A study of 700 companies showed that only 25 percent of managers believe their organizations are competent at both strategy and innovation.
The common denominator for both strategy and innovation is insight. Insight is described as the joining together of two or more pieces of information or data in a unique way to come up with a new approach, product, service or solution that delivers value. Insights come from the ability to wade through the waves of input we receive each day and mentally connect the dots in new and creative ways. As Apple founder Steve Jobs remarked, “Creativity is just connecting things.”
A study of 5,560 executives at 47 companies shows that the most important trait for managers in high-performing companies is the ability to come up with insights. Prolific inventor James Dyson built his billion-dollar business through insights on what frustrated people. His first significant invention—the Ballbarrow—was a wheelbarrow that used a ball instead of a wheel. This insight came from the frustration people had with the wheels getting stuck in the mud and rendered useless. Dyson recounted how insight also fueled the birth of his famous vacuum:
“Sometimes you see a bit of technology working in one application and you wonder whether that might solve the problem that’s been gnawing at your brain. That’s how the vacuum cleaner worked. I went to a lumberyard one day to buy some tinder and saw these massive 30-foot high cyclones collecting the sawdust on top of the roof. So I rushed home and started building small cyclones.”
INSIGHT LEADS TO BOTH INNOVATION AND STRATEGY
Innovation, defined simply as creating new value for customers, begins with an insight. The insight often centers on a solution to a problem or a way to fulfill an unmet need of a customer. To create new value, you need this insight.
Business strategy is defined as the intelligent allocation of limited resources through a unique system of activity to outperform the competition in serving customers. The only way to intelligently allocate resources is to have strong insight into how your product or service provides value to customers in ways that are different than competitive offerings. Doing the same things in the same way as the competition is a common formula for bankruptcy. Just ask Borders or Circuit City.
A rich source of strategic innovation is the ability for leaders to move out of their strict mindset of providing either a product or a service, and instead look at the other category as an opportunity to develop their own complementors before outsiders do.
Manufacturers exploring service complementors (Apple and their retail stores) or service providers exploring product complementors (Amazon.com and the Kindle) can reignite a company’s growth. In the automobile industry, increased pricing transparency and hungry competitors have whittled away at profits. A number of auto manufacturers have worked to build on their platforms with services such as financing, insurance, warranties, maintenance, repair, Wi-Fi, navigation, and satellite radio. Their ability to enhance the service experience of an automobile may hold the key to growing profits in the long run.
HOW TO MERGE STRATEGY AND INNOVATION
The following five questions will help you begin to consider how you might merge your strategy and innovation efforts:
1. How can we develop offerings that are simpler, more convenient, and less expensive than established offerings to attract new or less demanding customers?
2. How can we modify one or more dimensions of our current offering to create a new subcategory that expands the market by bringing in new customers?
3. What one dimension of our offering can we improve to increase share of wallet with existing customers?
4. How can we make the current offering more competitive by leveraging other elements of the marketing mix (promotion, place, price)?
5. How can we use our capabilities to develop new markets for our existing offerings and what untapped uses can they fill?
The intent of both business strategy and innovation is to create value for customers. Too often, in the day-to-day business, we lose sight of the fact that competitive advantage is nothing more than “creating superior value for customers.” Innovation is the continual hunt for new value; strategy is ensuring we configure our resources in the best way possible to deliver it.