The Eight Core Principles of Strategic Innovation

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Many businesses launch on the strength of an innovative product or service. But somewhere along the line, most successful companies become more focused on protecting the business they have than in creating new streams of growth that position the company for the future. To enjoy long-term success, businesses need to develop the capacity for systematic strategic innovation, just as they have built out their operational capabilities.  Strategic innovation is defined as the discipline that transforms creative discoveries into new platforms of business that bring significant value to the market and the organization.  Unfortunately, this is a capability that few companies have managed to build.

Based on their research the authors have found a set of eight common practices that, when combined, build a sustainable strategic innovation capability.  These eight are summed in three domains:  Set Direction and Establish Commitment, Build the Capabilities, and Manage the Dynamics of the Innovation System Over Time.

1. Adopt a common language for defining the innovation landscape. Establishing a framework and terminology to discuss innovation activities is critical because different kinds of innovation happen on different timelines and need to be managed differently.
2. Set the domains of innovation intent. Senior leadership must scope out and articulate the opportunity areas where the company will focus its innovation efforts. The scale of ambition has to be big, and the company needs to be creative about how it can influence those opportunity spaces.
3. Treat strategic innovation as a permanent function. Executives often try to boost innovation through special initiatives like a call for moonshot ideas or offering incentives to participate in an innovation contest or hackathon. This is like trying to create new growth platforms via suggestion box. To become an enduring organizational capability, strategic innovation needs to have two important characteristics. First, it must be treated as a full function supported by a comprehensive set of management practices. Those practices must then be designed to support one another.
4. Develop each domain into a portfolio of opportunities. Successful innovators spread their bets across several different domains of innovation intent simultaneously to hedge against risk. Within each domain, the strategic innovation team aims to identify and explore a range of opportunities. Operating at the domain level is crucially important for realizing the potential of strategic innovation, because it yields a portfolio of related opportunities rather than a pipeline of independent projects that are each subjected to a go/kill decision.
5. Develop the three organizational competencies of discovery, incubation, and acceleration.
6. Clearly define innovation roles. The work described above requires distinct skills, and companies will need to create career paths to both develop and retain new business creation talent. That means moving away from scenarios where new business opportunities are led by project champions whose careers will be sidelined if their venture fails, and designing career paths that allow people to rise to positions of influence in the strategic innovation function.
7. Proactively manage four dimensions of uncertainty. Mature companies are good at managing risk to mitigate the likelihood of an undesirable outcome. In the world of strategic innovation, however, it’s important to investigate uncertainties about technology, market structure and receptiveness, resourcing, and the organization itself in order to carve out new business territory.
8. Tune the innovation function. While financial pressures can dampen an organization’s appetite for investing in strategic innovation, adjusting budgets and activities rather than sidelining the function is critical. Unfortunately, innovation is often the first to go in challenging times: The portfolio of opportunities is discarded, and accumulated expertise is lost. Continual stops and starts prevent organizations from developing the necessary expertise and reaping the benefits of their investments. Instead of abandoning big bets, companies can adapt the size and pacing of a portfolio to what’s feasible in a more constrained environment.