The Seven Elements of Innovation Strategy

Innovating, in 2024, has become a wildly complex endeavor. In our rapidly evolving technological world, the boundaries of what’s technologically feasible are expanding so much faster than our capacity to implement new solutions. The possibilities are essentially infinite. While this expansion has been occurring for decades, it has accelerated with the wave of digital transformations and further still with the rapid rise of AI. Of course, the constraints haven’t changed: time, budget, regulations. With this new reality, the discipline to discern where to invest becomes more challenging.

Determining what you should do becomes even more important as the scope of what you can do widens. This evolving landscape sees leaders often caught up in the "how" and "when" concerning the adoption and integration of new technologies. They are channeling millions of dollars into efforts aimed at aligning their systems to the evolving market trends. Yet, while doing so, they often lose sight of the crucial "what" and "why." Without a grasp on these elements, you’re a leader operating without a genuine strategy, and you run the risk of misdirecting or squandering valuable investments.

Innovating in today’s environment requires a special kind of leadership: strategic, courageous people who have the appropriate mindset and the properly calibrated tools to make change. As Chris Michaud, EPAM’s VP of Product Strategy & Design, says: “Experience has taught us that innovation doesn’t come easy. It requires maverick characters within an organization to champion the vision and drive progress, often in the face of incredibly challenging hurdles.” Strategy is what enables maverick leaders, such as yourself, to make innovation real. The question is: Are you ready to put strategy to work for you?

Defining Innovation Strategy

As a leader, you’re faced with making decisions every day. Without a clear strategy, decision-making can be challenging and uncertain. As Theodore Roosevelt once said, "In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing." Ignoring the decision altogether can lead to unhappy employees, a lag behind competitors, and a lack of direction in the market.

When it comes to innovation, having a strategy is even more vital. Larry Keeley, the author of Ten Types of Innovation, defines innovation as “the creation of a viable new offering." New is inherently risky. Your stakeholders are often looking for proof that a new offering will drive growth for the business. It is very difficult to offer proof for things that don’t exist or might happen in the future.

To add to the confusion, the adjective "strategic" often gets muddled with the noun "strategy." While you need strategic people, that doesn't necessarily mean their output is a strategy. A strategy is a decision-making framework, guiding what to do (and what not to do), and how your goals will be achieved with your resources. A decision-making framework isn't a decision tree. It's not an algorithm that prompts questions and spits out answers for what to do. Rather, it’s a tool used to facilitate the process of decision-making.

The Seven Elements of an Innovation Strategy

At its core, an innovation strategy consists of the new offering, why it's right for the business and customers, and how to evolve it for the future. This strategy contains seven major components, including:

1. Lighthouse. The vision to guide the strategy. The lighthouse is what you want to be. A lighthouse provides you with a trajectory to aim for. You can ask yourself whether an initiative builds toward the lighthouse when deciding on future steps and priorities. This adds value in the near term while building to the far-term vision. This is sometimes referred to as the North Star.

2. Offering. The new experience that has a differentiated value proposition. The offering is what you need to create to achieve the lighthouse vision.

3. Backcasting Model. The roadmap to how you will achieve the Lighthouse. Backcasting helps you set a trajectory towards the future, while also taking near and mid-term tangible steps that feel manageable and meaningful. The backcasting approach helps you define achievable steps at each timeframe that deliver against the experience goals and help advance the experience in the right direction.

4. Opportunity Area. The reframe of the business challenge around an addressable need in the market. Simply put, it is the problem you are solving for your customers. Opportunity areas ensure the offering focuses on what will be desirable and valuable to people.

5. Insights. The evidence that supports and differentiates a strategy. Insights are what make the strategy right.

6. Business Case. The evidence to validate a strategy’s viability. It's the value the innovation will provide. The business case layers in the operational and competitive context, and accurately estimates the value of innovation through financial models.

7. Story. The narrative that creates confidence among stakeholders that the strategy is right. It's why your stakeholders should believe in the strategy. Without an engaging story, the audience may lose interest in the initiative, miss the key value, or overlook important insights. Ultimately for innovation work to succeed, it needs to be socialized within an organization. Without the right story, the socialization will fail. Stories convince your stakeholders they need to do something.

Develop Your Innovation Strategy, Maverick

Strategy is not just about being aware of the elements, it requires you to apply them. As you strive to grow and evolve your business, a carefully crafted innovation strategy will help you navigate the array of possible options before you. It will help you identify and capture the most fruitful opportunities and guide you to allocate resources, maximize your return, and win in the market.

Got questions about being a strategy-informed maverick? Let’s talk.

Illustrations by Natasha Polozenko