Weekly Business Insights from Top Ten Business Magazines | Week 316 | Strategy & Business Model Section | 1

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 316 | September 29-October 5, 2023

A New Approach to Strategic Innovation

By Haijian Si et al., | Harvard Business Review | September–October 2023

Extractive Summary of the Article | Listen

Companies typically treat their innovation projects as a portfolio: a mix of projects that, collectively, aim to meet their various strategic objectives. Some projects, for instance, will improve business processes, others develop new products and services.  All too often, executives carefully evaluate individual projects along standard performance metrics such as net present value, but they spend little time thinking about what types of projects the company’s competitive positioning needs beyond the general notion—borrowed from finance—that diversification reduces risks. As a result, companies’ innovation projects tend to be only weakly related to their distinctive strategic goals, and at worst, they work against its strategy.

This article introduces a strategic innovation tool kit the authors developed to help companies align their innovation investments with their unique competitive strategies.

Creating Strategic Alignment.  Thetool kit is anchored in two graphics that, taken together, help companies relate their innovation projects to their strategic goals. Companies begin with an examination of their business strategy and their innovation basket.  

Achieving consensus and identifying strategic change needs. Completing this exercise helps leaders articulate a shared view of their strategic position, which will enable them to reach the strategic goals.  The organizations need to identify change needs. These change needs reflect weaknesses in the company’s current strategic position. These weaknesses often signal innovation opportunities.

Creating the innovation basket. The process of categorizing innovation projects is the next step, and it is where the authors’ process deviates from established frameworks. They use the word “basket” rather than “portfolio” to denote a company’s collection of innovation projects. In this way, they differentiate the concept from finance and avoid the mistake of treating projects like financial securities, where the goal is usually to maximize returns through diversification.  Unlike a portfolio, the basket is customized to the business unit’s strategy and organization.

Filling the basket. Next, executives locate the company’s existing innovation projects in the basket, with the understanding that some may straddle multiple goals and areas. For each project, leaders should ask, “How does this help the unit achieve its strategic innovation goals?” Or, put another way, “How does it address our strategic gaps?” If a project addresses an identified change need, it fits the strategy and belongs in the basket. But in many cases, projects may deliver different changes from those identified as opportunities, or little change at all. Those go into the “unaligned” column. Once the basket has been winnowed of projects that do not align with strategic goals, it’s time to begin adding new ones that are consistent with the strategy. 

Putting in the numbers. Only after the basket has been filled and reviewed a few times should managers introduce numbers. They can establish targets for each innovation goal.

3 key takeaways from the article

1. Companies typically treat their innovation projects as a portfolio: a mix of projects that, collectively, aim to meet their various strategic objectives.  All too often, executives carefully evaluate individual projects along standard performance metrics such as net present value, but they spend little time thinking about what types of projects the company’s competitive positioning needs beyond the general notion—borrowed from finance—that diversification reduces risks. As a result, companies’ innovation projects tend to be only weakly related to their distinctive strategic goals, and at worst, they work against its strategy.
2. A new strategic innovation tool kit could help companies align their innovation investments with their unique competitive strategies.  The tool kit is anchored in two important acts i.e., an examination of organizations’ business strategy and their innovation basket. 
3. To create strategic allignmnet the companies need to: achieve consensus and identify strategic change needs; creating the innovation basket; fill the basket; and put the financial numbers for each project.

Full Article

(Copyrights lies with the publisher)

Topics:  Strategy, Business Model, Innovation, SWOT