Many innovation departments across industries are operating productively. They practice well-understood core innovative activities: discovering short-term technologies that appropriately compete with their competitors, staying in line with their current customer's needs, and continuing to produce revenue, all while maintaining alignment with the company’s corporate strategy. What happens when a competitor or startup releases an innovative technology that changes the game?
Well, the original company falls behind, nipping at the ankle of the new industry leader, doing as they did before, searching for near-future opportunities, and leaving incredible discoveries to be broached by the other guys. After all, opportunities are not lost; they go to someone else.
Focusing on the future may seem like an easy task to table. Given the current economic climate, after the effects of the global pandemic and supply chain shortages, there are many arguments for what should be a leading corporate objective. One item missing from the list? Strategic innovation.
The deviation between core and strategic innovation practices must be established, executed, and monitored to stay ahead of the competition. And who should do the monitoring? The executive innovation officer. Regardless of the title or department, that innovation practice falls under the need for internal top-down cheerleading and is a must for a successful program.
We’ve previously explored the importance of strategic innovation in our 6 Elements of Strategic Innovation at the beginning of 2022. After conducting interviews with hundreds of industry leaders, the theme remains essential to any company’s innovation evolution. This theme was identified again in our annual R&D and Innovation agenda. Looking at Wellspring’s 4th annual R&D Agenda, we found that the top 41% of companies interviewed had two teams with strict objectives focused on both the current market and associated products and clients, as well as a team that looked downstream towards the future market shifts which transformed traditionally threatening disruptive technologies into revenue building whitespaces and explicitly focusing on the importance of high-level internal support as they directly correlate with the development and success of a strategic innovation team.
Incremental Innovation relies on a solid understanding, from bottom-up to top-down, and provides predictable and relatively precise results. However, focusing on current product improvements does not bode well for the future. Given the ever-increasing speed of technology, the need to investigate technologies that may alter an industry, or become a critical competitive advantage in ten years, is becoming increasingly important.
Strategic innovation deviates from core innovation because the innovation strategy and corporate growth plan no longer align directly. To correctly explore the second and third horizons of innovation, the conditions of known competitors, customer segments, and products must be relinquished. The metrics used to measure strategic innovation differ from those of incremental; success is ill-defined, messy, and will rely on exploration. Following the acceptance of unknown market trends, customer segments, and competitors, there needs to be a leader connecting the strategic innovation team with other departments, communicating effectively, and ensuring collaboration when technology has proven itself worthy.
The actual acts of core and strategic innovation build on one another. Core innovation relies on tech scouting and external partnerships to fix current product issues, launch products for existing customers, and, more than anything, provide revenue. At the same time, strategic endeavors call for a new strategy incorporating day-to-day open innovation practices, new measurement thresholds, loose timelines, and a shared mission by the ventures and scouting teams looking downstream.
Product measurement cannot be measured the same way it is when conducting core innovation activities. The value must be determined by critical findings about potential breakthroughs, with the notion of a pivoting strategy at the height of importance. Resource allocation should shift from one promising initiative to another as the possible technologies are determined more or less in line with the company’s objectives and long-term priorities. 2H and 3H depend on an influx of new information to determine potential breakaway technologies. An abundance of information is vital as only one of many possibilities may lead to a worthwhile technology.
The Importance of the Executive Cheerleader:
We’ve previously discussed the importance of putting the right leader in charge of an innovation program, as most current executive offices lack the research and development expertise this position requires to determine promising technologies. This innovation leader’s focus will fall towards that of strategic innovation programs and objectives, as it requires the need to promote further investigation and reallocation of resources. Incremental innovation does not require a specific leader to the same effect as many current C-suite officers understand the value of core innovation principles and do not require a niche area of experience.
Creating the role for this leader is only part of the internal cheerleading significance. As we discussed in Wellspring’s 2022 R&D and Innovation Agenda, and discoveries we found in our spring roundtable, without a voice to continually promote and report on the progress and significance of strategic innovation, it can be the first project or team to lose funding when it's time to tighten the purse strings. An involved leader will not only be knowledgeable about the significance of future investigations, but they will also act as a reporter as they will have eyes and ears amidst the research, with the expectation and communication skills to reiterate the team's progress and findings to other departments throughout the organization. While communicating with other department heads is essential, the ability to involve other departments, like manufacturing or supply chain, when a promising technology evolves is another driving force toward success.
The innovation leader should regularly update other executives to pave a path for a potential pivot. These updates do not need to be daily, weekly, monthly, or quarterly. An annual or bi-annual progress report will keep everyone apprised of the pending breakaway discoveries. Altering metrics to measure new insights is vital, but without preparing other departments for involvement in future projects may be side-tracked or abandoned, as early-stage researchers can only take innovation so far without collaboration.
The third key component to a successful strategic innovation department leader is the person’s ability to identify, produce, and explain relevant information on potential disruptive threats and emerging opportunities in new markets, with new customer segments, or creating a flexible environment willing to help the company adjust its mission to future changes. Although small, funding a strategic innovation team is a consistent uphill battle. Establishing the importance of second and third-horizon innovation projects is not always accepted by the company’s revenue-centric growth plan; thus, creating a divergent strategy to realign in the future is necessary.
Just as quickly as a quarterback can attempt a breakthrough on the field, he can be tackled and fumble the ball if his offensive line isn’t covering him appropriately. The same applies to the scientists, engineers, and researchers on the front line discovering valuable innovations; without a high-level executive to protect their pursuit, they could be easily stopped by established processes like pricing, supply chain, and current company objectives.
Those who employ strategic innovation strategies are not looking to solve problems the company currently faces but rather to look towards disruptive technology, new white spaces, and other areas of potential collaboration that will benefit the company in the long term and predict new areas of potential revenue.
There must be action within the leadership team to make fundamental changes, incorporate new practices, and establish a strategic innovation plan to prepare any organization for future unknown changes. Creating an innovation department is more complex than checking off a task. Still, it demands attention to determine why and how the team will be successful in its pursuit to identify and act on a new mission. Utilizing innovation leadership as a check and balance will determine where the company will go by combining internal and external efforts and comparing them against the corporate growth strategy and its evolution.