How to Develop an Efficient Innovation Strategy

One of the great challenges for modern businesses is to make innovation sustainable. They know how valuable that one great idea can be. 

But how can you go from one great idea to a steady stream of meaningful improvements? How can you make innovation predictable?

For most companies the goal is simple: to create new products and explore new markets to outperform the competition. For others, the hope is to improve internal processes and make the company more efficient overall. 

The best way to achieve either aim - to successfully manage innovation - is to create and follow a clear strategy. In this article, we’ll show you how to do it.

What is an innovation strategy?

A strategy is “nothing more than a commitment to a set of coherent, mutually reinforcing policies or behaviors aimed at achieving a specific competitive goal.” It’s the idea that things don’t just happen because you want them to. You need a repeatable, consistent approach. 

For innovation managers, this is vital. The work is a mix of science, art, and economics, and a solid strategy gives you the best chance of success.

Your innovation strategy needs to be “a systematic method for evaluating, prioritizing, and investing in the best research projects, and then driving these projects through the development stage to generate profitable products.” 

We’re here to help you create that. We’ll present three different options to match your specific innovation goals. But first, let’s talk about why you can’t simply wing it and hope to produce.

Why do you need a strategy? 

Another way to ask this question is: what do you want to achieve? Obviously, you want to innovate. But this can take various forms, and you need to be clear about what you hope to walk away with at the end. 

You will likely hope to create one of the following: 

• A one-off innovation project. You need something to spur growth and find customers quickly. This could be a new product or clever repackaging of your existing offer.
• A repeatable innovation strategy. You’re invested in innovation, and you intend to launch new projects regularly - perhaps 2-4 times each year. 
• Continuous improvement company-wide. This involves building a culture and expectation among staff that they’ll always be looking for ways to update processes, and generally work smarter.
  

Clearly, the same approach isn’t going to work for all three of these aims. So for the remainder of this post, we’ll give you actionable strategies for each. 

Let’s start with the quick win.

One-off Projects: Minimum Viable Innovation System (MVIS)

This strategy leans heavily on the lean start-up methodology. In a nutshell, you want to move quickly, build something, then test to see whether you have a viable idea on your hands. 

The MVIS gameplan comes from Scott D. Anthony, David S. Duncan and Pontus M.A. Siren. They present “four basic steps in no more than 90 days, with limited investment and without hiring anyone extra.”

To use this model, you’ll need: 

• A designated innovation leader - ideally a senior leader
• Strong buy-in from executives and managers
  

Notably, there is no need for a dedicated “innovation team” from the beginning. The project will be driven by the leader, and they’ll bring in support as needed. As long as that one person has a clear vision and grasp of the project, the rest of the company can continue business as usual. 

You will eventually create a team to execute, but it doesn’t make sense to do this until after you’ve decided what they need to do.

Here’s what the full MVIS framework looks like: 

Now, let’s look at each phase one-by-one.

Phase 1: Set expectations (days 1-30)

If you’re running one-off innovation projects, it’s likely because you have a specific challenge to overcome. This could be slow revenue growth, high customer churn, or stiff competition eating into your market. 

The first phase is all about choosing the kind of innovation you want to embark upon. Generally speaking, the authors separate these into two main categories: 

• Core innovations: These help “either by enhancing existing offerings or by improving internal operations.”
• New-growth innovations: “Reaching new customer segments or new markets, often through new business models.”
  

This distinction is important because while you can achieve either using MVIS, the amount of growth will usually be different. 

Core innovations are perfect if you want fast (but limited) growth. You’ll be able to keep most of your business practices the same, and you won’t have to set up new teams or structures. You’re going to find a good opportunity for improvement, and improve.

For a lot of companies, this will be more than enough. You’ll have meaningful change with minimal effort. 

But if you need transformational growth, core innovation is probably not going to be enough. “There will be a gap between your growth goals and what your current operations and core innovations can generate. It’s the purpose of the new-growth innovations to fill that gap.”

So Phase 1 requires you to figure out what sort of innovation you need, based on the company’s growth goals. Once you’ve done that, it’s time to start looking for possibilities. 

Phase 2: Identify opportunities (days 20-50)

In our long-term strategy, we’re going to highlight multiple ways to find innovation opportunities. Your business analysts may have created algorithms and financial reports that show specific issues that are slowing growth. 

You may already have a long list of challenges from your different business teams, just waiting for someone to tackle them. If so, great!

But your MVIS needs to move quickly. Which means you can’t wait around for others to deliver ideas. 

If you’re starting from scratch, Anthony, Duncan, and Siren have a simple solution. Take a handful of committed executives and “have them meet with at least a dozen customers, probing for unmet needs that could be the foundation of a new-growth innovation, and investigate new developments in and around your industry.”

This should be done within three weeks. 

Another quick win is simply to look for existing projects that aren’t moving the way they should be. If they have the potential to create good growth, your innovation leader may be able to breathe new life into them. 

Next, lock these executives in a room and don’t let them out until they’ve found three answers to the following: 

• A significant problem for your typical customer that isn’t being solved by the industry
• A new product idea that can fix this problem, or a change in the market that promises to make this issue more burdensome
• The reason why you should be the company to solve it, instead of your competitors
  

If your executives can confidently answer all three of these, they’ve found a good opportunity. 

You want three good potential ideas. 

Phase 3: Create your team (days 20-70)

Even though we said that you don’t need an innovation team for this strategy, you will of course need a group of people to execute the necessary changes. And it’s a lot easier to form this group once the first two phases are underway. 

This size of the team really depends on the project. The beauty of not having this predetermined is you can remain lean. If the project only requires two or three team members, then that’s all you’ll need. 

But your team must be committed to each project full-time. “At least one person (and typically more) [needs to] get up every morning and go to sleep every night thinking about nothing but innovation.”

Asking staff to juggle their existing work with these special responsibilities is a great way to ensure that you come up short. 

Phase 4: Create a mechanism to shepherd projects (days 45 to 90)

The final piece of the puzzle is to set up an evaluation structure. Just like a board of trustees for a new startup, form a senior leadership committee which will allocate resources, gauge progress, and kill any projects that aren’t working.

This committee needs to be comprised of senior leadership because, of course, it needs to actually have the power to make these decisions. But it shouldn’t be the same as your full company’s leadership team. It needs to make assessments on these projects in isolation. And this can be hard to achieve when a leadership team is used to operating a certain way.

The best analogy is to a group of venture capitalists invested in a new project: 

• They often disagree
• They don’t always at regular intervals. Instead, they convene when a decision needs to be made. 
• They allocate resources as soon as they’re required
• They give project leaders (or CEOs) relative freedom outside of board meetings
  

At the end of these four phases - after 90 days - you’ll already have at least one project off the ground. More importantly, you’ll have the framework in place to make quick, smart decisions and see rapid change. 

Why not use this strategy long-term? 

You could. But quick turnaround and minimal investment are perfect for quick projects and small tests. But if you’re planning to commit serious money and company energy to innovation, you’ll probably want an approach that is more considered.

This also puts a lot of pressure on one innovation leader. Provided that person is driven and creative, it has great potential. But larger companies should be able to spread the burden of innovation across either multiple managers, or a designated innovation team. 

The long-term strategy we’re about to explore is more comprehensive and probably more sustainable. But if you want to produce a series of short, one-off quick wins, then there’s nothing to stop you from using MVIS over and over again.

Long-term innovation: A scalable 7-step strategy

As stated above, innovation doesn’t always mean a race to create a product in a few months. Innovation managers need to find scalable, sustainable strategies to ensure that the company consistently improves and thrills buyers. 

We’ll look shortly at a strategy for continuous improvement - a way to ensure that you keep getting better results without necessarily launching full projects. 

The following strategy is for companies serious about innovation. They know that they need to constantly build new products, test different markets, and change in order to survive. 

This strategy gives them a way to launch new initiatives with a set playbook, and to reliably achieve results.

Step 1. Find a need or problem

Successful innovation almost always comes from a need. That may be a recurring issue for your customers, an internal process that inhibits productivity, or even an industry-wide challenge that hurts efficiency everywhere. 

And just “growing the company” is not going to be good enough. This is a challenge, but it’s too broad to fix with a single project. 

But you should be able to tie the challenges you identify to your company goals - including growth. For instance, if you need to increase recurring revenue by 5% over the next year, a project that significantly reduces churn might be perfect. As might a new line of products.

So starting from zero, how can you make a list of potential challenges to tackle?

How to identify problems

There are plenty of places to look. But to keep things simple, here are five to start with:

• Talk to customers. As we saw in the MVIS model, customers can be your most direct source of inspiration. If you want to sell more goods, why not ask real buyers what they want or need?
• Poll employees. Your team members have hands-on experience and should know what doesn’t work well at present.
• Ask for submissions. This is not quite the same as asking for product submissions (we’ll get to this shortly). You simply want to know what people outside the company (social media users or survey respondents) struggle with.
• Study internal data. What can you learn from financial reports, customer conversion rates, or manufacturing times?
• Monitor industry trends. Look for changing buyer habits and ways that the industry as you think you know it might be ready to transform.
  

Once you’ve done even a few of these steps, you’ll have a long list of problem areas that could be perfect for your innovation project. Which means you need to evaluate them.

Step 2. Assess the market

Most businesses will have an almost endless list of potential areas for innovation. To choose the problems you’ll eventually address, you need objective criteria by which to analyze them. 

You can of course make these decisions by whatever logic you prefer. But to help, a team of Swedish academics proposes the following criteria.

Innovative opportunities should be: 

1. An economic value to someone
2. Achievable technologically
3. Monetizable (or the company should be able to gain some of that economic value above)
   

You need to weigh each opportunity based on these properties. It’s not just a matter of satisfying each, but how much value can you create by solving a problem, and how achievable is it technologically?

If you assess each of your new problem areas above on these criteria, you should be able to choose a good opportunity to tackle. 

Step 3. Identify current capabilities

After you’ve assessed the problem itself, it’s time to examine how capable you are of solving it. Or more specifically, are you capable of running a project to try?

You likely won’t have all the technology or expertise you need already. You may need to hire people and purchase new tools. If you already have an innovation team in place, you probably won’t have as high a hurdle to jump. 

Remember, at this stage you haven’t even started sourcing project ideas. How do you plan to do that, and will it be difficult given what you already have in place? 

For example, many companies love to hold public competitions to gather exciting new ideas. This can easily require: 

• A website or mobile app
• A public relations campaign
• Prize money or an equivalent reward
• Crafted rules and regulations
• An innovation management system to handle entries
• A committee to analyze submissions and choose the winners
  

This can be what’s necessary just to find a good idea. Then there’s all the research and technical development that goes into building the thing. 

Step 4: Generate ideas

Now comes the fun part. Your innovation leaders can start actually brainstorming and finding the best possible solutions to the problem you identified in the first step. 

As mentioned, there are lots of ways to go about this. This list is by no means exhaustive, but here are some interesting methods to gather ideas: 

• An idea challenge for employees or the public
• The SCAMPER method which gives you different ways to look at a problem
• Focus groups and conversations with existing customers
• Competitor research to find out what’s working for other companies
• Mind maps and other brainstorming techniques
• Surveys and social media polls
• Morphological analysis
• Brainwriting
  

Of course, all of this is nice, but there’s no guarantee that you’ll actually receive any submissions or get any good buy-in from employees. So on top of simply creating a method for finding them, you need to create the following conditions: 

1. A low barrier for entry. It needs to be as easy as possible for people to submit ideas. If that’s the public, a good online system needs to be combined with a significant PR campaign. If your ideas will come internally, make sure that staff are given the time and encouragement they need. 
2. A system for assessment. A predetermined scoring system or panel of experts usually works best.
3. Incentives to submit ideas. Why should anyone actually take part in this program? Whether it’s for the public or for employees, you need to give people a reason to submit their ideas. 
   

Find as many good ideas as possible, and then it’s on to the selection process.

Step 5: Choose the best idea

With all of these good ideas in the bank, it’s time to choose one. And as previously stated, you should already have ensured that you have a selection rationale in place.

You want this process to be consistent and clear from the outset. It’s important that individuals’ enthusiasm or recent experience don’t bias this system. 

For a good model, here’s a suggestion from Cornell professor Samuel Bacharach. Every idea needs to be scored for its: 

1. Clarity. Do you know everything you need to about this idea? 
2. Usability. Will it solve the problem in question?
3. Stability. Will it stand the test of time?
4. Scalability. Could a new prototype be produced on mass and without major improvements?
5. Stickiness. Might people use it as part of their routine? 
6. Integration. Is it achievable within the organization you have today? Or will it require change?
7. Profitability. Can you make money from this? 
   

None of these considerations is more important than the others - even if profitability seems like it would be. 

The idea with the top score for each of these seven questions is most likely the best. Now, you should have a project to get started on.

Step 6: Assemble your dream team

To come this far, you’ve already had to rely on a team of people. Whether that’s an innovation team, some senior leaders, or a core group you assembled just for this purpose, these were the people you chose to help select this innovation project. 

But now that you’ve identified a problem and the best idea to overcome it, you’ll need to recruit a few people with more specific expertise. There’s almost certainly further knowledge needed, and other team members will need to be brought in. 

The team doesn’t need to be large. And you may be able to find what you need within the organization itself. 

But one thing is important if you want the best possible results: your team should be dedicated to this one project until completion. As in, they should be on it full-time. 

Otherwise, you’re not going to get the full focus that you need, and their other responsibilities can become a burden. Or worse still, this new project is the burden, preventing staff from doing “what they should be doing.”

Step 7: Create your prototype

A working prototype is the first chance you’ll get to see and test the fruits of your project. So the sooner you’re able to put one together, the sooner you’ll know whether you have a breakthrough on your hands. 

And most likely, you’ll find countless errors in what you’ve built. Which is totally normal and probably good. If you can’t see glaring problems with a new product, that probably says more about your evaluation abilities than about the product itself. 

Once you have this prototype, the clear next steps are to test, evaluate, and iterate.

Ongoing: A continuous improvement plan

The preview two strategies are designed to get specific projects off the ground. They begin with the premise that we need to do something new, and give you a framework to do just that. 

But gradual improvements over time can also help you reach your goals. Whether or not this is truly innovation is debatable, but companies should view it as an important part of their ongoing transformation. 

Continuous improvement “happens over time, bit by bit, and is never finished. Improvements tend to be incremental with every change resulting in a small gain. With continuous improvement there is a focus on improving the processes that are already in place.”

So how can you promote this gradual, positive change?

The most common continuous improvement framework is called kaizen. This Japanese philosophy is most often associated with manufacturing, where change usually leads to literal improvements in the process line. Toyota is one company that famously relies on kaizen.

But we can apply this method to all areas of the business. Here’s how that works. 

1. Set goals and provide background

As with virtually all projects, you have to begin with goals. But compared with the other strategies we’ve already seen, your kaizen goals can be relatively modest. 

Identify an area of the business that’s not running as smoothly as it should be. You’ll do this in the same ways that you would identify opportunities in our previous strategy: ask customers, talk to staff, and monitor the wider industry. 

Choose one, and make sure you can tie it to a specific company goal - usually increasing revenue by X%. 

Then set the goal for this specific event. If the overall company goal is to increase revenue 10% by the end of this year, can a specific process improvement represent 10% of that increase?

You also need to set boundaries for this event. Who will be involved, and where will it take place?

2. Review the state of affairs and create a plan

At its most basic, the kaizen method can be described in three simple steps: 

1. Pick apart a particular process (or document it thoroughly)
2. Remove or improve any unnecessary or faulty ingredients
3. Put it back together and implement the new process
   

So in this phase of a kaizen event, you need to understand the process that’s not working as it should be, and try to find the culprit(s). 

Map it out fully, step-by-step. This may be harder than it sounds, especially where you have employees doing things their own way. The idea is to have some level of standardization - to know how certain actions should be done in their current state. 

This should help to unearth some of the bigger drawbacks with your methods at the same time. It’s often quite clear which links hold the bigger chain back.

As a team, find these weak links and figure out how they need to be fixed. 

3. Make improvements

Now that the planning and diagnosis are out of the way, it’s time to put the plan into action. 

Depending on the scope of the challenge, implementing improvements can be quite simple, or the hardest part of this process. At the very least, it will often feel the most rewarding in real time. 

Employees are motivated and excited to actually do the things they’ve talked about. They’ll be able to test new working methods and help to make their work more efficient. 

And you’ll hopefully finish this step with a working solution to a real problem. 

4. Assess and fix what doesn’t work

After initial implementation, your new process needs to be scrutinized and assessed with the same rigour as you showed in phase 2. 

What does the full process look like now, is it more efficient or effective, and what are its shortcomings? Whatever you end up with is going to become standard operating procedure, so you need to be sure that you’re happy with it. 

If not, now’s the time to make changes. Implement, test, iterate, and test again. 

5. Report and standardize

The final stage is to make all of this official. That means first explaining to the rest of the company what changes you made, and how these affect their own work. 

The best practice is to create a new process manual. Explain how your new and improved process ought to be done, and give team members clear step-by-step instructions. 

And in most cases, this needs to be policed. You need to watch employees work, ask for reports and feedback, and ensure that your improvements become concrete. 

The worst case scenario is to do all of this work, only to have nobody pay any attention and for the status quo to continue. You can’t let this happen. 

Run regular kaizen events

The above is the process for a single kaizen “event.” It’s a fixed cycle to help your team tackle a specific challenge. 

The goal then is to consistently begin (and finish) new events. By overcoming small problems in isolation, the company continues to better its past performance and work more efficiently. 

The whole point of this exercise is to keep things lean, to make short, fast changes. But this needs to keep happening constantly, with new kaizen events running all the time. 

Kaizen as a work style

But the goal - what leads to continuous improvement - is to make this the norm across the organization. 

When employees are given a clear strategy to solve smaller issues, they start to notice other problems that could use the same treatment. They can highlight previously overlooked flaws, knowing that there’s a workflow to take care of them. 

That’s because “kaizen teaches people to question everything and think differently about problems.” Over time, you embed continuous improvement within the company culture. And every team member is empowered to promote change. 

For project managers and product designers, these ideas are not new. It’s the rest of the company that likely doesn’t think this way currently. 

And while every business likes to think that employees are encouraged to spot holes and propose improvements, this can often just amount to a suggestions box. Team members quickly stop offering ideas because, most of the time, there’s no process in place to implement them. 

With a good improvement strategy like kaizen, this won’t be the case.

Build a tailored strategy - then stick with it

Those were three innovation strategies to give your new product development more structure. They provide a step-by-step framework to ensure that your team gives each project the same attention and discipline. 

Of course, these are offered as examples. Your own strategy needs to be built with your company in mind. Take the best elements above, mix them to suit your team and its working style, and be sure to update it whenever necessary. 

The most important thing is to be consistent. If you want repeatable, predictable innovation, you need to approach each project this way. 

Otherwise, you’re simply relying on luck.