Innovation Strategy

Overall innovation strategy must answer three questions:

1. Where to Innovate? Depending on their specific situation and ambitions companies must decide if they want to focus on new products for existing markets, on developing new markets, etc. Beyond this, they sometimes have to re-evaluate whether to change their position in the value chain through backwards integration, forward integration, etc. And if the current market position can no longer be sustained it might even be the time to replace the whole business model, e.g. sell licenses instead of products, spin out companies, start new companies to deal with disruptive technology.
2. How to Innovate? Innovation priorities must help to implement the business or segment strategy. If, for example, product innovation no longer guarantees sustainable competitive advantages, this might call for a shift of innovation focus from technology development towards innovative services that complement the product ranges and permit completely new integrated solutions for customers. Maybe there is a need for corporate venturing to solve your innovative challenge. Innovation strategy is all about defining from where and how you want to get your competitive edge.
3. How to Allocate Innovation Resources? With their limited resources, companies need to cover more and more complex competency portfolios and focus in their projects on future winners. Therefore, it is crucial to “place their innovation bets” properly. Innovation leaders use portfolio planning techniques to balance risk vs. rewards, incremental vs. radical innovation, etc. They use strategic management of technologies to create a development and/or acquisition plan to develop the portfolio of technologies and competencies they need in the future. And they use partnerships and alliances, outsourcing, co-development, etc. to complement their own resource base.

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