for you. There are many pros and cons to this approach as I had written in great detail earlier.
You can achieve a much higher impact innovation by developing your innovation agenda using a thoughtful framework.
In my view, business goals should drive all your innovation efforts. This focus on goals will allow you to make the maximum impact on your business.
At any given time, your business faces one of the four critical needs. Align your efforts with these goals for a high impact innovation. Relying on emergent strategies to define your agenda may not be as powerful.
Critical Business Needs
The four business goals a business may face during its lifetime are as follows:
Although growth is a critical need for any business, some firms need it a lot more than others do. If you are running below capacity, or have not yet reached minimum efficient scale, you need to scale up. Sometimes you may need growth because that is the raison d’etre of your business in your company’s portfolio.
Since growth can come from many different sources, your innovation efforts will vary depending on your path. Market expansion needs different kind of innovations than share shifting in a market. Getting new consumers is a different path than upgrading your existing customer base.
For market expansion, you need to improve the price/performance to get more users. It involves product or some other aspect of your value chain. Apple watch needs to focus on growth via market expansion. It did this successfully when it added a new category of tablets. People used laptops or phones prior to the tablets. The tablet innovation expanded the market for mobile devices.
But, if you want to take share, your innovation goals will focus on your competitors. Competitive intelligence has to be a critical part of your agenda. The automakers are using new bells and whistles to gain market share as they have done for decades in the past. In-car telematics has become an important source of share shifting innovation now.
At times, your growth comes from upgrading your existing users to newer products. Gillette has been doing this for growth for decades. For this goal, your innovation efforts must improve your product in meaningful ways. The key here is ‘meaningful,’ something that companies often ignore.
For many businesses, protection becomes the most critical goal. It could be protection from competitive assaults or a disruptive force.
Protection from competitive attacks will need innovations that provide tactical or strategic advantages. When Blackberry faced iPhone threat, protection became a critical need. Its innovation efforts failed to protect its position.
Disruptive forces are becoming more common across many industries. Such an assault often requires a massive response. If you are in this situation, you need to rethink your innovation agenda. Your previous innovation model will most likely not work in such a situation. Even if you do not face disruption, disruption management needs to be on your agenda.
The mutual fund industry faces this disruptive force in its industry. Index fund innovation emerged over three decades ago as a disruptive force. But since the great recession, it has become a far bigger threat to the industry. The industry has to focus on innovations that will allow it to deal with index fund innovation.
At times your business is broken, and only innovation can fix it. If that is the case, then your agenda should already be aimed at this critical problem. Whether it is due to a disruptive force or another structural issue, you need to fix the problem. Innovation efforts should be aimed at fixing this core issue you face.
Netflix introduced a business model that was superior to Blockbuster’s model. As a result, Blockbuster lost market share to Netflix. It took seven years for Blockbuster to come back with a reasonable response to this threat. Its hybrid online-offline offering was an innovation but too little too late. It needed to fix the issues faster than it could and thus lost its business.
In the 1990s, a key hurdle for the digital camera industry was the camera resolution. Firms could not develop 1-megapixel cameras for under one thousand dollars. This technological barrier prevented the technology from becoming mainstream. But Innovation in CMOS technology allowed the industry to fix their business.
At times a business no longer fits your portfolio. In such situations, you need to divest the business. Often managers harvest their business before divesting. By cutting market spend and R&D, they maximize their cash flow. This path often sacrifices longer term business value. It doesn’t always need to be this way. I suggest you examine if innovation may allow you to improve the value of the firm. It may provide you with a larger return than harvesting can.
As a result, although innovation is hardly a part of a divestment candidate, I urge you to reconsider.
These above-mentioned goals should lead your innovation agenda for 2017. Spending time this week on developing your innovation agenda for 2017 will pay off well over the year.
So when are your developing your innovation agenda for 2017?