2020

INNOVATION IMPERATIVE

STRATEGY

Plan to Pivot

An innovation strategy must be flexible and open to change

by Peter Merrill

Next to the word “innovation,” “strategy” is perhaps one of the most widely misunderstood words in business. Put the two words together, and you could have some serious problems.

“Strategy” comes from the Greek stratēgia, or “art of the general,” and is “a high-level plan to achieve goals under conditions of uncertainty.”1 Strategy involves setting goals, determining actions to achieve the goals and mobilizing resources to execute the actions. It is the art and science of planning and marshalling resources, which are usually limited, for their most efficient and effective use. It involves activities such as strategic planning and strategic thinking. Strategy is about shaping the future.

In this context, one of my favorite quotes comes from Sun Tzu’s The Art of War: “No battle plan ever survives first contact with the enemy.”2 This is especially true when it comes to innovation strategy. The art of the pivot is essential, and an innovation strategy always must be flexible and open to change.

Depending on the nature of the organization, the innovation strategy may need to align with a core business strategy if innovation is being executed in a single business unit or a spinoff. With a standalone business or a startup, the strategy will speak entirely to the needs of the business.

Business unit strategy is focused on how the business should compete in a particular market, guiding the business on chosen customers, products and competitors. Strategy concerns long-term decisions such as marketing, the product or service life cycle, and pricing.

When I consulted with IBM in the mid-1990s, it bought Lotus Notes, a software organization that had developed an early version of email, electronic calendars and other online offerings. I recall seeing lifelong IBM-ers mystified by the move. Organization strategists, however, saw the internet as a major force of the future, although at the time few people outside universities used email. John Thompson, then a rising star at IBM, was given the job of integrating Lotus Notes with IBM.

Early in this transition, IBM was measuring success not based on the financials, but on the new knowledge gained. It quickly saw the development of mobile handsets becoming a trend, but stayed away from hardware that it saw as a commodity in the future. Clearly, IBM was thinking about long-term strategy.

Respond to change

As you look to the future, remember your core competences. IBM was making a major strategic shift from manufacturing to service and software. In the 1990s, it had seen service as a fast-growing sector in which its customers had evolving needs. IBM was now developing the skills to deliver service.

The future will have some areas that you can predict and control, and other areas you cannot. Be agile to respond to change, and be open and curious to find and accept the changes you cannot predict. Also:

  • Forget straightforward predictions. Life insurance sets premiums based on mortality rates that are entirely predictable. Today, we see the PC and TV merging, and that was predictable.
  • Forget the impossible. You cannot predict where the clouds will be in the sky or what their shape will be at 9 a.m. tomorrow. I do realize that in the future, however, technology may be able to predict for us.
  • Focus where there is data, but also where judgment may be required. In a takeover, the financials are easy to analyze, but what about the leadership? That requires judgement.

Consider the moves the Tata Group made after 2000. Offshore call centers were growing fast, yet Tata sold its business. In this industry, labor turnover is huge and difficult to manage. Often in this industry, “streetwise kids” with low education are recruited and trained. That can be a financial drain. Tata saw signals (weak at the time) that new technology could replace some people in these roles. Think online services. Still, there’s some need for educated talent in today’s call centers

We also must explore trends in those areas where we know we have the competences or can acquire them. You must ask how will new technology affect you, who will become your competition and what may be potential new regulations. You must embrace uncertainties and test them. You must ask who will be your future customer and how will you address that market.

SWOT and strategy

We have been doing strength, weaknesses, opportunities and threats (SWOT) analysis for years. Figure 1 is populated with typical issues, but of course it will look different for every organization.

Figure 1

  • The strengths quadrant asks you to identify what your organization does better than others. What are the unique competences and resources?
  • The weaknesses quadrant asks the opposite: Where do you do a poor job and where are you being beaten in the marketplace?
  • The threats quadrant wants you to think about your worries you and where the competition is attacking you and your weaknesses, which in the end creates risks for the business and hopefully a quality system to mitigate these risks.

What about the opportunities quadrant? The inputs to the SWOT analysis come from market research and an environmental scan. More specifically for innovation, the technique of ethnographic research from the world of anthropology looks at people in their real-life environment. This is not unlike gemba. We identify where people have difficulty or waste time.

For innovators, this is just the beginning of opportunity, and where innovation strategy begins.

Discovering unmet customer needs and innovation opportunities comes from real-life observation of people’s behavior. Ethnographers follow people—or even live with them—to understand rituals and routines with products or tasks.

Leadership has the task of addressing these issues and providing the time, money and people to uncover the unmet needs and innovation opportunities.

Strategy—and vision

A strategic plan can take many forms, but it will eventually break down into individual tasks for individual people. Strategy must be consistent with the organization’s vision and align with policy and mission.

Vision describes a future state. An organizational vision can include attributes such as agility, risk taking and challenging the status quo. In short, a vision should get people thinking longer term. It would be dangerous to formulate a vision describing specific future products and services. The challenge with vision is deploying it into the organization, so it’s worth including deployment as an integral part a strategy development.

You sometimes hear the term “visionary leader,” which usually applies to an inspiring leader. Many of the best leaders are quiet, friendly and easy to get along with. When I was a junior engineer at Courtlaulds, the textile group, Sir Norman Wooding, the deputy chairman, always found time to talk with us and—more importantly—listen. A strong innovation vision can be a powerful marketing tool.

In a perfect world, strategy would be self-explanatory, but in the real world, it requires explanation. The document’s language must be simple and not overly technical. Some parts may be restricted, and so there may be layers of confidentiality. But it should be a document that not only engages and inspires the employees, but also potential business partners that are needed. Some partners, actually, will be engaged already before the strategy is documented.

A good structure for a strategy document is the Monroe motivation sequence:

  1. Gain attention.
  2. Visualize need.
  3. Answer need.
  4. Visualize result.
  5. Call to action.

The strategy document must grab any reader’s attention immediately and explain why innovation is important. Going back to the SWOT analysis, the answer will come from the threats to the business and the opportunities ahead.

Then you can start building in the organizational vision, but get much more specific stating the problem and the opportunity being addressed in the strategy. This may change, and the strategy must be flexible. The initial strategy will be based on several assumptions, and assumptions carry risk. The assumptions must be clearly specified together with their attendant risk. The strategy will contain plans to make assumptions into hard facts.

As a result, many jobs will need to be done, and people’s roles and responsibilities must be specified. Early responsibilities will be in a loose and open network. People will probably not be used to the looseness and openness, and things will need to be explained. The strategy document also must explain how strategy will tighten as uncertainty is reduced.

Strategy must emphasize this is a venture into uncertainty, and discovery can be exciting. As we discover new knowledge, we will pivot and the strategy will change.


References

  1. Wikipedia, “Strategy,” https://en.wikipedia.org/wiki/Strategy.
  2. Sun Tzu, The Art of War, 5th Century BC.

Peter Merrill is president of Quest Management Inc., an innovation consultancy based in Burlington, Ontario. Merrill is the author of several ASQ Quality Press books, including Innovation Never Stops (2015), Do It Right the Second Time, second edition (2009), and Innovation Generation (2008). He is a member of ASQ, previous chair of the ASQ Innovation Division and current chair of the ASQ Innovation Think Tank. Merrill also is head of delegation for his country to ISO/TC 279 Innovation Management.


Average Rating

Rating

Out of 0 Ratings
Rate this article

Add Comments

View comments
Comments FAQ


Featured advertisers