The past months I have been approached by companies to help them define their innovation strategy. This sounds great, doesn’t it? Companies consciously making the effort to start exercising their innovation muscle. But what really gets me is the admission that these clients have no clear business strategy to start with and then the realisation that they have no idea about an innovation strategy. I preferably like to define an innovation strategy together with the business strategy, but in traditional, what I would call ‘low innovation power’ companies, having a business strategy, a sense of direction would be a preferable start.
With the speed of technology innovation stretching companies to look at ways to keep the business running and maintaining their position in the market, leadership frequently has problems addressing the next the steps for the company and defining their direction, their ‘true north’.
Confronted with a deluge of startups, introduction of new business models, strong players such as Google, Apple and Amazon continuously building new capabilities and moving into new markets (autonomous driving, health & fitness, space), and with Marc Andreessen’s quote – software is eating the world – proving to be a huge truth, more mature companies and their leaders endeavour into projects such as digital transformation and ask their people to be more innovative and to come with new ideas for growth.
Innovation is, alas, not just a lever you can switch on. Innovation (technology, process and business model innovation) needs to fed; it needs a fertile environment, the right enabling conditions and a specific mind-set of leadership. You need to understand the nature of innovation to adopt it successfully. Younger companies, have built their innovation model into their DNA; it’s in their blood, their veins, their mind-set – they don’t even talk about innovation: everything they do is intended to meet the customer’s needs better, quicker and more efficiently, redefining themselves constantly. And, alas, this mind-set is often found lacking by exactly the people asking for more innovation in traditional companies. Some things need to change in a company to enable a sustainable innovation practice: your view of the future, your long vs. short term perspective, your risk adoption profile, your communication about why things work or don’t work, etc., etc. In short, you as a leader need to change.
This post is about the front end of all of this: the role strategy currently plays and should play in defining the future of a company, i.e. how leadership should grasp change.
So what is the current practice in strategy?
Strategy in many companies has been reduced to examining what’s happening in the market now, which companies might be potential M&A targets (whilst most M&A initiatives fail to deliver on key objectives), bench-marking results against current competition set. This is the current comfort zone for strategy departments. In addition, as most current business practices focus on operational excellence, there is no real push from leadership to change the way strategy is functioning. Obviously, this is a generalization of the situation as there are strategy departments that do step outside their comfort zones.
Nevertheless, strategy is no longer about the long term play, what kind of company it should be and in which markets it should be playing. There are several examples such as Nokia, which had to adapt quickly to declining market conditions to re-invent themselves – now three times in a row, that indicate that avoiding a hard turn isn’t that easy. Nokia had no other option than make a harsh re-direction of what the company is about (no longer “Connecting People”). Companies like Fujifilm and Philips take smoother turns, but based on timely detection that the direction they’re currently taking will lead to decline and potentially worse. New entities, and by now the usual suspects, such as Amazon, Netflix and Google, don’t let the market surprise them but create markets over and over again, i.e. seeking and finding Blue Oceans. You might conclude that these companies are specialists in continuously seeking out Blue Oceans and never let themselves get into Red Oceans.
The role of strategy, therefore, should be to continuously seek out what a future business could look like, instead of current practice which is too much focused on the now, on maintaining a position in a current market and not seeking out new value spaces. Strategy should play a much more important role in defining innovation. But it should do so in a strong collaboration with marketing, and especially with insight and intelligence disciplines. Peter Drucker expressed what building business is about: “The purpose of business is to create and keep a customer.” And in this context, strategy and marketing should be left and right ventricular of the innovation muscle aimed at creating and keeping customers.
Strategy should be playing a stronger role of creating customers. Strategy should continuously be working on understanding change(s) in the market. Strategy should collaborate with marketing as that should be the department that understand customer / consumer psychology that drives purchasing behaviour. In addition, and perhaps making this even a bigger challenge, strategy needs to bring the future into the company as quickly as possible, and as the future changes at ever increasing speeds, strategy cannot afford setting out a direction that will last for years.
Each direction might only be valid for 2 to 3 years max. This implies that strategy needs to be defined and adopted as the company develops. Strategy needs to, therefore, also keep an eye on how the company develops; it needs to move back and forth between the now and the future…..continuously…..annually, perhaps even quarterly. Answering the question “What business do you want to be in?” is never as easy as it seems, and the answer never lasts as long as you think or hope. It is most likely to be a continuous evolution rather than a complete revolution.
I remain with the main conclusion that strategy needs to step out of its current comfort zone and, in some instances its isolated tower, to change and adopt a more pro-active role of defining the future of companies. It needs to get closer to the business and closer to the actual changes in society – it needs to actively bring the future into the company and at the heart of your future .
