EIGHT PENALTIES FOR YOUR WEAK INNOVATION STRATEGY

The problem of innovation is not that organizations do not innovate. In fact, every company innovates as if innovation is its second nature. Most businesses make innovation choices in an emergent manner. As a result, every business already has an innovation strategy. The key question is whether your innovation strategy is effective or ineffective. Whereas wise choices lead to a robust strategy, weak choices do the opposite.

In fact, weak and ineffective innovation strategies penalize you in ways that are not obvious.

Wasted Resources

Since innovation is expensive and risky, poor choices often lead to wasteful activities.  I have a client that has a high powered sales team in a B2B space. They are successful because of their sales prowess. It is a client-centric organization with a core capability of customer intimacy. But, its customer focus drives innovation more often than needed. Due to an extreme customer focused innovation process, the organization wastes enormous resources.

The customers often need customizations in product and offerings. These customizations account for the bulk of innovation effort of the group. A well thought through innovation strategy would lead to better decisions around customization. But the sales organization does not make choices that result in them saying no to a client. Instead, they take pride in the fact that they help their customers no matter how small the need or the customer.

Due to the nature of this innovation strategy, the managers wastes resources. They spread themselves too thin. They take resources from core customers and spend them on peripheral and unprofitable customers. They undertake innovation for clients that provide them negative returns.

The above example shows how unbridled innovation without an explicit innovation strategy can waste resources.

Another symptom of the same malaise is the presence of zombie projects that refuse to die

Another symptom of the same malaise is the presence of zombie projects that refuse to die. Even when everyone thinks the project is dead, it somehow keeps coming back to life. Managers often have little will to kill them.  When initiatives provide little value to the organization, they sap resources.

Both these examples point to massive wastage of resources in the name of innovation.

Misplaced Focus

A deliberate strategy forces you to make choices. One of those choices is where to focus your innovation effort. An emergent strategy often results in a lack of direction in the innovation effort.

Consider the case of Kodak. It kept changing its innovation strategy. It permitted many flavors of strategy logic to permeate its invention efforts. When faced with the digital camera threat, it invested in digital innovation.  It developed over 50 digital products in response to the digital imaging innovation.

It created many valuable patents due to its efforts in digital space. It also earned the patent for the digital sensor which became the heart of the digital camera. But most of its efforts were in convergence space. It focused on products that combined old world photography with digital imaging. It created photo CD innovation and launched $500 photo CD players. But they flopped in the market as the market didn’t want a photo CD player. Instead, people wanted better digital cameras.

Similarly, Polaroid invested in printers on top of digital cameras. These are examples of misplaced focus of innovation. Without a well thought through innovation strategy, organizations often miss the proper innovation focus.

Avoiding Choices

Another issue with emergent innovation strategy is that it leads to decision avoidance.  A plan is great because it involves making decisions on what to focus on and what to avoid. But sometimes, emergent strategies lead to avoidant choices.

Yahoo is a great example. After a successful start, Yahoo began to struggle in the market. At that time, one Yahoo executive wrote a scathing memo to the senior management. He titled the note the peanut butter manifesto, and it somehow reached the press. As a result, it appeared in the Wall Street Journal. The point in that memo was that Yahoo was not making innovation choices due to which it was struggling. It is a worthwhile read for anyone interested in strategy and innovation.

Companies often start too many projects and rarely kill them

Often, emergent strategies flourish in organizations. Without a nudging mechanism, they become a poster child of choice avoidance. Moreover, companies often start too many projects and rarely kill them.

The logics behind emergent strategies also tend to crowd out critical projects. For example, influence weighted strategies crowd out projects that do not have strong backers.

With five different emergent strategy logics working together, too few choices can ensue. As in the case of Yahoo, it can be a costly mistake.

Poor Market Performance

A weak innovation strategy can also result in poor market performance of innovation projects. Too many projects, without a central organizing principle, can weaken the overall effort. They can force an organization to be spread too thin. Too little effort, spread across too many opportunities, can starve critical projects. Such projects, without enough marketing muscle behind them, often fail.

Too many weeds can sap the healthy plants of sunlight, water, and nutrients. Many of these emergent innovation strategies allow weeds to grow along with healthy plants.

Many of these emergent innovation strategies allow weeds to grow along with healthy plants

If your company has a method to try many ideas and kill the worst ones fast, then it makes sense to try many things. But most companies are awful at stopping projects. As a result, once a project starts, it becomes hard to kill it. In such situation, starting a project should be hard to do.

In emergent innovation scenarios, starting projects are rarely challenging. As a result, a lack of deliberate innovation strategy can lead to too many projects. It can thus lower innovation success rate in the market.

Lack Of Profits

Sometimes, innovations are wildly successful in the market but make no money. That is another example of a lack of a deliberate innovation strategy. TiVo created an amazing project that became wildly successful. People loved the DVR from TiVo, and a cult-like following emerged. But TiVo made no money from this success. Since Tivo didn’t deliberately think about profiting from its innovation, it found several hurdles on its way to profits.

Skewed Innovation portfolio

In the 1990s, most projects in Kodak’s innovation portfolio focused on convergence. They all assumed that the future holds a convergence between digital and chemical worlds.

Unfortunately, the market had no interest in convergence projects. As a result, most of the plans failed in the market.

It would have been a much better strategy to focus on multiple futures, as I write in my book the dark side of innovation. But Kodak didn’t do so, and as a result, it had a skewed portfolio.

A laser type focus on a single future outcome can appear to be a good strategy, but it can lead to a dangerous outcome as became evident for Kodak. This is often the case during a major industry discontinuity. A well thought through innovation strategy can help you avoid such outcomes.

Missed Opportunities

Without a deliberate innovation strategy, projects enter the innovation portfolio using many logics. This often leads to a diffuse and unfocused view of the future. An unfocused view along with a lack of an environment  scanning strategy can be dangerous. It can make you miss opportunities in the marketplace.

Consider the possibilities that Kodak Missed. It missed the fact that computers were becoming commonplace. It missed the fact that internet was connecting the computers and users. These two trends were responsible for many opportunities in the digital space. It obviated the need for photo CD players and provided opportunities for the digital darkroom. Kodak also missed the online photo sharing and storage opportunities.

Blindspot Threats

The biggest issue with a lack of a deliberate innovation strategy is the blind spot management problem. Firms cannot look at everything in its environment and the future. It is the same issue with people. We only focus on a small number of areas and ignore the rest.

Emergent innovation strategy often assumes business as usual in the future. Such a worldview often misses major threats and opportunities during times of significant change.

Often major changes shock firms because they were least prepared to deal with them

Often major changes shock firms because they were least prepared to deal with them. This outcome ensures because companies rely on emergent innovation strategies.

A deliberate innovation policy often adds significant value by enabling you to scan your blind spots regularly. Emergent strategies leave you prone to attacks from your blindspots.

Key Takeaway

Overall, a lack of innovation strategy leads to ineffectiveness in innovation management, lower innovation performance in the market and misses opportunities and threats.