Picture this — you have a new startup or large business operating in a highly competitive market. A constant shift in trends makes it hard to keep up with your competitors and offer products people want. How will your organization keep up with those changes, thrive in the market, and set the pace for the industry with what you offer?
In the business world, the answer usually lies in your innovation strategy. It isn’t only about generating great ideas — it’s also about creating a strategy to put your ideas into place to drive growth and attract customers.
In this guide, we’ll walk through creating an innovation strategy. We’ll go through the process — from idea generation to executing your plan. We’ll also cover the types of innovation you can invest in and a few examples of companies innovating in competitive markets.
What is innovation strategy?
An innovation strategy is a detailed roadmap with a series of strips that helps your organization reach its future goals. This roadmap isn’t just a guide for business success — it’s a guide that helps you keep up in your industry by thinking of new and innovative ways to tackle problems.
These innovations can be creating new products to solve future problems, optimizing business processes to be more efficient, or thinking of entirely new ways to disrupt your industry.
Ultimately, your innovation strategy will help you align your business with your customer’s needs and create products and services to give your company a competitive advantage.
What are the stages of innovation strategy?
The innovation process doesn’t happen in a vacuum — it requires a clear process that takes a new idea and brings it to market.
1. Idea generation and ideation
Idea generation is the foundation of an innovation system. It’s the process that helps companies develop ideas to compete in the market and explore new opportunities without taking too much risk.
Many companies innovate by taking advantage of new technologies for insights — learning from data to see what problems customers have that you can solve. Innovators can use this information to explore new ideas and brainstorm ways to bring those ideas to life.
The vital part of this process is customer feedback. A great idea needs a customer base available to see success — and not every idea will have people around willing to pay money to access it. New ideas need customer validation to determine if they are viable.
2. Idea evaluation and selection
Idea evaluation and selection is assessing new ideas to see if they are feasible. During this process, you’ll look at costs, time to market, potential profit, and other business metrics to see if it’s worth pursuing an idea.
If it looks like a product you’re considering has a chance to succeed, then the next step is to compare it with what’s currently on the market. Is your new product something new that doesn’t exist yet, or does it improve on existing products? Will this help your company stand out?Use this information to find the unique value proposition and determine if the idea is worth pursuing.
3. Implementation and execution
The implementation and execution phase is where you take your new idea and turn it into a concrete plan to make it a reality. But this stage is more than building a product — it’s also about creating a successful business strategy and finding help to create your idea.
The first step is product development. Which vendors can supply the materials for your product or help you manufacture it? Which members of your team will be the best fit for development?
Once you find the right people, implementation becomes a matter of executing a plan. It involves project management, resource management, process management, and continuous improvement.
4. Monitoring and evaluation
You’re breaking new ground when innovating in an industry, so you may not get everything right. Monitoring and evaluation will help you handle those problems and adapt your innovation efforts.
Your goal when monitoring a new project is to assess your performance. Is what you’re doing helping you achieve your goals and keeping you on track for release?
A key part of doing this is metrics. These numbers will tell you how well you are doing. Track your time to release, product progress, defects, and eventual return on investment. Reassess your strategy and make changes if your metrics show you aren’t meeting your goals.
What are the types of innovation strategy?
There isn’t one type of innovation in business. Let’s look at four of the main ways you can create new and innovative ideas.
- Product innovation: Product innovation is the process of building new products or upgrading existing ones to meet customer needs in a new way. It helps companies offer better products and stay competitive in evolving markets.
This process happens when you pay attention to product markets. You see the problems customers have and their issues with the current offerings. Use that information to develop novel ways to solve those problems and offer a better customer experience. - Process innovation: Process innovation is changing how you do things inside an organization. You aim to apply new initiatives and technology to optimize efficiency and your ability to compete in the market.
Take the inclusion of a new IT system, for instance. New technological innovation can improve your employees’ ability to collaborate and get more done — allowing them to serve customers better in your core business. - Business model innovation: Business model innovation is about making big changes to how a business runs. It isn’t just a few changes in business processes or a new product. Your goal is to create new business models to capture value in the market.
One of the common ways this happens is finding new sources of revenue. An excellent example of this is service businesses adding subscriptions to their revenue.
Take an HVAC company. Instead of relying on incoming calls to get business, HVAC companies offer customers a maintenance plan — allowing companies to get a new source of predictable revenue. - Disruptive innovation: Disruptive innovation is about shaking things up. You aren’t launching products that are a minor upgrade of what exists — you’re making game-changing innovation initiatives that disrupt existing business models.
Radical innovation often comes from startups, such as rideshare companies taking on the taxi industry. You’re rewriting some of the rules to take on the established industries to provide a better service and give people more options.
What are some examples of successful innovation strategies?
Now that you’ve seen what types of innovations there are, let’s look at a few innovation strategy examples.
Amazon
Amazon was one of the first companies to use the internet to sell products. It started as an online bookstore, but as time passed, it changed its focus to become a one-stop marketplace for every product you can imagine.
Since then, Amazon has continued to use technology to innovate in the online market. It now offers subscription services to offer more customer value, video streaming, audiobooks, eBooks, and countless other value-added services for its customers.
Apple
Apple’s innovation projects are a blend of user-centric design and quality. Apple doesn’t often create brand-new product categories. Instead, it waits to see how technology trends play out and creates innovative approaches to those products.
One of the best examples of this is the iPhone. Apple didn’t create the first smartphone. Blackberry was one of the first to market and was popular for a while.
But smartphones didn’t start making their way into most homes until Apple unveiled the iPhone — their easy-to-use smartphone offering that every consumer can use.
Startups and entrepreneurs
Innovation is at the heart of the startup and entrepreneurship ecosystem. Let’s look at how a few companies changed the game with their new innovations.
- Uber: Took on the taxi industry by allowing regular people to use their cars to offer rideshare services to customers using mobile apps.
- Airbnb: Competed against the established hotel industry to give people more lodging options and allow homeowners to rent parts of their homes.
- Netflix: Used a subscription model and on-demand streaming approach instead of a monthly fee for live TV.
- Stripe: Changed the payment industry by allowing companies to integrate payment processing into their websites easily.
IMD’s Driving Strategic Innovation Program — Empowering businesses for innovation success
Innovation strategy is an essential part of creating a roadmap for long-term success. It helps you define new product ideas, validate them in the market, and execute the process of bringing them to life. Without the right strategy, you take more risk of building products that don’t work or won’t meet your customers’ needs. IMD offers business school programs for entrepreneurs and professionals who want to learn how to drive innovation in their businesses.