Does Strategy Inform Innovation or Does Innovation Inform Strategy?

Linking Innovation with Strategy

The-links Innovation that is linked to strategy is seen as more realistic and supportable.  Innovating is efficient because you avoid creating ideas that are out of scope.  Firms struggle with this as Idris Mootee observed in his blog, Innovation Playground:

“The most amazing thing with strategic experience innovation is that it takes one kind of company and leadership to create the idea and another kind of company to scale it up and drive industry transformation and we see it in markets after market.”

Andrew Hinton offered this insight on his blog, Inkblut:

“We hear the words Strategy and Innovation thrown around a lot, and often we hear them said together. “We need an innovation strategy.” Or perhaps “We need a more innovative strategy” which, of course, is a different animal. But I don’t hear people questioning much exactly what we mean when we say these things. It’s as if we all agree already on what we mean by strategy and innovation, and that they just fit together automatically.”

There are two approaches to linking innovation and strategy:  Strategy-Informs-Innovation and Innovation-Informs-Strategy.  Here is how:

Strategy-Informs-InnovationFor Strategy-Informs-Innovation, I begin with a model that depicts what the firm is trying to do at a strategic level.  My favorite model is The Big Picture framework developed by Professor Christie Nordhielm at the University of Michigan. It describes strategic quadrants that a firm can pursue. The choice of strategy is deciding which quadrant offers the biggest payoff. Once a firm has selected a quadrant, it guides the use of a systematic innovation method.

The trick is to use the process to generate creative concepts that give the marketing impact of the selected strategic quadrant. So, for example, if I had selected Quadrant 2 as my lead strategy (retaining existing loyal customers), I would use an innovation approach that emphasized loyalty from current customers.

Innovation-Informs-StrategyFor the other direction (Innovation-Informs-Strategy), we begin with an innovation initiative to generate a large stock of ideas. We map those ideas back into the strategic model to see where they best fit (while remaining agnostic about which strategic quadrant to choose). When done correctly, we see a scatter of ideas around the strategic framework.  Then we put on our “strategy hat” and reflect on the choice of quadrant based on the quality and quantity of ideas within each quadrant. For example, if I believe that Quadrant 2 (multi-brand users) of the Big Picture model had the most variety of useful and novel ideas, I would prefer this quadrant to make the biggest, disruptive impact on the market. In effect, I am letting the innovation choose my strategy.

Either approach is viable. That said, it may make sense to start with the Strategy-Informs-Innovation approach if the firm knows it won’t change regardless of the ideas generated for other strategic quadrants. In that case, go with the flow. Narrow your innovation process so that it pours out ideas for the strategic quadrant at hand.

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