Post COVID Innovation Strategy
With the enormity of disruption caused by COVID and the tough times that will continue to emerge, an effective innovation strategy is more important than ever.
When you are you are in the thick of major change and uncertainty, it’s hard to focus on anything but ‘today’s’ problems. However, you must.
COVID will create winners and losers and in this environment, its more important than ever to give consideration to ‘tomorrow’ and the ‘next’ day.
Significant disruptive events mandate the need to revisit and reassess the key assumptions and beliefs that are implicit in your business model and your view of how success is achieved and sustained.
If you have a clear innovation strategy, it’s time for a review.
If you don’t, it’s time to prepare your innovation strategy as follows.
Six Steps to an Effective Innovation Strategy
An effective innovation strategy involves making choices about what you will and will not do and sticking to them.
You must be focused and disciplined if you want to:
- Maximise the use of your resources
- Accelerate the development of your innovation capabilities
- Minimise the time it takes to achieve your goals
Developing an Effective Innovation Strategy
The six steps to developing an effective Innovation Strategy are:
- Establishing the amount of value that you must generate from your innovation investments (what level of innovation investment returns you must achieve)
- Defining your area of focus, where you will look for innovation opportunities and importantly, what’s off-limits
- Establishing your key innovation investment objectives and priorities
- Establishing your investment portfolio weighting and level of diversification
- Setting the high-level investment performance metrics for each category of innovation
- Setting your performance review cycle
Step 1 - Innovation Investment Returns
When developing an effective innovation strategy, the amount of innovation activity and the returns you need to achieve depends on the:
- Nature of the industry and the broader environment you operate in
- Business’s current position, level of resources and its capabilities
- Goals you have set for your business
A base level of innovation activity will be required to simply maintain your current profitability and position within your industry.
If your goal is to exceed industry performance and outcompete your rivals, you will need a more significant investment in innovation – something above the base level.
An effective innovation strategy must seek to meet both your base profitability and business growth requirements, however, this should be undertaken within the confines of your current capabilities.
If you are new to innovation, you may need to develop some new capabilities before you are in a position to achieve the returns you desire!
Step 2 - Area of Focus and Where to Invest
Before you invest material resources into innovation, you need to make sure each innovation investment is strategically relevant.
If they are not strategically relevant, they’ll result in wasted time, effort and resources and will not advance you towards your goals.
To a large extent, the question of strategic relevance is addressed when completing your mission, vision and business strategy.
To be effective, your investment in innovation must align with and reinforce the business’s goals and objectives.
Step 3 – Innovation Investment Objectives
As with any portfolio of investments, there are typically several key objectives you seek to achieve.
Your specific objectives and their priority will depend on your particular circumstance.
Some of your key objectives might include:
- Establishing the base level innovation activity needed to keep pace with your industry
- Maximising the commercial value of your innovation efforts and exceeding average industry performance
- Creating the additional innovation activity needed to exceed your industry performance
- Capturing the value of pre-existing opportunities
- Addressing an imminent crisis that the business may face
- Providing a sound platform for the development of your innovation capabilities
- Ensuring innovation projects stretch your innovation capabilities but do not exceed them
- Establishing a diversified and balanced innovation investment portfolio
- Ensuring projects do not put the business at unacceptable risk
Step 4 - Portfolio Weighting
Managing a portfolio of innovation projects is much like farming:
- Harvest the current crop
- Prepare ground for next year’s crop
- Search for new crops to grow in the future
You should spread investments across:
- Today (short term)
- Tomorrow (medium term)
- The next day (long term)
A diversified innovation investment portfolio is essential for growth and risk management.
Step 5 - Investment Performance Metrics
The performance metrics you hold your innovation activities accountable to play a significant role in success.
Each investment time horizon needs dedicated performance metrics.
As a project transitions from one time horizon to another, it should only become accountable to those standards.
Step 6 - Investment Review
An effective innovation strategy must adapt as circumstances change.
It should not be set in concrete.
Regular review allows you to reassess progress and realign activities.
If you would like to learn more about how to develop your innovation strategy, give the team at Fortitude Business Consulting a call on 1300 551 040.