In recent years, the business landscape has undergone major changes. The push of technological progress and the rise of agile startups has made a shift in how corporations approach strategy a necessity. Corporates can no longer rely on traditional models, instead, innovation has become a critical factor for survival and growth in the modern economy (HBS, 2022).
The imperative of corporate innovation
Traditional business models, which were once seen as bulletproof, are now faltering in the face of disruptive innovation. A clear indication is the shift of “smart money” towards startups and internal VCs departments of established corporations, showcasing the strategic pivot towards innovation. The falling average of the market maturity of companies on the S&P 500 Index further instates the urgency of adopting innovative practices.
Key benefits of corporate innovation
Gaining a competitive advantage
Innovation enables the development of unique products and services, distinguishing a company from its competitors. This is crucial in the digital age where 80% of mature companies cite innovation as a core strength (IMD, 2023).
Superior Performance by Innovators
The most innovative companies, as identified in the 2023 Most Innovative Companies report, consistently outperform the MSCI World Index on shareholder return. This superior performance underscores the tangible benefits of innovation in terms of financial returns and market standing (BCG, 2023).
Leaders vs. Laggards in Innovation
The disparity between innovation leaders and laggards is becoming more evident. While leaders are consistently developing new products and tapping into new markets, laggards are struggling to make significant progress beyond incremental improvements. This highlights the importance of a proactive and comprehensive approach to innovation rather than a reactive or minimalistic approach (BCG, 2023).
Global Trends and Priorities
A global survey from 2023 found that an overwhelming majority of companies now rank innovation among their top three priorities, with a significant number planning to increase their investment in innovation. This indicates a global shift in business strategy, with a strong focus on innovation as a key driver of growth and competitive advantage (BCG, 2023).
Innovation Strategy
Innovation therefore is an imperative aspect and driver of corporate growth and is needed in this day and age to push forward an organization to new horizons. To implement innovation, an organization must develop an innovation strategy. An innovation strategy is an approach that organizations adopt to effectively manage and foster innovation. It serves as a roadmap for resources, capabilities, and external collaborations to generate new ideas, develop breakthrough products or services, and maintain a competitive edge in the marketplace. Such a strategy ensures that innovation efforts are aligned with the organization's overall goals and objectives, driving sustainable growth and creating value for customers (Jain, 2023).
An innovation strategy can be defined as being divided into answering three main questions:
What value do you want to create?
How do you want to create that value?
How are you going to capture and retain that value?
As you can see it all revolves around creating real value. To find that out we must take a step back and ask ourselves a crucial question: What is my customer hiring my product to do?
This can be defined as looking into the “jobs-to-be-done” framework where you are essentially expanding the preview of what your product is doing and who your competitors are. This framework combines both functional, social and emotional aspects of a product to generate an answer in the preview of the customer that starts with, Help me … .
For example, someone purchasing a milkshake before a long ride to work might phrase this statement as: “Help me have something to keep me entertained through traffic”. When looking through that lens, the competitor pool expands from your typical competitors such as other brands that sell shakes to any beverage or even product that provides the same utility such as a power bar or even a playlist of your favorite hits. When focusing on the true value you are providing the customer you are able to protect yourself against disruption. This is done through these four avenues:
Customer centric innovation: It shifts the focus from the product to the customer’s needs and motivation therefore allowing the fostering of innovations that more closely aligned with what the customer actually wants
Identifying unmet needs: Companies can identify unmet needs when looking at the ‘jobs’ customers are trying to accomplish allowing them to innovate in ways that competitors may not have considered.
Enhancing value proposition: Innovations developed through this lens are more likely to improve the customer experience, offering solutions that are more relevant and valuable to the customer.
Long-term customer loyalty: Products or services designed around the 'jobs' customers need to get done can lead to higher customer satisfaction and loyalty, as they resonate more deeply with customer requirements.
After looking through the lens of the jobs-to-be-done framework, you would be able to pinpoint exactly where your true value lies. This answers the first question of developing an innovation strategy.
How do you want to create that value?
Coming off the job-to-be-done analysis you are able to widen the scope and define appropriately the value you are creating and wanting to maintain. To implement this value you must look at the types of innovations you should pursue in relation to your current business lines. These can be categorized into three main categories:
Core: opportunities address key business alternatives for main customers
Adjacent: opportunities serve a broader customer base, targeting key moments in their day-to-day
Transformational: opportunities address different use cases and technologies, moving far beyond the current business model
Core Innovations
Core innovations involve making incremental improvements to existing products or services.The goal is to renew interest in the marketplace by enhancing tried-and-true products or services, thereby helping firms stay competitive in the short term. However, focusing solely on incremental innovation can limit long-term growth and lead to a continuous game of catch-up with market trends and customer expectations (Kupitman, 2018).
Adjacent Innovations:
Adjacent innovation means entering new markets or connecting with new audiences by leveraging existing competencies. This involves reshaping current offerings to meet the needs of new users, often through partnerships with technology solutions providers. Adjacent innovations carry less risk and can support growth by creating a more dynamic company capable of adapting to evolving markets (Kupitman, 2018).
Transformational Innovations:
Transformational innovation has the potential to completely transform or create new industries. These innovations are characterized by unique, often groundbreaking ideas that significantly change how people live and work. Such innovation is high risk but can lead to high rewards, including new market exposure, revenue streams, and process improvements. Companies often collaborate with startups or other vendors to achieve transformational innovations, leveraging external capabilities and open innovation strategies (Kupitman, 2018).
In summary, implementing this step of an innovation strategy requires a balanced approach that encompasses core, adjacent, and transformational innovations. By understanding customer needs, engaging leadership, allocating resources appropriately, and developing a comprehensive innovation system, companies can create sustainable value and remain competitive in the ever-evolving business landscape.
How are you going to capture and retain that value?
Having identified the value we aim to create through the 'Jobs to Be Done' framework and determined the types of innovations to pursue (core, adjacent, transformational), the next critical step is capturing and retaining this value. This involves several key strategies:
Developing robust value propositions: Ensure that the innovations align with the identified customer 'jobs' and deliver on the promises made. This strengthens the product-market fit and enhances customer loyalty.
Continuous Market Analysis and Adaptation: Regularly analyze market trends and customer feedback to evolve and adapt innovations, ensuring they remain relevant and competitive.
Building and Protecting Intellectual Property: Secure patents and trademarks where appropriate to protect innovative products and services from being easily replicated by competitors.
Establishing Strong Branding and Marketing Strategies: Utilize effective branding and marketing to communicate the unique value of the innovations, thereby creating a distinct market position.
Leveraging Data Analytics for Insight-Driven Decision Making: Use data analytics to gain insights into customer behavior and preferences, which can inform future innovations and strategy adjustments.
Fostering a Culture of Continuous Improvement: Encourage a company culture that values ongoing innovation and adaptability, ensuring the organization can swiftly respond to new opportunities and threats.
Conclusion
Business today is all about change. Old ways of doing things are no longer enough. Now, being innovative – coming up with new ideas and ways to do things – is really important for companies to grow and stay ahead. It's like seeing what customers really need and creating something special for them. Companies are focusing on three main areas: improving what they already do, reaching new customers, and coming up with big, game-changing ideas. To keep these great ideas safe and make the most out of them, companies are using smart strategies like protecting their ideas, always keeping an eye on what customers want, and making sure everyone in the company is ready to adapt and improve. This new way of thinking is not just about staying in the race but leading the way into the future.