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Innovation in Business: What It Is & Why It’s So Important

• 08 Mar 2022

Today’s competitive landscape heavily relies on innovation. Business leaders must constantly look for new ways to innovate because you can't solve many problems with old solutions.

Innovation is critical across all industries; however, it's important to avoid using it as a buzzword and instead take time to thoroughly understand the innovation process.

Here's an overview of innovation in business, why it's important, and how you can encourage it in the workplace.

What Is Innovation?

Innovation and creativity are often used synonymously. While similar, they're not the same. Using creativity in business is important because it fosters unique ideas. This novelty is a key component of innovation.

For an idea to be innovative, it must also be useful. Creative ideas don't always lead to innovations because they don't necessarily produce viable solutions to problems.

Simply put: Innovation is a product, service, business model, or strategy that's both novel and useful. Innovations don't have to be major breakthroughs in technology or new business models; they can be as simple as upgrades to a company's customer service or features added to an existing product.

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Types of Innovation

Innovation in business can be grouped into two categories : sustaining and disruptive.

• Sustaining innovation: Sustaining innovation enhances an organization's processes and technologies to improve its product line for an existing customer base. It's typically pursued by incumbent businesses that want to stay atop their market.
• Disruptive innovation: Disruptive innovation occurs when smaller companies challenge larger businesses. It can be classified into groups depending on the markets those businesses compete in. Low-end disruption refers to companies entering and claiming a segment at the bottom of an existing market, while new-market disruption denotes companies creating an additional market segment to serve a customer base the existing market doesn't reach.

The most successful companies incorporate both types of innovation into their business strategies. While maintaining an existing position in the market is important, pursuing growth is essential to being competitive. It also helps protect a business against other companies affecting its standing.

Learn about the differences between sustaining and disruptive innovation in the video below, and subscribe to our YouTube channel for more explainer content!

The Importance of Innovation

Unforeseen challenges are inevitable in business. Innovation can help you stay ahead of the curve and grow your company in the process. Here are three reasons innovation is crucial for your business:

• It allows adaptability: The recent COVID-19 pandemic disrupted business on a monumental scale. Routine operations were rendered obsolete over the course of a few months. Many businesses still sustain negative results from this world shift because they’ve stuck to the status quo. Innovation is often necessary for companies to adapt and overcome the challenges of change.
• It fosters growth: Stagnation can be extremely detrimental to your business. Achieving organizational and economic growth through innovation is key to staying afloat in today’s highly competitive world.
• It separates businesses from their competition: Most industries are populated with multiple competitors offering similar products or services. Innovation can distinguish your business from others.

Innovation & Design Thinking

Several tools encourage innovation in the workplace. For example, when a problem’s cause is difficult to pinpoint, you can turn to approaches like creative problem-solving . One of the best approaches to innovation is adopting a design thinking mentality.

Design thinking is a solutions-based, human-centric mindset. It's a practical way to strategize and design using insights from observations and research.

Four Phases of Innovation

Innovation's requirements for novelty and usefulness call for navigating between concrete and abstract thinking. Introducing structure to innovation can guide this process.

In the online course Design Thinking and Innovation , Harvard Business School Dean Srikant Datar teaches design thinking principles using a four-phase innovation framework : clarify, ideate, develop, and implement.

• Clarify: The first stage of the process is clarifying a problem. This involves conducting research to empathize with your target audience. The goal is to identify their key pain points and frame the problem in a way that allows you to solve it.
• Ideate: The ideation stage involves generating ideas to solve the problem identified during research. Ideation challenges assumptions and overcomes biases to produce innovative ideas.
• Develop: The development stage involves exploring solutions generated during ideation. It emphasizes rapid prototyping to answer questions about a solution's practicality and effectiveness.
• Implement: The final stage of the process is implementation. This stage involves communicating your developed idea to stakeholders to encourage its adoption.

Human-Centered Design

Innovation requires considering user needs. Design thinking promotes empathy by fostering human-centered design , which addresses explicit pain points and latent needs identified during innovation’s clarification stage.

There are three characteristics of human-centered design:

• Desirability: For a product or service to succeed, people must want it. Prosperous innovations are attractive to consumers and meet their needs.
• Feasibility: Innovative ideas won't go anywhere unless you have the resources to pursue them. You must consider whether ideas are possible given technological, economic, or regulatory barriers.
• Viability: Even if a design is desirable and feasible, it also needs to be sustainable. You must consistently produce or deliver designs over extended periods for them to be viable.

Consider these characteristics when problem-solving, as each is necessary for successful innovation.

The Operational and Innovative Worlds

Creativity and idea generation are vital to innovation, but you may encounter situations in which pursuing an idea isn't feasible. Such scenarios represent a conflict between the innovative and operational worlds.

The Operational World

The operational world reflects an organization's routine processes and procedures. Metrics and results are prioritized, and creativity isn't encouraged to the extent required for innovation. Endeavors that disrupt routine—such as risk-taking—are typically discouraged.

The Innovative World

The innovative world encourages creativity and experimentation. This side of business allows for open-endedly exploring ideas but tends to neglect the functional side.

Both worlds are necessary for innovation, as creativity must be grounded in reality. You should strive to balance them to produce human-centered solutions. Design thinking strikes this balance by guiding you between the concrete and abstract.

Learning the Ropes of Innovation

Innovation is easier said than done. It often requires you to collaborate with others, overcome resistance from stakeholders, and invest valuable time and resources into generating solutions. It can also be highly discouraging because many ideas generated during ideation may not go anywhere. But the end result can make the difference between your organization's success or failure.

The good news is that innovation can be learned. If you're interested in more effectively innovating, consider taking an online innovation course. Receiving practical guidance can increase your skills and teach you how to approach problem-solving with a human-centered mentality.

Eager to learn more about innovation? Explore Design Thinking and Innovation ,one of our online entrepreneurship and innovation courses. If you're not sure which course is the right fit, download our free course flowchart to determine which best aligns with your goals.

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Innovation Strategy: Developing Innovative Strategies in Business

Published: 27 February, 2024

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Table of Contents

Innovation has become an imperative for organizations worldwide, yet the multitude of methods and frameworks available often lead to confusion rather than clarity. While various approaches focus on specific aspects such as user experience or design thinking , they often fail to provide a cohesive strategy for innovation from start to finish. An innovation strategy is key to capturing and  sustaining innovation , it serves as a detailed roadmap, comprising a series of strategic steps that propel an organization toward its future objectives. Beyond being a mere guide for business success, this roadmap is essential for ensuring a company remains competitive in its industry by continually devising new and innovative approaches to address challenges.

At Digital Leadership , our core belief is that by harnessing emerging technologies and innovative business models , we can revolutionize customer experiences. Crafting an innovation strategy is crucial for a company’s success. It entails fostering collaboration within the organization to stimulate new ideas and establishing a well-thought-out framework for future growth. It’s crucial to understand that no two innovation strategy plans are identical. 

We specialize in making and putting into action creative plans that work and help organizations not just accept innovation but to do well in the always-changing digital world through our innovation consulting services to bring business growth through innovation as an essential roadmap that leads enterprises towards their unique success. Utilizing our Innovation Blueprint service as a starting point provides a robust foundation for your business. We carefully assess how you currently approach innovation and smoothly integrate those practices into your overall business plan .

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Corporate training, innovation consulting and much more.

What is Innovation Strategy?

An innovation strategy is a planned and organized way of using new technologies and creative ideas to bring about significant changes in a company. It involves creating a detailed plan that closely matches the company’s main goals, encouraging a culture of constant improvement. Think of an innovation strategy as a commitment to a shared goal of innovation, including a structured set of activities designed to drive the future growth of the organization. 

Each innovation strategy is unique. This innovation strategy plan is more than just a guide for business success; it functions as a compass, steering the organization through new and creative approaches to address challenges. Developing a company innovation strategy includes clearly defining an innovation mission, aligning activities with long-term business goals , and promoting a culture that welcomes change and creativity. Following such a strategy ensures that organizations stay ahead in their industries, always adjusting and evolving to meet emerging needs.

Much more innovation approaches, you will find in our book  “ How to Create Innovation “.  Recognizing that innovation is a dynamic process, this guide emphasizes adaptability. Stay ahead of the curve by understanding how  innovation strategies  evolve with market dynamics, ensuring sustained relevance and competitiveness.

The Only Book On Innovation You’ll Ever Need

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Business Innovation Strategy: What is Innovation Strategy In Business

In the business environment, remaining competitive necessitates ongoing evolution to address evolving customer demands. Establishing an innovation strategy becomes imperative for organizations aiming to excel in this dynamic setting. One prevalent initial step in crafting such a strategy involves gaining a comprehensive grasp of the organization’s innovation initiatives and overarching business goals . This encompasses identifying the market landscape, comprehending customer requirements, and discerning the most effective strategies to optimize customer satisfaction while utilizing resources efficiently.

Once you have a grasp of your organization’s innovation landscape, the next step is to define a common innovation mission. This mission should align with your overall business strategy and focus your innovation efforts on creating value for your customers. An effective innovation strategy must also include setting specific innovation goals and metrics to measure success. By establishing clear objectives, businesses can better track their progress and adapt their innovation programs as needed.

So, Why are Innovation Strategies Important in Business

• Generating and capitalizing on returns from innovations serves as a primary source of competitive advantage.
• Complex and resource-intensive activities like R&D, product design, and collaboration can impact a firm’s competitive standing. Without strategic guidance, these efforts may yield fragmented and short-term outcomes.
• With globalization, firms face a multitude of opportunities and threats across various markets. A strategic approach to innovation helps navigate this landscape effectively.
• Organizational structures and innovation processes must align with the overall corporate strategy. For instance, R&D efforts may differ depending on whether the firm aims to lead or follow in innovation.
• Articulating long-term strategic objectives for innovation is crucial for engaging with public-sector policies, fostering collaborations, and attracting patient investors.
• A firm that prioritizes innovation strategically is more likely to attract talented individuals seeking opportunities for creative engagement.

The “UNITE Innovation Approach” Model acts as a guide for entrepreneurs to build a strong innovation strategy framework. This model smoothly combines market insights, aligns with business goals, and offers a structured way of generating and implementing ideas. By employing the UNITE model, entrepreneurs gain a strategic advantage, ensuring that their innovation efforts are intentional steps toward lasting success, not haphazard. 

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The UNITE Innovation Approach | Overview

Steps of developing innovation strategy framework.

Innovation is crucial not only for large corporations but also for small and medium-sized enterprises (SMEs). It serves as a vital competitive advantage and is often considered a core capability of firms. For SMEs, innovation is particularly important due to resource constraints, making it an effective means to enhance productivity and performance. However, research findings on Heineken Beverage Industry reveal that the organization’s innovative strategies, particularly in process, market, and product innovation, are weak and fail to significantly contribute to its performance and productivity levels. To strengthen their innovation efforts, SMEs can follow several steps in developing an effective innovation strategy.

Step 1: Innovation Strategy Setup

In the crucial first step of Setup within the innovation strategy , organizations lay the groundwork for success. This involves defining the business intentions and direction, outlining high-level Search Fields, and identifying detailed Opportunity Spaces. By articulating the Business Intention, organizations clarify the problem they aim to solve or the legacy they aspire to leave behind, ensuring alignment with organizational goals.

You can now access the complete Business Intentions Package, including a full presentation, related models and instructions for use.

The UNITE Business Intentions

Utilizing tools like the Search Field Matrix aids in analyzing dimensions like trends and market segments, guiding prioritization of areas for innovation within the overarching innovation strategy. Opportunity Spaces then pinpoint specific intervention sites, outlining Jobs to be Done and target customers in alignment with the innovation strategy’s objectives. Building the core team, led by an experienced entrepreneur, is essential for executing the innovation initiative effectively. Operating in a protected environment, clear goals are set for each stage, with regular updates provided to stakeholders, ensuring smooth organizational setup and progression through subsequent stages.

You can now access the complete UNITE DEFINITION OF SEARCH FIELDS & OPPORTUNITY MATRIX, including a full presentation, related models and instructions for use.

THE UNITE Definition Of Search Fields & Opportunity Spaces

Step 2: problem/solution fit.

In step 2 of developing an innovation strategy, the focus is on achieving Problem/Solution Fit , and aligning customer needs with viable solutions. This involves three key streams of work: Stream A delves into understanding Jobs to be Done, Stream B crafts a Value Proposition, and Stream C defines the Business Model. Bringing the team up to speed is essential, involving active briefings with stakeholders and thorough research to refine objectives. Properly framing the broader objective, clarifying the JTBD, and conducting initial market research are vital steps before proceeding further, ensuring a solid foundation for subsequent actions.

You can now access the complete UNITE PROBLEM / SOLUTION FIT, including a full presentation, related models and instructions for use.

The UNITE Business Model Innovation Patterns

The Jobs-to-be-Done (JTBD) framework is a powerful tool for understanding customer needs and driving innovation. By focusing on tasks rather than demographics, businesses gain deep insights into their target market. Through qualitative interviews and quantitative surveys , companies validate insights and identify growth opportunities. This approach helps in creating solutions that precisely match customer needs, reducing the risk of failure and increasing market success. Continuous iteration based on customer feedback ensures a competitive edge in today’s customer-centric landscape. Embracing JTBD is essential for fostering innovation and delivering value to customers.

You can now access the complete JTBD Customer’s Job Statement Package, including a full presentation, related models and instructions for use.

The UNITE Jobs-To-Be-Done Statement & Map

It offers a systematic approach to understanding customer needs and shaping innovative solutions. By focusing on the tasks or objectives customers are trying to accomplish, rather than just their demographic or psychographic profiles, businesses can uncover deep insights into unmet customer needs and opportunities for improvement.

To effectively outline the tasks and activities customers undertake to fulfill their job using the UNITE Jobs-to-be-Done Universal Job Map, convene your team and set up a whiteboard or wall with eight columns representing the eight steps in the Job Map. From defining and planning to concluding, each step provides insight into the customer’s journey. For example, when purchasing a bottle of wine, steps may include defining preferences, locating a store, preparing by comparing options, confirming the choice, executing the purchase, monitoring the taste, modifying preferences based on satisfaction, and concluding the purchase experience. Understanding these steps is vital for developing solutions that precisely meet the customer’s needs.

You can now access the complete Jobs to be Done Universal Map Package, including a full presentation, related models and instructions for use.

At this stage, having gone through the Jobs-to-be-Done process and developed initial Customer Promises, we find ourselves within a relatively narrow solution space ripe for exploration using methodologies like Design Thinking. The next step involves translating these initial promises into robust solutions by treating each promise as a mini-opportunity Space. Ideation is the key here. We encourage exploring a plethora of ideas, ranging from ambitious “moonshots” to targeted solutions addressing specific but unsolved problems. It’s about being smart in approach, knowing when to think big and when to focus narrowly, all while keeping the original customer needs at the forefront.

To navigate this process effectively, we recommend leveraging frameworks such as the Value Proposition Canvas . This tool provides a structured approach to deep dive into the value proposition, ensuring alignment with customer needs and market demands. Crafting a robust value proposition isn’t just about generating ideas; it’s about understanding the core essence of what your offering brings to the table. By embracing ideation, divergence, and strategic frameworks, businesses can unlock innovation potential and create value propositions that resonate deeply with their target audience.

You can now access the complete Business Model Canvas Package, including a full presentation, related models and instructions for use.

The UNITE Business Model Canvas

(3) solution/market fit (mvp).

In step 2, we’ve pinpointed our customers’ needs, tested potential solutions, and outlined a solid business model. However, jumping straight into execution is risky. While we may have a good grasp of what our customers want, our concept hasn’t been fully validated yet. Step 3 of developing an innovation strategy, where customers actually buy and use our product, is crucial for true validation. Rushing into scaling before perfecting our concept can lead to wasted resources and the need for costly adjustments later on. It’s essential to ensure our business concept is finely tuned before expanding.

Innovation strategy hinges on the meticulous execution of a Minimum Viable Product (MVP) , a streamlined version of your offering that validates key business assumptions while conserving resources. The MVP approach, epitomized by Zappos’ early success, emphasizes real-world validation over elaborate prototypes, focusing on tangible customer experiences. Yet, challenges like imitation and reputational risk loom large, necessitating strategic differentiation and brand management. Moreover, maintaining quality is paramount, ensuring that the MVP not only functions but delights users, fostering genuine feedback. Executing an MVP entails two phases: development and launch, followed by rigorous testing and iteration. This iterative process drives continuous improvement , steering your innovation strategy towards tangible value creation .

You can now access the complete Unite Solution/Market Fit (MVP) Scorecard, including a full presentation, related models and instructions for use.

The UNITE Problem-Solution Fit & Minimum Viable Product (MVP) Scorecards

In the initial phase of MVP development and launch, four key work streams drive the process: Marketing focuses on brand development and campaign planning, while the Business stream refines models and tests pricing strategies. Product & UX teams develop and test the MVP, while Technology sets up technical infrastructure. Phase B shifts focus to live testing and tweaking, with Marketing launching test campaigns and Business refining operating models.

Step 4: Build & Scale Your Innovation Strategy

After countless tests and a number of pivots and iterations, you have quantitatively proven with real customers that you have achieved a Solution/Market Fit. In other words, your product works and customers have actually bought it! In Stage 4 of developing an innovation strategy, you will be shifting gears and moving from incubation (concerned with finding a working Business Model) to acceleration (building and scaling the identified Business Model). With your business concept now proven and well-defined, the next challenge is getting it to scale. That is the core purpose of this stage: to build and scale the business concept that you have been working on thus far and now get it out into the market to scale as quickly as possible. But moving from your business concept (the strategy) to an actual business (the execution) is inherently difficult. Many organizations fail to bridge the Strategy-Execution Gap , meaning they fail to implement the strategy, or business concept, they originally designed. According to the available statistics, up to 70% of organizations struggle with moving from strategy to execution.

One key ingredient we propose to overcome the Strategy-Execution challenge is to establish how you are going to execute using a well-defined and communicated Operating Model. The Operating Model Canvas emerges as a potent solution, offering a blueprint for execution. Establishing a well-defined and communicated Operating Model is pivotal in overcoming the Strategy-Execution challenge.

You can now access the complete GROWTH-HACKING PROCESS, including a full presentation, related models and instructions for use.

The Growth-Hacking Process

To ensure the effectiveness of the innovation strategy , it is imperative to embed innovation within the organization’s processes and overall strategic framework. This necessitates the allocation of resources, including time, finances, and skilled personnel, to innovation initiatives, while fostering a culture that champions and rewards innovative thinking.

By adhering to these guidelines for formulating an innovation strategy , businesses can position themselves for sustained success and growth amidst a rapidly evolving market landscape. Through a steadfast commitment to customer value creation and adaptability to uncertainty, organizations can pave the path to industry leadership through innovation.

Types of Innovation Strategies

Elaboration on innovation strategy typologies has been provided by various scholars (Freeman and Soete 1997; Goodman and Lawless 1994). These typologies encompass proactive strategies, characterized by technological and market leadership with a strong research focus, often associated with firms embracing first-mover advantages and taking significant risks. Active strategies involve defending existing technologies and markets while remaining agile to respond swiftly to emerging opportunities. Reactive strategies, on the other hand, are adopted by firms with a slower response to innovation, often prioritizing cost-cutting measures over technological advancements. Finally, passive strategies entail engaging in innovation only in response to customer demands, typically involving low-risk initiatives.

Examples of passive strategies can be observed among supplier firms in industries like automotive manufacturing, where lower-tier suppliers often rely on fulfilling specifications rather than driving innovation themselves.

1) Proactive Innovation Strategy

Being ahead in innovation defines successful companies that stand out in the ever-changing business world. These forward-looking organizations don’t just react to changes; they actively search for new opportunities and predict future trends. This proactive approach allows them to take control of the market by introducing fresh and distinctive products or services that capture consumer attention.

Within proactive innovation strategies, several paths contribute to an organization’s overall success:

• Product Innovation: At the core of being proactive in innovation is making new and groundbreaking products. Companies that do well put money into research and development, always trying to do things that haven’t been done before to meet new needs and go beyond what customers expect. Whether it’s using the latest technology or coming up with creative designs, creating innovative products is a big reason why these companies lead the market.
• Process Innovation : To ensure internal efficiency and stay ahead of the competition, organizations with a proactive innovation strategy focus on optimizing their internal operations. Process innovation becomes crucial, streamlining workflows, improving productivity, and fostering a culture of continuous improvement.
• Business Model Innovation : Recognizing that how value is provided and money is made is as crucial as the products themselves, organizations embracing proactive innovation strategies engage in business model innovation. This involves reimagining the fundamental structure of the business, exploring new revenue streams, and adapting to changing market dynamics.
• Open Innovation : Proactive innovators often collaborate with external partners, startups, or research institutions through open innovation practices. By tapping into a broader pool of ideas, expertise, and resources, these organizations enrich their innovation ecosystem and stay at the forefront of industry advancements.
• Sustainability Innovation: Forward-thinking companies, under a proactive innovation strategy, increasingly incorporate sustainability into their product development and business practices. This aligns with societal and environmental expectations, positioning them as responsible and future-ready entities.

Essentially, a proactive innovation strategy goes beyond mere adaptation; it positions organizations as catalysts of change, architects of the future, and leaders in industries where innovation is the key currency.

For instance, proactive innovators like DuPont and Apple exemplify a commitment to technological leadership through continuous innovation. Microsoft, employing an active strategy, strategically leverages existing technologies while adapting swiftly to market shifts. In contrast, firms like Dell may adopt a more reactive approach to technology adoption but remain proactive in their production and distribution models.

2) Active Innovation Strategy

Active innovation represents a dynamic approach for organizations to swiftly respond to market changes and evolving customer preferences. Embracing flexibility and agility, companies adopting this strategy proactively lead rather than merely follow in the ever-changing business landscape. Key aspects of the active innovation framework include:

• Proactivity : Organizations take the lead in meeting the needs of the continually evolving market.
• Incremental Innovation : Constant, small improvements to existing products or processes keep offerings up-to-date and aligned with customer preferences.
• Service Innovation: Beyond product creation, organizations focus on enhancing the overall customer experience by listening to customer feedback and adapting services accordingly.
• Adaptability : Rapid response to new demands, including staying abreast of technological changes.
• Technology Innovation: A pivotal component, organizations prioritize staying updated on technological advancements to provide modern solutions in the digital era.

Active innovation places a premium on a proactive mindset, swift actions, and a deep understanding of the market. This strategy positions organizations not only to navigate changes effectively but also to capitalize on new opportunities, establishing them as leaders in their respective industries.

3) Reactive Innovation Strategy

In the Reactive Innovation Strategy , businesses respond to market changes as needed. While not always the first to introduce groundbreaking products, these companies prioritize adaptability in the competitive environment. Cautious in their responses, organizations employing this strategy carefully evaluate market shifts before making changes. Though the pace of innovation may be slower compared to proactive approaches, this strategy holds advantages, especially in industries where stability and a deep understanding of market dynamics are paramount.

Strengths of Reactive Innovation:

• Adaptive Innovation: Enables precise adjustments in response to changes, maximizing resource utilization.
• Cost Innovation: Focuses on finding cost-effective solutions and operational efficiencies.

For organizations embracing Reactive Innovation , balancing responsiveness with forward-looking anticipation is key. While not always the first movers, strategic and well-timed responses to market shifts make them resilient players in the ever-changing business landscape. This approach proves particularly relevant in industries experiencing gradual changes, where staying attuned to market demands remains the primary focus.

4) Passive Innovation Strategy

In passive innovation , organizations show limited involvement in the innovation process , often missing opportunities and potential advancements. This cautious approach relies on established practices, avoiding proactive exploration. However, this passivity, while providing stability, can be a double-edged sword, risking stagnation in a quickly changing landscape.

• Imitative Innovation: Organizations that embrace passive innovation may tend to copy successful ideas from competitors or industry leaders, finding security in proven models but sacrificing the agility and originality of more proactive strategies.
• Stability vs. Stagnation: While passive innovation gives a sense of stability, organizations must be aware of potential downsides, including the risk of falling behind in industries where rapid advancements are the norm.
• Open Innovation Bursts : To counteract potential stagnation, passive innovation strategies may benefit from occasional bursts of open innovation. Drawing on external ideas and collaborations brings in fresh perspectives and helps maintain relevance in dynamic industries.

Developing an effective innovation strategy requires a comprehensive approach, incorporating key elements and following a systematic framework. By understanding the market, aligning strategies with business goals , and fostering a culture of innovation , organizations can stay ahead in the ever-evolving business landscape. The examples of successful innovation strategies from industry leaders further highlight the importance of innovation in achieving sustained business growth and competitiveness.

This nuanced understanding of innovation strategy underscores the dynamic interplay between technological advancements, market dynamics, and organizational capabilities, shaping firms’ strategic orientations towards innovation.

Innovation strategies vary widely, each tailored to specific organizational contexts and objectives. Also, there are five styles of Innovation Strategies

• Leadership ignites entrepreneurial energy within teams.
• Culture of rapid innovation and creation of new business models.
• Suitable for industries facing rapid changes.
• Management involves sharing the vision, establishing internal markets for ideas, and encouraging intrapreneurship.
• Managers innovate within existing business structures.
• Transformation of business structures over time.
• Ideal for companies seeking significant yet sustainable change.
• Management practices include experimentation, empowering teams, and customer-centricity.
• Exploration of new directions beyond existing strategic assets.
• Pursuit of radical change in response to limited growth opportunities.
• Management involves identifying crucial assets, encouraging cross-pollination of ideas, and seizing opportunities beyond core areas.
• Conducting low-cost experiments to overcome obstacles hindering major innovations.
• Cautious yet progressive approach to innovation.
• Suitable when significant opportunities are sensed, but details remain unclear.
• Management practices include goal-focused research, patience, and continuous exploration.
• Outsourcing creativity and investing in startups.
• Acquisition of promising startups.
• Feasible with available resources to leverage discoveries from smaller players.
• Management involves maintaining internal R&D capacity, scouting for acquisition prospects, and efficient integration processes.

Innovation Strategy of the Four main Types of Innovation

Four primary types of innovation —radical, architectural, disruptive, and incremental—provide a comprehensive innovation strategy framework for organizations to navigate the complexities of innovation and achieve their strategic objectives. Each type offers unique opportunities and challenges, catering to different levels of risk tolerance and resource availability. Understanding these distinct approaches to innovation is essential for organizations seeking to adapt, evolve, and thrive in an ever-changing marketplace. Let’s explore each type of innovation strategy in detail to gain insights into their applications and implications for organizational success.

• Radical Innovation : Radical innovation involves the development of entirely new technologies, products, or services that often disrupt existing markets or create entirely new ones. It represents a significant departure from current offerings and requires a high level of investment and risk.
• Architectural Innovation : Architectural innovation focuses on reconfiguring or redesigning existing systems, processes, or components within an organization to create new value. It involves changing the underlying structure or design of a product or service while keeping its core functionality intact.
• Disruptive Innovation : Disruptive innovation refers to the introduction of a product, service, or business model that fundamentally changes the way an industry operates, typically by targeting underserved or overlooked segments of the market. It often starts at the low end of the market and gradually improves to challenge established competitors.
• Incremental Innovation : Incremental innovation involves making small, gradual improvements to existing products, processes, or services over time. It focuses on optimizing and refining existing offerings rather than introducing radical changes, making it a lower-risk approach to innovation.

Innovation Strategy Examples

(1) apple innovation strategy.

Apple’s innovation strategy revolves around creating groundbreaking products that seamlessly integrate hardware, software, and services. Their focus on user experience and design sets them apart in the technology industry. This dedication matches the core of t he marketing innovation strategy – putting user happiness first by creating new and exciting solutions.

(2) Amazon Innovation Strategy

Amazon’s innovation strategy centres around customer-centric approaches, such as one-click purchasing, Prime membership benefits, and advanced supply chain management. Their focus on enhancing customer experience sets the standard for e-commerce.

(3) Tesla Innovation Strategy

Tesla’s innovation strategy includes advancements in electric vehicles, renewable energy solutions, and autonomous driving technology. Constantly pushing boundaries, Tesla exemplifies the essence of value innovation strategy, delivering cutting-edge solutions that reshape the automotive industry.

(4) Netflix Innovation Strategy

Netflix’s innovation strategy lies in content creation, personalized recommendations, and streaming technology. They continually invest in original content and technological advancements to stay ahead in the entertainment industry.

(5) Microsoft Innovation Strategy

Microsoft’s innovation strategy encompasses a diverse range of products and services, from operating systems to cloud computing. Their commitment to empowering individuals and organizations through technology fuels continuous innovation.

(6) Google Innovation Strategy

Google’s innovation strategy revolves around search algorithms, online advertising, and a wide array of digital services. Their commitment to organizing the world’s information and making it universally accessible drives innovation in various sectors.

(7) Nike Innovation Strategy

Nike’s innovation strategy focuses on product design, materials, and technological advancements in sportswear. They continuously introduce new technologies, such as Nike Adapt, to enhance athletic performance and customer experience.

Types of Innovation Strategies Examples

Innovation strategies can vary significantly depending on the industry, organizational goals, and market dynamics. Here are several types of innovation strategies along with examples:

• Example: Apple’s continuous development of the iPhone, introducing new features and designs with each iteration.
• Example: Toyota’s implementation of lean manufacturing principles, led to streamlined production processes and reduced waste.
• Example: Netflix transitioning from a DVD rental service to a subscription-based streaming platform, revolutionizing the entertainment industry.
• Example: Airbnb’s platform, enables individuals to rent out their properties to travellers, disrupting the traditional hospitality industry.
• Example: Procter & Gamble’s Connect + Develop program, which sources innovation ideas from outside the company to fuel new product development.
• Example: Tesla’s electric vehicles disrupt the automotive industry by challenging traditional gasoline-powered vehicles with innovative technology.
• Example: Coca-Cola introduces new flavours or packaging variations of its beverages to maintain consumer interest and market relevance.
• Example: SpaceX’s development of reusable rocket technology, aims to revolutionize space travel and exploration.

Elements of a Great Innovation Strategy

Crafting an innovation strategy plan entails navigating a dynamic landscape, demanding a flexible and multifaceted approach.

• Nurturing an Innovation culture : Establishing an environment that fosters creativity and embraces change is crucial for fostering innovation.
• Embracing Digital Transformation strategy : Incorporating technology to enhance processes and business models is a key aspect of digital transformation.
• Top-Level Endorsement: Securing commitment and support from senior leaders is essential for successful innovation initiatives.
• Strategic Resource Allocation : Wisely allocating resources to support novel and imaginative ideas is paramount.
• Customer-Centric Focus : Prioritizing and comprehending customer needs throughout the innovation process is indispensable.
• Agile Adaptation : Remaining receptive to agile methodologies facilitates swift adjustments to evolving circumstances.
• Performance Measurement: Implementing metrics to assess the success and impact of innovation efforts is vital.
• Investment in Research and Development: Devoting funds to research and development endeavors represents a valuable investment.
• Learning from Risks and Setbacks: Cultivating a culture that embraces risk-taking and views failures as learning opportunities is critical.
• Innovative Business Models : Continuously reimagining and innovating fundamental aspects of the business model adds a layer of dynamism to the innovation strategy.

In essence, innovation is the cornerstone of organizational longevity and competitive advantage. By embracing diverse innovation strategies such as technological advancements, architectural refinements, disruptive shifts, and incremental enhancements, businesses can unlock fresh opportunities and deliver unique value propositions. Whether through revolutionary changes or gradual refinements to existing offerings, innovation is pivotal for adapting to market fluctuations and seizing value.

Central to these pursuits is the evolution or reinvention of the business model. By aligning with customer preferences, organizations can develop innovative solutions that resonate with consumers, thereby bolstering market presence and fostering growth. Ultimately, a well-crafted innovation strategy empowers organizations to stand out from the competition, achieve objectives, and ensure sustained success in today’s fiercely competitive business arena.

Frequently Asked Questions

(1) what role do senior leaders play in achieving innovation strategy.

Senior executives wield significant influence in propelling innovation strategy forward. Their unwavering commitment, backing, and visionary guidance establish the organizational ethos. They allocate resources judiciously and foster an atmosphere conducive to experimentation and bold risk-taking.

(2) How is product innovation strategy delineated in business?

Product innovation strategy in business encompasses the formulation and introduction of novel or refined products to satisfy consumer demands and attain a competitive edge. It revolves around the conception of pioneering features, designs, or functionalities that distinguish the product within the market milieu.

(3) What delineates the trifecta of Innovation Strategies?

The trinity of innovation strategies comprises proactive, active, and reactive approaches. Proactive strategies entail a proactive quest for novel opportunities, active strategies pivot swiftly in response to market dynamics, while reactive strategies are triggered only by exigencies.

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5 Effective Steps to Creating a Powerful Innovation Strategy

Updated on: 1 March 2023

Innovation is an organization’s path to survival. In a world of rapid change and increasing competition, innovation has become essential to maintaining business growth, competitiveness, and productivity.  

Innovation is one of the key activities in a company’s operations. Innovation is a long and complex process that takes an abstract idea and converts it into a successful product or service. A proper strategy in place to execute it ensures that you do it well. 

In this post, we are exploring 5 effective steps for developing a powerful innovation strategy.

What is an Innovation Strategy

“Innovation transforms insight and technology into novel products, processes and services that create new value for stakeholders, drive economic growth and improve standards of living.”

In the simplest of terms, innovation is the process of bringing new, unique, and creative ideas into reality. An organization following an innovation strategy uses innovation to execute its business strategy. In other words, an innovation strategy guides the process of resource allocation, enabling the organization to achieve its long-term goals through the use of innovation.  

“An innovation strategy guides decisions on how resources are to be used to meet a firm’s objectives for innovation and thereby deliver value and build competitive advantage.” – Mark Dodgson, David Gann, Ammon Salter (The Management of Technological Innovation: Strategy and Practice)

A company’s innovation strategy should specify how the different types of innovation fit into the business strategy and the resources that should be allocated to implement these innovations.

An innovation strategy paves the way to 

• Improve the ability to retain customers 
• Reduce competitive intensity
• Improve product or service performance  
• Increase the chances of becoming a market leader 
• Preserve bargaining power in an ecosystem and blunt imitators

Types of innovation

• Gradual/ incremental innovation (continuous innovation) is based on abilities that can be easily learned and developed in an organization and has a low-risk low return. 
• Radical innovation (discontinuous innovation) on the other hand may change the structure of an industry dramatically and has a high-risk high return. 

Innovation Matrix

The innovation matrix as introduced by VIIMA helps categorize innovation based on two dimensions; the technology it uses and the market it operates in. It, thus, visualizes the most common types of innovation.

Based on these categories, three major types of innovation an innovation strategy can be based on can be identified, 

• Product innovation; occurs in the development of new products, modifications in established products, or in the usage of new materials or components in the manufacture of established products
• Process innovation; refers to the development of and implementation of significantly improved organizational processes through the integration of new technologies
• Business model innovation; refers to the improvements done to an existing business model or the creation of a new one to better meet the needs of customers

The Innovation Value Chain 

The innovation value chain provides a framework to identify which innovation approach makes the most sense for a company to adopt. It enables managers to find the company’s weaknesses and become more aware of an apt approach to implement for success. 

The framework includes three phases 

• Idea generation ; creating and sourcing new ideas from internal and external environments to achieve a competitive advantage in the marketplace.
• Conversion ; selecting and screening the best idea and implementing them. While this involves transforming knowledge into innovations in the form of new products, processes, or organizational forms, special focus should be placed on the company budget and strict funding criteria to avoid shutting down the development of the idea. 
• Diffusion ; spreading the idea across the organization. Find the relevant communities in the organization to support and spread the new product or service, process, and practices across geographic location, consumer groups, and channels. 

How to Develop an Innovation Strategy 

Determine the innovation strategy objective .

Developing an innovation strategy should start with understanding the reason behind developing one in the first place or the objectives you want to achieve by implementing it. 

To identify your innovation strategy objectives, examine the overall business objectives that help the company achieve sustainable competitive advantage. This will clear the path for your innovation strategy as it should eventually support the overarching goals of the organization.

Get the executive team onboard 

Engage the leadership team in dialogue and ensure that they are aware of the innovation objectives established and what it means for them as well as the future of the organization. During the discussions also identify, 

• External changes that could be occurring at present and in the future as a result of innovation 
• The implication of such changes on the company 
• Scope of innovation; identifying opportunities for innovation, whether to improve existing products or services or introduce brand new products to new markets
• Business outcomes; financial results, social impact, new economic models, market leadership,  etc. 
• The gaps that must be closed to deliver the chosen innovation scope, especially in terms of processes, skills, and resources needed and company culture
• Barriers to and enablers of the innovation strategy.  Barriers can come in the form of embedded beliefs on how the business should operate and enablers can show up as core capabilities or resources.  

Their involvement is necessary to create a shared vision of success with innovation at the core.

Gather customer insight 

Understanding customer needs will inform the direction of the development of the innovation idea. It will also enable you to formulate a strategy that works and create value-creating innovations that will ultimately generate a good return on investment.

In order to create value for potential customers with your innovation strategy, you need a thorough understanding of your market and the customer segment you are catering to. 

(Utilize a customer persona to gather insight on customers’ demographic characteristics, needs, challenges, and ambitions and apply that knowledge to generate a solution.)

Allocate resources 

When allocating resources for new areas for growth and renewal, reserving resources for the core business growth should also be taken into consideration. By conducting a comprehensive audit on the current innovation landscape of the organization you can determine and understand how much time, effort, and money are allocated to different innovation initiatives. 

The Harvard Business Review has introduced the Innovation Ambition Matrix to determine how to allocate resources based on the type of innovation initiative.

The matrix describes 3 types of innovation and how resources should be split among them,  

• Core initiatives – refer to efforts to make incremental changes to existing products and incremental inroads into new markets. For example, through new packaging or added service convenience. Such efforts can draw on resources the company already has. 
• Transformational initiatives – refer to creating new offers to serve new markets and customer needs. This may require assets the company is unfamiliar with. 
• Adjacent innovations – involves leveraging something the company does well into a new space. This type of innovation allows a company to draw on existing capabilities but necessitates putting those capabilities to new uses.

Research conducted by HBR shows that companies that allocated about 70% of resources to core initiatives, 20% to adjacent ones, and 10% to transformational ones outperformed their peers.

However, the right balance will vary from company to company and according to factors such as industry, competitive position, and the company’s stage of development.

To learn more about striking and maintaining the right balance between the allocation of resources and the innovation initiative, refer to this article here.

Develop an innovation system 

Not all organizations are likely to possess the capabilities to execute successfully at all three levels of innovation ambitions identified above.

However, HBR emphasizes that the companies that have got it right, have usually focused on five key areas of management that help them excel at the three levels of innovation ambition, and hence enable them to maintain a sustainable innovation system with the organization. 

• Talent : includes the skills needed to execute core, adjacent, and transformational innovation initiatives. 
• Integration : refers to organizing and managing the skills in the right way, with the right mandate, and under the conditions that will help them succeed.
• Funding: refers to determining how to fund the innovation initiatives. Core and adjacent innovations can be funded by the relevant business unit’s P&L through annual budget cycles. Transformational innovations, on the other hand, require a sustained investment that comes from an entity (i.e. executive suite and the CEO).  
• Pipeline management : mechanisms to track and monitor ongoing initiatives and ensure that they are progressing according to plan.
• Metrics : what measurements should inform management. While traditional financial metrics are appropriate for measuring core and adjacent initiatives, a combination of noneconomic and internal metrics should be used to evaluate transformational efforts.

Developing an Innovation Strategy 

The innovation strategy of a competitor or an industry leader may not work for you. While you can learn from their best practices, an explicit innovation strategy to match your own competitive needs will be effective in the long run. 

Follow the innovation strategy steps explained above to formulate a robust strategy and better coordinate your innovation process. 

Got anything to add to our guide? Let us know in the comments below.

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Five Steps to Implementing Innovation

We’re all familiar with stories about breakthrough products, services, and processes—the disruptors that grab the headlines and garner eye-popping valuations. And then there are the entrepreneurs who end up on the cover of Bloomberg Businessweek and write best-selling books about the keys to their success. The message seems to be that, through good timing or genius, innovation is the purview of a select few.

But at its core, innovation is simply a way to solve problems and create value in new ways. Overhauling an inefficient process, using customer feedback to breathe new life into a stale product—innovations don’t have to be splashy or game-changing to lead to sustained organizational success. These small but mighty initiatives seldom come from top management or an “idea lab,” but rather from individual contributors and frontline leaders who are closest to the customer and best positioned to understand their needs.

When employees from throughout the ranks learn to see themselves as innovators and take steps to make their ideas a reality, the results can be powerful. In addition to furthering a company’s purpose and bolstering its bottom line, employee-driven innovation engages people in ways that carrying out top-down directives never will.

Tips to get you started

Given the growing interest in innovation, it’s no surprise that organizations are looking for clear guidelines on how to implement it. Every innovation is unique. Even so, certain strategies and skills are useful across a range of projects and at all levels of an organization:

• Spot opportunities for innovation. As innovation expert Greg Satell puts it, “No matter what form innovation takes—short, agile sprints or long-term, grand-challenge investments—innovation is fundamentally about solving problems.” As you think about your organization, what problems need solving? Where do opportunities lie? Once you land on some promising ideas, continue to explore them from different angles. By doing so, you may discover even more exciting possibilities.
• Prioritize opportunities. You don’t have infinite time and resources, so prioritize potential innovations depending on where you think you’ll get the most bang for your buck. Narrow in on the two or three ideas you think are most worth digging into, testing, and refining. Then express them as hypotheses you can test through targeted experiments.
• Test your potential innovations. Keep your experiments modest in scope, especially when you’re starting out. You may want to begin with “paper prototypes,” or simple drawings of the new product or process that your end users can interact with to see what works and what doesn’t. They are quick and inexpensive, and they help you figure out where you need to tweak your concept. With each round of testing, move to progressively more complex experiments involving more users.
• Build support for your innovations. Don’t be shy. Make sure the time is right and tell your story to all your stakeholders, including those whose resource backing you need and those who’ll directly benefit from your innovation. You’ll want to tailor your approach based on what’s important to each person and what you need from them.
• Learn from your innovation efforts. You’ve probably heard the mantra “fail fast, learn fast.” After each innovation, list what you would do again and what you wouldn’t. And don’t overthink failure; the key is learn from it and apply those lessons to your next innovation.

We’ve seen these steps work at all levels in an organization. In fact, we even followed them when redesigning our Harvard ManageMentor® innovation-related topics. What process do you follow when implementing innovation in your organization?

Janice Molloy is senior manager, online learning at Harvard Business Publishing. Email her at [email protected] .

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Innovation Blog

Business innovation strategy: 9 key pillars for success in 2021.

• Published on: January 6, 2021
• Author: masschallenge

More than 80% of leaders at large corporations believe innovation is crucial for business growth. And yet, many companies have no innovation strategy.

Technology and digital disruption continue to advance at breakneck speed, leading all industries into a future where business agility counts just as much as having an experienced C-suite.

It doesn’t matter what industry you operate in now—the choice is the same for all companies:

Innovate or get left behind.

Without a solid plan that maps out how you will achieve your goals and establish a sustainable business built to adapt to a rapidly-changing digital landscape, you’re bound to struggle.

In this article, we’ll find out what an innovation strategy is, why it matters, and then we’ll give you the ideas and inspiration to start innovating at your company.

What is an Innovation Strategy?

An innovation strategy is a clearly-defined plan of structured steps a person or team must perform to achieve the growth and future sustainability goals of an organization.

Innovation  aims to create original value, such as new solutions to adapt in changing industries or solve impeding social, health, or economic challenges. A strategy is a plan that details precisely how you will bring your vision into reality.

Essentially, a strategy acts as a heuristic that we can rely on when facing tough decisions. Ergo, an innovation strategy provides people with a framework for critical decision-making relative to company innovation, such as:

• In what areas will we invest?
• How much will we invest?
• Who will make investment decisions?
• What capabilities will we need to develop to support our investments?
• What capabilities can we not build, which we must then acquire or form a partnership to provide?

All of these questions are long-term decisions. When devising an innovation strategy , we must consider our goals and the potential for change over several years.

Why Are Innovation Strategies Important?

Typically, the most effective business models, markets, and products follow a similar growth cycle, often visualized as an S-curve , where diminishing returns set in sometime after the initial growth trajectory.

This slowdown in growth is inevitable, and yet, many companies are taken off-guard. We can’t simply ignore these decisions. If you decide to wait until there is a lull in growth or sales until you gather more information, it may be too late.

In 2008, Blockbuster CEO Jim Keyes said, “Neither RedBox nor Netflix are even on the radar screen in terms of competition.”

This bold claim came even though Blockbuster had lost 75% of its market value between 2003 and 2005.

By 2010, the DVD rental store declared bankruptcy, succumbing to the indomitable rise of Netflix and the streaming television era.

Kodak fell to a similar demise. As smartphones became ubiquitous, Kodak could no longer compete, and in 2012, the company once synonymous with photography filed for bankruptcy and vanished from the camera industry.

These are, of course, highly visible and consumerist examples, but the same dilemmas befall more naunced areas is every industry, whether it be in healthtech, security, sustainability, or infrastructure.

Nothing grows forever, and you can never really know when the inflection point will hit, which is why it is best to always be ready. In other words, you should make innovation a continuous process. Otherwise, it’s only a matter of time before revenue starts tumbling.

Benefits of an Innovation Strategy

Holding on to traditional practices just because “that’s what we’ve always done” is not a strategy for success. That rigid approach is guaranteed to fail in the face of disruption, as proven by Kodak and Blockbuster.

With that in mind, here are four benefits of an innovation strategy:

Improve existing products

When selling any product or service, you must consider the three levers of the value proposition:

• Benefits and features
• Target customers

A good innovation strategy will experiment with these levers, helping sales and marketing teams to reinvent or revert the value proposition of existing products. In doing so, innovation helps to bring more value to the customer, and ultimately, more revenue for the business.

Develop new products

For many, the most appealing benefit of a business innovation strategy is its capacity to generate entirely new ideas. Innovation can birth new products and services to add to your existing lines, or it may open the doors to target new markets, or solve growing societal problems.

By analyzing the customer journey of different consumer types, you can develop a better understanding of purchasing behaviors. This research helps companies identify the key factors that motivate people to make purchases and discover new opportunities by finding markets or products that need improvement.

Optimize revenues

The three variables of profit are price, demand, and costs. For any business strategy to be deemed successful, it must increase profit by reducing costs or raising prices or demand.

Earnings innovation encourages businesses to seek out ways of maximizing their profit. Quite often, the most effective way to do this is by expanding your customer base.

Whether you’re creating a new product or improving your existing ones, the impact on your earnings should be a top priority of your business innovation strategy.

Optimize costs

Increasing revenue is not the only way to drive profits, as you can also use innovation to reduce costs. When you apply new practices and process throughout the organization, you can optimize internal operations in many ways, such as:

• Switching from legacy offline systems to cloud storage
• Moving to paperless systems for all records and communication
• Using live chatbots instead of human customer support staff

Through constant innovation, it’s possible to streamline workflows and teams so that you spend less on administration and more on activities that generate a higher return on investment (ROI).

9 Key Pillars of a Business Innovation Strategy

Creating an innovation strategy is a vital step that gives your team the understanding and directional insight into how individual, departmental, and organizational goals come together to deliver the business objectives.

Here are 9 pillars of an innovation strategy that enable a company to maximize its potential:

You can execute an innovation strategy using one of two models—business model innovation or leveraging existing business model.

• Business model innovation is the process an organization uses to adapt its business model to deliver more value to its customers. By making changes to its value proposition and the underlying business model, a company can gain a competitive advantage.
• Leveraging Existing Business Model focuses on continuous improvement of core business, rather than seeking to build new business models.

Once you have decided on your preferred model, you can experiment with the concepts below:

2. Intrapreneurship

Intrapreneurship is the practice of enabling employees to act as entrepreneurs while they work within a company.

By empowering individuals to think, act, and create their own ideas, a company benefits from a widespread internal culture of ongoing innovation. An organization can provide resources and support to intrapreneurs, helping them launch startups within the organization.

3. Corporate accelerator

A corporate accelerator is an innovation event or program funded by a large enterprise, which typically offers aspiring entrepreneurs the chance to acquire seed capital, mentorship, and important connections.

These programs usually culminate with a demonstration day, where startups pitch their ideas to the host corporation for the chance to secure investment or a partnership.

By including a corporate accelerator in your innovation strategy, you get the chance to build your network with promising new talent in your industry. Moreover, there is an excellent chance you will discover startups and concepts that align with your own business needs and goals.

4. Innovation labs

An innovation lab is a business department that provides a base and supporting resources for startups or R&D teams to work on new ideas that could disrupt the current market.

While these labs may operate independently from the parent company, it’s also possible to house an innovation lab within the main company building and staff it with existing employees.

5. Open innovation program

The traditional model of research and development relies on internal resources and expertise. Existing employees work together to generate, manage, and sustain new business ideas and retain all information within the company, usually within the R&D department.

Open innovation takes a novel approach by opening the company’s doors to external input, welcoming experts, researchers, and bright minds from outside the company to come and share their ideas.

6. External accelerators

An external accelerator is a little different from an in-house corporate accelerator, as your company will not cover the full costs of running the program. As such, this is a low-risk tactic in an innovation strategy, with the potential to deliver fantastic rewards. Like a corporare accelerator, purview to new startups and concepts that align with business needs and goals are exhibithed, but additionally there’s the benefit of opening your eyes to advantageous approaches that were not intially apart of your goals.

By becoming involved, you can actively participate in advancing startups and focusing on particular solutions that appeal to your business, making this type of accelerator a worthwhile venture.

7. Collaboration

The ideas are just the beginning, but it’s only through interaction and discussion with subject matter experts, researchers, and other innovators that you can successfully bring ideas to life.

Having more conversations around an idea with various outside sources makes it easier to identify potential issues and iterate a basic idea until it is something genuinely worth producing.

You should seek praise and criticism at this stage, as it’s important to challenge the concept and debate the pros and cons in-depth.

8. Ideation

Approximately 4 of every 5 employees has an idea to improve the company. Finding ideas is not a challenge—gathering, analyzing, and implementing the best ideas is the struggle for many companies.

Many companies fail because they lack an effective system to take a simple idea and turn it into a practical process that will deliver results. In other words, they don’t have an innovation strategy.

It’s important to explain your ideation processes to all employees to be aware of how the company captures ideas. When you have this system in place and encourage people to contribute, it’s easier to collect and organize new ideas.

9. Measurement

You can’t manage what you don’t measure. And so, one of the most important pillars of your innovation strategy is a plan for how you will measure success.

Think about your goals and the most relevant metrics to track. For example, if your goal is brand awareness, you could track social shares, website traffic, and email subscribers.

With every new idea, monitor its progress, and gauge performance by taking periodic measurements of your key metrics. It’s not always easy to measure innovation, but doing so from the start allows you to determine whether your efforts are successful.

Innovation Strategy Examples

We can see innovation strategy examples in every industry, as companies strive to get an edge in increasingly competitive marketplaces.

As the rise of café culture birthed hipster pop-ups and independent shops, the dominant chains began to lose ground. Keen to avoid a Kodak moment, Howard Schultz jumped to action . The Starbucks CEO invited store managers from all over the world to come together for a conference to redesign the café experience.

As a leader in technology and sustainability, Bühler invests up to 5% of its turnover every year in research and development. To optimize these efforts, in 2016 Bühler identified five core topics that are decisive for driving change:

• Food and Feed Safety: spend 50% of food relevant R&D projects with focus to improve food and feed safety
• Energy, Waste and Water Reduction: reduction by 50% in the value chains of their customers by 2030
• Mobility: make lighter cars with die-casting solutions and create more efficient batteries for electric vehicles
• Nutrition: spend 20% of food relevant R&D projects with focus to improve nutrition
• Digitalization: improve transparency through digitalization and collaboration

By working with an external accelerator, in the case MassChallenge, Bühler received early access to emerging, high-impact technologies and startups across their five core initiatives.

In 2018, Bühler teamed up with Givaudan to support Legria , a new natural sweetener made from waste streams, supporting their waste reduction initiative. The new business model was made more public-appealing by having two companies in support of it, however maintaining economic independence of each other.

The dating app, Tinder , was the first of its kind to gamify dating. The development team approached potential users at college sororities, recruiting signups from a largely female audience before pitching the app to men in the same colleges’ fraternities.

With a personal touch, the company’s clever innovation strategy quickly grew the app’s user base, as many college students joined because they knew other people on the app.

Sometimes, people can be concerned about offending with their reviews online, and therefore, they may not be totally honest.

Airbnb set 14-day deadlines and implemented a double-blind review process, so neither party can view the other’s review until both have been completed. This change paved the way for more spontaneous reviews and more candid, detailed feedback.

Airbnb turned reviews into a bonafide trust factor on their site with this simple move, which people use to make booking decisions. In the long-term, the strategy has helped grow the authority of the website and company.

The growth of the software-as-a-service (SaaS) industry tempted many customers away from traditional hardware technology companies. In the cloud age, IBM knew change was needed and decided to take a startup-like approach to innovation.

In 2014, IBM launched a growth hacking team to explore new ideas and tap into new markets through data-driven creativity. Now, the legacy tech corporation operates with a collection of lean, startup-sized teams within its workforce, encouraging team members to work in an innovation lab style to test new marketing strategies.

Our vision for a better company, product, or value for the customer may feel clear, but how we get there isn’t always so simple. Faced with market trends, changes in consumer preferences, new technology, and disruptive competitors, companies will need a blueprint to stay on track.

An innovation strategy goes beyond simple tactics like campaign ideas and marketing ploys to develop the company’s mission, vision, and unique value proposition against this ever-evolving landscape.

Nowadays, it’s no longer an option.

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”  – Sun Tzu

MassChallenge gives partners the tools to meet this moment head on while realizing results that make the difference for their businesses. See how companies like MassMutual , Barry Callebaut , Columbia Threadneedle , and Elta Systems  have partnered with MassChallenge to drive their innovation.

Join the MassChallenge program today to give your corporation the edge in the startup era.

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Building an integrated technology road map to drive successful innovation

With cutting-edge technology more important than ever, is your IT road map pointing where you need to go—or only where you are now?

A technology road map depicts how a company intends to manage the innovations (such as new sensors or energy storage technologies) needed to launch new products or services that satisfy customers' needs, while also supporting the enterprise's strategy (Exhibit 1). It also shows the connection between bottom-up project realities and the organization's top-down vision and strategy, and it lays out a sequence of projects that enables innovation in the next two to three product life cycles. Additionally, a road map can shine a light on "white spots" and illuminate fields worth investigating for innovation opportunities that may materialize as the marketplace changes.

The best technology road maps deliver vital advantages to companies—helping them to:

• Develop the right technologies, capabilities, and organizational structures at the right time, to satisfy customers' changing needs and preferences
• Boost returns on technology investments by focusing resources (including managerial attention) on the technology most likely to unfold
• Enhance transparency into where they are going and what to invest in
• Build consensus on technology innovation plans and foster learning from innovation experiences across different parts of the organization
• Coordinate product development activities within the company and with external organizations by aligning all parties' resources and capabilities behind the long-term innovation and project plan
• Foster clear communication on technology projects between internal and external stakeholders.

Constructing a technology road map that does all this is not easy. We take a closer look at what is required here.

Understanding common pitfalls

When asked what their company's road map looks like, many executives describe something akin to what is shown in Exhibit 2, which is drawn from the historic example of an automotive OEM. This road map is all too typical, in several respects. For one thing, it shows only the company's existing projects, which are tightly constrained by current realities. For instance, power train innovations are focused on fulfilling emission requirements. What is more, the road map does not look very far into the future; the projects mapped here represent just two development life cycles (typically seven years in the automotive industry). It also fails to identify white spots (such as electric drive as an alternative power train strategy) or to offer a holistic view on how technologies and markets may change—and what such changes imply for development plans.

Road maps like these do not encourage managers to adopt a mind-set that encompasses innovations that go beyond incremental, short-term refinements of existing products or services. Consequently, companies that rely on such road maps miss out on opportunities to innovate. They also set aside questions about the kinds of technology projects managers should focus on or the best ways to align critical business capabilities, such as software-development or advanced-analytics capabilities, and organizational structures for the future.

Challenges and dilemmas in building a technology road map

Companies that aspire to go further face several challenges in building a technology road map—we have dubbed these challenges the moving-target dilemma ("How will markets change in the future?"), the resource-focus dilemma ("Which of the multiple options facing us should we allocate our limited resources to?"), and the evolution-revolution dilemma ("Should we emphasize incremental or breakthrough innovations in our project portfolio?"). We will examine each dilemma in greater detail.

The moving-target dilemma

The further into the future a technology road map looks, the more a company's innovation objectives become a moving target. Longer-term innovation plans entail time frames of different lengths, depending on the typical innovation life cycle of the product or service in question. For example, the life cycle for consumer electronics would typically be two to three years. For cars, it might be eight to ten years. With longer innovation life cycles, nobody can know with certainty how customers' needs and behaviors will develop or how technology will advance—and what those shifts will mean for the competitive landscape.

Yet teams building technology road maps can still take steps to envision and plan for a range of potential scenarios. Examples include analyzing global megatrends such as urbanization, digitization, and the growth of the global middle class, as well as considering their implications for companies' innovation strategies. Teams can form assumptions about future developments, envision a number of potential scenarios, and gauge the probability of each scenario coming to pass. Teams can also use mathematical functions or models to estimate the probability of mutually exclusive or interdependent scenarios manifesting themselves.

From there, teams can construct a backward-reaching timeline for their technology road map—one that traces long- and medium-term milestones and decisions back to shorter-term innovations the company has planned. In crafting this timeline, it is vital that teams not overlook developments that may emerge in the long term just because analysis suggests they are not very likely. For instance, in the section of an automotive OEM's road map that focuses on power train innovations, teams should have taken into account scenarios that do not include the use of internal combustion engines. That way, they can be sure to include in the road map some technologies needed to develop alternative power train innovations such as battery electric vehicles or fuel cell vehicles, even if they think non-internal-combustion-engine scenarios are unlikely to emerge.

By taking this approach, teams can compile a reasonably informed future-state assessment of a landscape that will remain a moving target. They can also identify potential commonalities across multiple scenarios (for instance, the introduction of hybrids), as well as no-go areas—projects that the company should avoid.

The resource-focus dilemma

Companies understand that they will want to prepare for many future options for innovations. But they also realize that there are limited resources (R&D personnel, investment dollars, prototyping and testing facilities, etc.) available to allocate to those options.

Road map teams can address this dilemma with the right planning process—specifically, by taking into account the possible future states they envisioned while managing current projects. To illustrate, consider a semiconductor company that is developing a section of its road map relating to silicon-wafer lithography innovation. Managers at this company already know what pattern resolution and throughput the lithography equipment requires for the next decade. With such a clear target, the managers need to determine how to allocate resources to only a few other lithography innovation options. Identifying such constraints does not eliminate the resource-focus dilemma, but it helps minimize it.

The evolution-revolution dilemma

To stay competitive, companies need to excel at both evolutionary (incremental) and revolutionary (breakthrough) technology-driven innovation. Further details can be found in the article "Managing your innovation portfolio." The majority of organizations are set up for excellence on the evolutionary piece, including their approaches to product or service development and project management (such as V-model, stage-gate, or milestone processes). However, revolutionary innovations can jeopardize approaches designed for managing such evolutionary projects. This is because the risks inherent in the development of breakthrough innovations do not allow for stringent stage gates or predefined timelines. Inevitably, project delays and resource-planning difficulties will crop up the moment something different from the usual incremental innovation project is fed into the established approach. To manage more radical innovations, companies must adopt a fundamentally different approach, for example, similar to venture capital processes.

Navigating the road map process

Building an integrated technology road map comprises two major phases: the initial setup of the road map and the refinement. Companies can improve the odds of a successful outcome by devoting some time to up-front preparation. Also the road map needs to be updated regularly to reflect new information, technological achievements, etc.

Setting up the road map

In the initial setup phase, managers compile information on and form assumptions about current and future market needs, components that may be needed to develop products or services in the company's innovation pipelines, technology white spots that (if filled) could support development efforts, and organizational designs and structures that may help. They use the resulting analyses and assumptions to compile a set of innovation scenarios and assess the likelihood of success for each (Exhibit 3).

Refining the road map

In the refinement phase (Exhibit 4), managers prioritize the scenarios they have defined, according to criteria such as how well different projects would support the company's competitive strategy and whether the business has the capabilities needed to ensure a project can be executed successfully. Managers then build a product road map showing how required technologies, components, and product or service features align for each prioritized innovation scenario. Next, they consider possibilities for compiling a portfolio of technology projects. At this point, they should address questions such as how many of each type of project the portfolio should contain, which projects may have interdependencies (for instance, a released electronic brake actuator will be required before brake by wire), and how acquisitions of needed technologies or components must be sequenced. Once projects in the portfolio have been launched, managers identify and address challenges that arise—such as cost overruns, delays, or quality problems—and adjust the road map as needed (for example, reprioritizing scenarios) to reflect emerging realities.

Developing and prioritizing innovation scenarios will demand the biggest time investment across the two phases. Participants in the road-map-building process use probability tools and methods to assess the likelihood of potential end states, and they identify intermediate building blocks and common milestones shared by the short-, medium-, and long-term innovation scenarios they are evaluating. All participants take time to thoroughly discuss the details associated with the scenarios and to double-check for completeness of innovation, identify and agree on white spots, and highlight mutual interdependencies across scenarios. Armed with this information, participants can assign a probability of success to each scenario, develop a concrete list of milestones, articulate the assumptions behind their assessments, and agree on possible go/no-go decision points for each scenario.

At the same time, those taking part in building the road map need to determine whether the organization has sufficient internal capabilities to support the development of the most promising innovation scenarios. After listing the scenarios with the highest potential for success and the immediate actions to realize them, participants can identify steps required to acquire or build needed capabilities. Examples include setting up training programs, hiring experts with specific knowledge or skills, and crafting plans to gain new competencies through a merger or acquisition.

Setting the stage for a successful road map

The initial setup phase starts with well-defined tasks for gathering information on several fronts. It entails a major effort at the corporate level and requires the heavy involvement of internal experts (such as division heads and chief engineers) and external experts. To manage this phase effectively, companies can assemble a team of dedicated specialists for each area of assessment to compile such information and use it to create a comprehensive view of their area. Owing to the many different people involved during this phase, companies should develop a precise plan for how the varied players will interact, well ahead of the process. This plan should include timelines and the nature of stakeholders' involvement and responsibilities.

Designating a facilitator to help guide the road map setup and refinement process can enhance the odds of a successful effort. This individual should have the backing of senior management but should not have too much expertise in any of the areas that will be assessed. This is particularly important when there are large differences among functions regarding the direction and vision for future technology. Why? The facilitator needs to elicit divergent opinions from participants and ultimately encourage them to converge and agree on what will go into the road map. He or she must also ensure that all subsections of the integrated road map are given equal weight and make certain that the road map reflects a balance of views from internal and external participants.

Updating the road map

As with many data collections and information libraries, the moment a technology road map is created, it is already outdated, because the conditions and trends that informed it are constantly shifting. With this in mind, companies must set up a disci-plined process for regularly updating their road maps. Using this process, managers can establish a rhythm for reassessing existing scenarios and the technology, market, and other trends informing those scenarios, and they can decide whether any plans or scenarios need to be revised to reflect important changes (Exhibit 5).

In updating the road map, companies must decide on an iteration rhythm. As a rule of thumb, we recommend at least three rounds of updating per type of innovation scenario (short, medium, and long term). Road maps for longer-term projects should be updated the most frequently because changes in technology can affect projects in development. In selecting an iteration rhythm, companies will have to make trade-offs between accuracy—that is, capturing the latest and greatest technologies—and resource consumption. To provide a few directional examples, we recommend revisiting road maps annually in an automotive setting and quarterly in consumer electronics.

To make these trade-offs, managers can take into account their company's capabilities and the degree of detail they need to gain foresight regarding potential developments in key assessment areas such as technology and market needs. Indeed, because under-standing market needs plays a crucial role in building an integrated technology road map, we devote more attention to the topic in the article "From myopia to foresight."

About the authors: Ulf Heim is a senior expert and Ruth Heuss is a partner in McKinsey's Berlin office, Tova Katzir is a consultant in the Boston office.

Planning, Startups, Stories

Tim berry on business planning, starting and growing your business, and having a life in the meantime., how does innovation fit into a business plan.

This is the third of four answers to questions I got in email last week from an MBA student asking my opinion as part of his research. The question is the title: how does innovation fit into a business plan? 

Innovation changes a business plan pretty much as a reflection of how it changes a business. It adds risk, uncertainty, and interest too.

Funny thing about risk: we usually think of it as a negative, but in this case it isn’t. Risk has two sides to it: up and down.

• The upside risk in innovation is of course the benefits to a business when innovation leads to a more desirable offering: better product, suitable for a larger market, differentiated from competition, easier to build, and so forth. We get that immediately. It’s faster, cheaper, better; higher resolution, longer lasting, lighter, and so forth.
• The downside risk is there too. Live by innovation, die by innovation. The business that depends on innovation usually positions itself on innovation and loses big time when somebody else comes up with the next new bigger, faster, and better.

Uncertainty comes along with innovation because, by definition, what’s innovative is new; and new means it might not work, might have a fatal flaw, might not be accepted by the market, might never be finished. New also means it could take off very fast — more uncertainty — or not at all. It’s uncertainty about when the product (or service) is available, will it work, will enough people like it, are there competitors out there in the bushes where you can’t see them yet.

And interest comes with innovation too. Market makers are interested. Opinion leaders are interested. Competitors are interested. And investors are interested. To the investor, innovation means defensibility and market advantage.

So how does all of this fit into a business plan? It’s all over the plan. It’s in the forecasts, the schedules, the marketing plans, the financial strategy. It’s part of the business’ DNA.

It starts with strategy, the heart of a business plan. Innovation is part of your company’s identity, we would hope one of its strengths, and certainly a key element in business offering. It directly affects the market, both in the higher degree of guessing required (educated guessing, we hope) and in how it affects target market and message. And it affects strategy focus, too, because it turns a company towards it like plants growing towards the sun.

From there it flows easily into the flesh and bones of the plan, all of the concrete, specific, and measurable details about who does what, when, and how much it costs, and how much it brings in as revenue.

Conclusion: it’s an oblique question, in a way. Something like asking how courage fits in a novel, or color in a painting. How does direction fit into navigation?

[…] Sara Manela First mover advantage is great, except when it’s not. If your product is truly innovative, your biggest challenge is likely to be explaining what, exactly, your product is, what its […]

[…] *How Does Innovation Fit into a Business Plan? by Tim Berry […]

Thanks Joseph. And that, of course, is what my book The Plan-As-You-Go Business Plan (see the sidebar here, on this site) is about too. Tim.

If you know that innovation is part and parcel of your business, then select a planning methodology that is built innovation rather than one that merely accommodates it.

The Agile development approach is built for environments where the outcomes are not all clearly defined and innovation is required. In these environments it is clear that the ship will change course many times. If you know you are going to need to change directions often, especially in the early phases of the business, don't get on a Cruise ship, get on a Skidoo.

I never hear people telling entrepreneurs about the benefits of Agile development, so I am taking it on as my personal mission. See my website about it. http://www.Making-A-DREAM.com

Peace Joseph Flahiff, PMP [email protected]

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What is an innovation roadmap? Best practices for managing innovation initiatives

Last updated: April 2024

An innovation roadmap is essential for building a competitive advantage. It is a visual plan for how a company will achieve its innovation strategy — outlining strategic goals , initiatives, and structured activities that will enable teams to drive and support business growth.

The purpose of an innovation strategy is more than just identifying and implementing new ideas. Innovation strategies are centered around value delivery , organizational resiliency, and market leadership. The world’s largest companies make innovation a critical part of their business model — typically through research and development efforts. But small- and mid-sized organizations can also benefit from being intentional about adopting new tools, processes, or techniques.

Map out innovation efforts in Aha! Roadmaps. Sign up for a free trial .

Jump ahead to any section in this guide:

Why are innovation roadmaps so important?

What is the process for creating an innovation roadmap, templates to get started.

This is a custom roadmap built in Aha! Roadmaps .

There are many different ways that companies can innovate and many innovation methods intermingle in practice. This guide offers definitions around innovation strategy, tips for establishing an innovation process, and best practices to help you create an innovation roadmap that is flexible and actionable.

Roadmapping starter guide

What is a business roadmap?

• Asking the right questions to drive innovation

Innovation is leadership in action. Regardless of size or industry, the most successful companies make ongoing innovation a priority to ensure differentiation in market. Innovation programs typically require buy-in from stakeholders , dedicated resources, and effort across business areas. These are large-scale endeavors that require upfront planning and careful monitoring to succeed. Even so, many companies struggle to innovate well.

The advantage of an innovation roadmap is that you can use it to steer both initial innovation management and the implementation of the output of those efforts — regardless of what type of innovation strategy you pursue. Let's take a closer look at the four main categories of innovation:

In addition to the four strategies above, there are some other common types of innovation:

Business model innovation: Changing an organization's value proposition and operating model.

New channel innovation: New methods to acquire and retain customers, either through marketing, sales, or partnerships.

Organizational innovation: Investing in human resources either through changing internal reporting structures, retraining existing teams, or hiring new talent.

Process innovation: Improving internal processes such as production, delivery, or customer service.

Product innovation: Improving the performance or features of existing products or creating new ones.

Technology innovation: Creating or implementing new technologies that enable faster value delivery.

This is why innovation programs fail

Feature innovation vs. product innovation

How to overcome common roadblocks to innovation

The process for creating an innovation roadmap follows the same roadmapping best practices as other types of roadmaps. It is always a good idea to start by prioritizing the greatest customer and employee needs. Beyond that, here are some of the most important questions to ask when creating an innovation roadmap:

Have we thoroughly identified and analyzed our strategic inputs ?

Are we in agreement about what we plan to deliver?

What are our parameters for what we will include or not include on our innovation roadmap?

Do we have internal commitment by management for the resources needed?

How will we integrate our innovation plans with the organization's operational plans?

What is our process for communicating status, reviewing progress , and identifying risks?

You want to set a clear strategy, gain stakeholder involvement, create organized work streams, and identify a method for sharing updates. Because of the complexity involved, many companies realize that they need a purpose-built roadmapping tool that allows you to set strategy, build plans, manage work, and report on progress from the same system.

Choose from a rich library of more than 100 purpose-built templates — handcrafted by product development experts at Aha! — to showcase your best thinking. Some of our favorites for deciding which product innovations to pursue include:

Competitive analysis template : See how you stack up against competitors.

Decision tree : Consider potential decisions and predict outcomes.

Gap analysis : Find the gaps between where you are now and where you want to be.

Opportunity canvas : Explore opportunities for innovation and new product features.

The benefit of using templates in Aha! software is that you can connect them directly to planned work and follow progress through the entire product development process.

• What is a business model?
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• What is product-led growth?
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• What is a Minimum Viable Product (MVP)?
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• How to position your product
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• Introduction to marketing strategy
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• Collections: Customer research
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• How to brainstorm product ideas
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Brainstorming meeting

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• Sticky note pack
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• Roadmapping: Your starter guide
• Business roadmap
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• Marketing roadmap
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• Product portfolio roadmap
• Project roadmap
• Strategy roadmap
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• How to choose a product roadmap tool
• What to include on your product roadmap
• How to visualize data on your product roadmap
• What milestones should be included on a roadmap?
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• How to build a roadmap for a new product
• How to build an annual product roadmap
• How to build a brilliant roadmap
• How to customize the right roadmap for your audience
• How to build an agile roadmap
• Product roadmap examples
• How to report on progress against your roadmap
• How to communicate your product roadmap to customers
• What is a content marketing roadmap?
• What is a digital marketing roadmap?
• What is an integrated marketing roadmap?
• What is a go-to-market roadmap?
• What is a portfolio marketing roadmap?
• How to choose a marketing roadmap tool
• Epics roadmap
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• Portfolio roadmap
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• Collections: Product roadmap
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• What is product planning?
• How to diagram product use cases
• How product managers use Gantt charts
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• Introduction to release management
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• Product backlog vs. release backlog vs. sprint backlog
• How to refine the product backlog
• Capacity planning for product managers
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• What is a product feature?
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• Common product prioritization frameworks
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• Introduction to marketing plans
• What is a marketing plan?
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• 2023 monthly calendar
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• Feature requirement
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• SAFe® Program board
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• Collections: Creative brief
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• Agile vs. waterfall
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• Introduction to agile metrics
• Agile glossary
• What is kanban?
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• How to set up a kanban board
• Kanban vs. scrum
• What is scrum?
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• What is a daily standup?
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• Product release vs. sprint in scrum
• Themes, epics, stories, and tasks
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• What is the Scaled Agile Framework®?
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• SAFe® PI planning
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• Sprint planning
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• Collections: Sprint retrospective
• How to test your product before launch
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• How to write excellent release notes
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• Knowledge base article
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• Collections: Product launch checklist
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• How to make data-driven product decisions
• How to measure product value
• What is product analytics?
• What are product metrics?
• What is a product?
• What is a product portfolio?
• What is product development?
• What is product management?
• What is the role of a product manager?
• What is portfolio product management?
• What is program management?
• What is product operations?
• What are the stages of product development?
• What is the product lifecycle?
• What is a product management maturity model?
• What is product development software?
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• Introduction to marketing methods
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• What is product marketing?
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• Collections: Product management
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Meeting agenda

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Product strategy meeting

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• What are the types of product managers?
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• What is the role of a program manager?
• How to become a product manager
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• How to choose a product management certification
• Introduction to marketing
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• What is the role of a marketing manager?
• What is the role of a product marketing manager?
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• Collections: Product manager resume
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Where documents are made available* through records in La Trobe University Research Online they may be regarded as" open access" documents; interested readers may read, download or print them, but they remain protected by copyright, and many are subject to publishers' policies regarding use, reproduction or communication. Please check individual records for details of other permissible use. If you believe that any material has been made available without permission of the copyright owner please contact us with the details.

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Purpose – Entrepreneurial orientation (EO) and dynamic capabilities (DCs) are two important pillars of increasing performance in fast-changing environments. However, little is known about how the effects of EO and DCs on performance are reconciled, integrated and balanced in terms of contingency factors. In this study, the authors examine three contingencies – firm, market and product characteristics – that significantly affect the level of EO and DCs that firms pursue. Design/methodology/approach – Using survey data on 252 Korean manufacturing SMEs, this study analyzes the influence of EO and DCs on performance using hierarchical regression models. Findings – The results show that EO plays a critical role in small and young firms' performance but that DCs are more critical in incumbent firms. Further, both EO and DCs enhance performance in dynamic markets, and EO increases performance under radical product development, while DCs show negative effects. Originality/value – Given the importance of EO and DCs in increasing firm performance, a lack of empirical attempts have been made to reconcile the effects of EO and DCs in a single research setting. This study provides important and unique implications that can bridge the empirical gaps regarding the complementary roles of EO and DCs by exploring three contingency factors – firm, market and product characteristics – with respect to firm performance.

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Innovation and risk are inseparable. In fact, literature on innovation management often recommends that innovation-oriented firms must actively monitor, evaluate, analyze and treat future events in order to mitigate risks whenever possible. This approach is particularly important in emergent economies characterized by unstructured national innovation systems and constant economic and market instability. However, there has been no systematic effort to identify and categorize risks that potentially impact businesses based on innovation. Thus, we propose an interpretative framework of risk events with potential financial impact in innovation-oriented firms constructed and tested by means of a mixed studies review. The risk events were identified through a comprehensive systematic search and review of the published literature on risk and innovation. From the 115 works that were analyzed, it was possible to identify nine categories of risk events frequently associated with innovation-oriented businesses that may generate financial impacts. The proposed interpretative framework was tested in an empirical study with 13 innovation-oriented firms located in six Brazilian technological parks. Results from the empirical study suggest that managers found the proposed interpretative framework complete and comprehensive. Moreover, the empirical study signaled which risk events are more relevant for the Brazilian context. The proposed framework is a first necessary step for future development of ERM models applicable in innovation-intensive contexts.

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Start » strategy, how startups contribute to innovation in emerging industries.

Discover how startups’ small business ingenuity drives innovation and impacts emerging industries with new ideas, according to new research.

Startups are known for thinking outside the box and creating revolutionary products and services. Driven by entrepreneurs who set out to meet consumers’ needs, these smaller businesses are more likely to spark innovation in emerging industries and accelerate the development of new technologies, according to research from Texas McCombs .

For small businesses, this underscores the importance of innovation as a strategic tool for differentiation and growth, demonstrating that even as newcomers with limited resources, small businesses have the potential to significantly influence their industries by introducing new ideas and solutions.

Researcher Francisco Polidoro, Jr., a Professor of Management at the University of Texas at Austin’s McCombs School of Business, outlined three key factors in the level of influence a startup’s innovations can wield:

• Resource disparities. Startups often lack resources in their early stages, which hinders development and can lead to business failure. While they may be unable to move forward, startups’ ideas and patents continue to live on, and when these concepts are particularly promising, more resource-rich companies may build upon their innovations and realize those goals.
• Academic citations. When academic institutions cite startups' patents in their research, it significantly boosts the visibility and credibility of those innovations. This implies the academic community's interest can elevate a startup's contributions, making them more influential in driving innovation.
• Lack of legal history. Established companies, known for their litigious and aggressive approach to protecting patents, may inadvertently discourage other companies from building upon their innovations out of fear of legal repercussions. Startups typically do not pose the same threat, making their patents more appealing for others to cite and build upon.

[Read more: What Every New Startup Can Do to Protect Their Intellectual Property ]

Startups with big ideas can leverage the industry know-how and deep pockets of bigger businesses through strategic collaboration to bring their vision to life.

The benefits and challenges of knowledge spillover in emerging industries

According to Polidoro, startup innovations lead to knowledge spillovers, where the developments of one company are utilized by others outside the original entity.

“Other entities can build on their ideas to create subsequent inventions, some of which may eventually benefit consumers in product markets,” said Polidoro in a press release.

Texas McCombs’ research, which analyzed 6,116 patents from the mid-1970s to 2016, demonstrated startups’ influence on innovation, with their patents cited 8.5% more annually — and 21% more over nine years — than those of established businesses.

However, Polidoro notes a downside: Startups’ resource constraints might hinder their ability to profit from their innovations, enabling wealthier companies to capitalize on these ideas. Research shows companies were more inclined to reference and build upon a startup’s patents, particularly when the startup showed limited capability in developing its innovations further.

[Read more: How Three Startups Scored Millions in Funding ]

Tips for startups looking to partner with larger businesses

Startups with big ideas can leverage the industry know-how and deep pockets of bigger businesses through strategic collaboration to bring their vision to life. Here are a few tips for forging a successful partnership to move your startup’s ideas forward.

Define your goals and ideal partnership

Before you seek out a partner, determine the goals and key objectives you hope to achieve through the partnership. From there, research businesses in your market that can help you reach those goals. Whoever you work with should have a good track record and ample experience in your specific area.

Establish a partnership agreement

A written agreement between you and your partner company should spell out the terms and conditions of the partnership, define the terms of intellectual property (IP) (including assets brought into the partnership versus those created jointly), and describe each party's responsibilities and expectations. Have both parties review the agreement with legal advisors to ensure it is legally binding and avoid any discrepancies or oversights.

Communicate openly and adapt as needed

Throughout your partnership, ensure consistent communication between both parties. Whether sharing success stories or challenges faced, keeping both entities in the loop about business happenings is key to addressing any problems before they arise.

Be flexible in your partnership, too. Situations can emerge that require sudden shifts, so it’s important to be adaptable and willing to switch gears when necessary.

[Read more: Micro-Business vs. Startup: What’s the Difference? ]

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Artificial intelligence (AI) has incredible potential to transform the economy, improve the way we work, and enhance our way of life. The global race to scale up and adopt AI is on, and Canada is at the forefront of this technology. To make sure we can seize every opportunity in the economy of the future, and set every generation up for success, we need to scale up our innovation ambitions. And do it in a way that brings everyone along. For Millennials and Gen Z, who feel their hard work isn’t paying off like it did for previous generations, we must invest in good-paying opportunities that help them get ahead. That’s why we’re focused on creating more good jobs, including in innovation and technology, which are among the highest paying of all industries.

AI is already unlocking massive growth in industries across the economy. Many Canadians are already feeling the benefits of using AI to work smarter and faster. The rapid advance of generative AI today will unlock immense economic potential for Canada, significantly improving productivity and reducing the time workers have to spend on repetitive tasks. Researchers and companies in Canada are also using AI to create incredible new innovations and job opportunities across all facets of the Canadian economy, from drug discovery to energy efficiency to housing innovation. In the past year, job growth in AI increased by nearly one third in Canada – among the highest growth of any sector. And most AI jobs pay well above the average income.

Canada has a world-leading AI ecosystem – from development, to commercialization, to safety. We have an advantage that can make sure Canadian values and Canadian ideas help shape this globally in-demand technology. Canada was the first country in the world to introduce a national AI strategy and has invested over $2 billion since 2017 to support AI and digital research and innovation. Since then, countries around the world have begun investing significant funding and efforts into AI to advance their economies, particularly in computing infrastructure. In order to maintain Canada’s competitive edge, and secure good paying jobs and job security for generations of young Canadians, we must raise the bar.

The Prime Minister, Justin Trudeau, today announced a $2.4 billion package of measures from the upcoming Budget 2024 to secure Canada’s AI advantage. These investments will accelerate job growth in Canada’s AI sector and beyond, boost productivity by helping researchers and businesses develop and adopt AI, and ensure this is done responsibly.

These measures include:

• Investing $2 billion to build and provide access to computing capabilities and technological infrastructure for Canada’s world-leading AI researchers, start-ups, and scale-ups. As part of this investment, we will soon be consulting with AI stakeholders to inform the launch of a new AI Compute Access Fund to provide near-term support to researchers and industry. We will also develop a new Canadian AI Sovereign Compute Strategy to catalyze the development of Canadian-owned and located AI infrastructure. Ensuring access to cutting-edge computing infrastructure will attract more global AI investment to Canada, develop and recruit the best talent, and help Canadian businesses compete and succeed on the world stage.
• Boosting AI start-ups to bring new technologies to market, and accelerating AI adoption in critical sectors , such as agriculture, clean technology, health care, and manufacturing, with $200 million in support through Canada’s Regional Development Agencies.
• Investing $100 million in the NRC IRAP AI Assist Program to help small and medium-sized businesses scale up and increase productivity by building and deploying new AI solutions. This will help companies incorporate AI into their businesses and take on research, product development, testing, and validation work for new AI-based solutions.
• Supporting workers who may be impacted by AI, such as creative industries, with $50 million for the Sectoral Workforce Solutions Program, which will provide new skills training for workers in potentially disrupted sectors and communities.
• Creating a new Canadian AI Safety Institute, with $50 million to further the safe development and deployment of AI. The Institute, which will leverage input from stakeholders and work in coordination with international partners, will help Canada better understand and protect against the risks of advanced or nefarious AI systems, including to specific communities.
• Strengthening enforcement of the Artificial Intelligence and Data Act, with $5.1 million for the Office of the AI and Data Commissioner. The proposed Act aims to guide AI innovation in a positive direction to help ensure Canadians are protected from potential risks by ensuring the responsible adoption of AI by Canadian businesses.

Today’s announcement is about investing in innovation and economic growth to secure Canada’s world-leading AI advantage today and for generations to come. This will create good-paying opportunities for every generation, boost innovation across the economy, raise productivity, and accelerate economic growth – and it’s just one of the things that we are going to be doing in Budget 2024. Alongside these measures, we’re building more homes faster, ensuring every kid has the food they need, investing in health care, making life more affordable, and creating good jobs to make sure every generation can get ahead.

“AI has the potential to transform the economy. And our potential lies in capitalizing on the undeniable Canadian advantage. These investments in Budget 2024 will help harness the full potential of AI so Canadians, and especially young Canadians, can get good-paying jobs while raising our productivity, and growing our economy. This announcement is a major investment in our future, in the future of workers, in making sure that every industry, and every generation, has the tools to succeed and prosper in the economy of tomorrow.” The Rt. Hon. Justin Trudeau, Prime Minister of Canada

“Today, we are making a significant investment to boost our economic growth. This will keep Canada a global leader in AI and ensure we are at the very cutting-edge of new technologies. And most importantly, this will mean more high-paying careers for Canadians who are leading the charge in AI.” The Hon. Chrystia Freeland, Deputy Prime Minister and Minister of Finance

Quick Facts

• The Government of Canada’s Budget 2024 will be tabled in the House of Commons by the Deputy Prime Minister and Minister of Finance on Tuesday, April 16, 2024.
• In 2017, Canada was the first country to establish a national AI strategy. The Pan-Canadian Artificial Intelligence Strategy is helping Canada maintain its position as a world leader in AI, businesses be more competitive, and Canadians benefit from growth in the digital economy. Phase 2 of the strategy was announced in 2022 with funding of more than $443 million.
• The federal research granting agencies – the Canadian Institutes of Health Research (CIHR), the Natural Sciences and Engineering Research Council (NSERC), and the Social Sciences and Humanities Research Council (SSHRC) – together have awarded $936.8 million in funding for AI-related research since 2017-18.
• Since 2017, the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP) provided $705.8 million in contributions to AI-related firms. This funding supported 1,111 firms and 3,837 projects in the AI and Big Data Technology space.
• In addition, the NRC Digital Technologies Research Centre has invested over $27 million both directly to firms and on collaborative AI projects related to natural language processing, Indigenous languages, and high-performance computing for AI.
• In 2023, Canada announced renewed funding for the Global Innovation Clusters , including Scale AI , bringing total funding for the company to up to $284 million. Scale AI is dedicated to promoting collaboration in AI and supply chain management research and innovation by strengthening linkages between researchers in industry, academia, and research institutes in Canada and abroad, and providing financial support for AI and supply chain management projects.
• Canada has also made significant investments in fast-scaling AI-related companies through the Strategic Innovation Fund , including Sanctuary AI and semiconductor firm Ranovus .
• Canada was recently ranked number 1 among 80 countries, tied with South Korea and Japan, in the Center for AI and Digital Policy’s 2024 global report on Artificial Intelligence and Democratic Values .
• The Artificial Intelligence and Data Act (AIDA) was introduced in Parliament as part of Bill C-27 in June 2022. It is designed to promote the responsible design, development, and use of AI systems in Canada’s private sector, with a focus on systems with the greatest impact on health, safety, and human rights. Since the introduction of the bill, the government has engaged extensively with stakeholders on the novel challenges posed by generative AI. Canada is one of the first countries in the world to propose a law to regulate AI. Learn more .
• The Voluntary Code of Conduct on the Responsible Development and Management of Advanced Generative AI Systems – announced in September 2023 and signed by major tech firms including Cohere, Ada, Coveo, BlackBerry, TELUS, OpenText, and IBM – enables companies to demonstrate that they are developing and using generative AI systems responsibly and strengthen Canadians’ confidence in the technology.
• The Public Awareness Working Group on AI was launched in 2020 under Canada’s Advisory Council on Artificial Intelligence with a mandate to examine avenues to boost public awareness and foster trust in AI. Its objective is to help Canadians have a more grounded conversation around AI, and help citizens better understand the technology, its potential uses, and its associated risks. The Working Group published a report on its public engagement activities in February 2023. A further public report is upcoming specifically on the Working Group’s engagement with First Nations, Inuit, and Métis communities to better understand their needs, interests, and priorities for AI development and use.
• Since the 1990s, Canada has been a leader in AI and deep learning, made possible by the research and innovations of the “Godfathers of AI”, Canadians Yoshua Bengio and Geoffrey Hinton. In the decades since, Canada has built up a robust and growing AI industry across Canada, anchored by our three national AI institutes in Montréal, Toronto, and Edmonton.
• In 2022-23, there were over 140,000 actively engaged AI professionals in Canada, an increase of 29 per cent compared to the previous year.
• Canada has 10 per cent of the world’s top-tier AI researchers, the second most in the world.
• Canada ranks first globally for year-over-year growth of women in AI (67 per cent growth in 2022-23 alone), first in the G7 for year-over-year growth of AI talent, and since 2019, has ranked first in the G7 for the number of AI-related papers published per capita.
• The number of AI patents filed by Canadian investors increased by 57 per cent in 2022-23 compared to the previous year – nearly three times the G7 average of just 23 per cent over the same period.
• In 2022, the Canadian AI sector attracted over $8.6 billion in venture capital, accounting for nearly 30 per cent of all venture capital activity in Canada.
• Canada ranks third in the G7 in total funding per capita raised for AI companies, with more than 670 Canadian AI start-ups and 30 Canadian generative AI companies receiving at least one investment deal valued at more than $1 million USD since 2019.
• Restore generational fairness for renters, particularly Millennials and Gen Z, by taking new action to protect renters’ rights and unlock pathways for them to become homeowners. Learn more .
• Save more young families money and help more moms return to their careers by building more affordable child care spaces and training more early childhood educators across Canada. Learn more .
• Create a National School Food Program to provide meals to about 400,000 kids every year and help ensure every child has the best start in life, no matter their circumstances. Learn more .
• Launch a new $6 billion Canada Housing Infrastructure Fund to accelerate the construction or upgrade of essential infrastructure across the country and get more homes built for Canadians. Learn more .
• Top-up the Apartment Construction Loan Program with $15 billion, make new reforms so it is easier to access, and launch Canada Builds to call on all provinces and territories to join a Team Canada effort to build more homes, faster. Learn more .
• Support renters by launching a new $1.5 billion Canada Rental Protection Fund to preserve more rental homes and make sure they stay affordable. Learn more .
• Change the way we build homes in Canada by announcing over $600 million to make it easier and cheaper to build more homes, faster, including through a new Homebuilding Technology and Innovation Fund and a new Housing Design Catalogue. Learn more .

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Case Study: How Aggressively Should a Bank Pursue AI?

• Thomas H. Davenport
• George Westerman

A Malaysia-based CEO weighs the risks and potential benefits of turning a traditional bank into an AI-first institution.

Siti Rahman, the CEO of Malaysia-based NVF Bank, faces a pivotal decision. Her head of AI innovation, a recent recruit from Google, has a bold plan. It requires a substantial investment but aims to transform the traditional bank into an AI-first institution, substantially reducing head count and the number of branches. The bank’s CFO worries they are chasing the next hype cycle and cautions against valuing efficiency above all else. Siti must weigh the bank’s mixed history with AI, the resistance to losing the human touch in banking services, and the risks of falling behind in technology against the need for a prudent, incremental approach to innovation.

Two experts offer advice: Noemie Ellezam-Danielo, the chief digital and AI strategy at Société Générale, and Sastry Durvasula, the chief information and client services officer at TIAA.

Siti Rahman, the CEO of Malaysia-headquartered NVF Bank, hurried through the corridors of the university’s computer engineering department. She had directed her driver to the wrong building—thinking of her usual talent-recruitment appearances in the finance department—and now she was running late. As she approached the room, she could hear her head of AI innovation, Michael Lim, who had joined NVF from Google 18 months earlier, breaking the ice with the students. “You know, NVF used to stand for Never Very Fast,” he said to a few giggles. “But the bank is crawling into the 21st century.”

• Thomas H. Davenport is the President’s Distinguished Professor of Information Technology and Management at Babson College, a visiting scholar at the MIT Initiative on the Digital Economy, and a senior adviser to Deloitte’s AI practice. He is a coauthor of All-in on AI: How Smart Companies Win Big with Artificial Intelligence (Harvard Business Review Press, 2023).
• George Westerman is a senior lecturer at MIT Sloan School of Management and a coauthor of Leading Digital (HBR Press, 2014).

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