Aligning innovation to organizational strategy

February 5, 2009

All materials © NetCentrics 2008 unless otherwise noted

Welcome• Our goal for the next hour is to examine the

importance of aligning innovation to strategic goals and outcomes– Align to goals and strategies– Define what innovation means– Defining and embracing “strategic intent”

What We Want to Accomplish

Goals for this section

• Examine the linkage between innovation and strategy

• Identify how innovation supports or enables key strategies

• Identify the “strategic intent” of the organization

• Position innovation as an enabler for the university and its strategy

Key Points• Innovation is not a strategy – it is an enabler to a

strategy– Too many times innovation is viewed as a strategy

rather than an enabler to help you achieve a strategy

• Firms that are innovators align innovation to enable key strategies– Define your key strategies, then determine how

innovation can help you achieve those strategies

• Align innovation to strategic intent

Identifying Corporate Strategy

• What are the 3 most important strategies of your organization today ?

Strategy and Innovation

• Unless we’ve missed the mark, you didn’t say innovation is a strategy, yet it is often treated that way

• Innovation isn’t a strategy, it is an enabler to important corporate strategies

• Innovation fails most often when innovators chase “interesting” ideas that aren’t aligned and don’t support corporate strategy

Strategy > Innovation

• Your strategic goals define what your firm wants to accomplish

• Innovation helps shape the possibilities for incremental change or disruption of products, services or markets aligned to those strategies

Strategic Overview

• Usually growth or acquisition oriented• Usually 3 to 5 year projection• About markets or customer segments• Communicated internally and externally

Innovation and Corporate Strategy

• Most organizations embark on an innovation program with one or more of these goals in mind:

1.Organic growth – gaining customers, revenue or profits from new products and services

2.Disruption – upsetting the existing order in a market, creating something new

3.Differentiation – demonstrate a unique offering or business model

“Organic” growth

• In this definition we mean growth based on extending or expanding the existing model, not growing through acquisition

Growth Gap

• Firms that seek organic growth typically have a three to five year growth goal in terms of revenue.

• The difference between the revenue total today and the goal in three to five years is the growth gap.

Your “Growth Gap”

• What’s your goal (for example, student headcount) in three years time?

• What amount of that goal can you count on today doing what you are doing?

• The difference is the “growth gap”• Can innovative products or services help you

grow organically and fill that gap• Alternatively, can innovative thinking help you

identify acquisitions to fill that gap?

Disruption

• Often firms will disrupt another market when their “home” markets or products have grown stale or commoditized

• Apple disrupted music distribution with iTunes, the real value driver behind iPod

• What’s the cost of disrupting? Why will your firm be successful? Are there any risks associated with disrupting your market or an adjacent market?

Christensen’s Model

From Christensen’s Innovator’s Dilemma

Disruption

• What organizations are disrupting your offerings? How?

• What are you doing to counteract or prevent that disruption?

• What competitors or markets are you planning to disrupt?

Differentiation

• In any industry, there are three clearly defined positions– Innovator– Customer Service leader– Low cost provider

• Every other firm is a second or third option in one of these categories

• How does innovation help Pacific differentiate?

Three Clear Differentiation Strategies

Differentiation

• What place do you hold in your customer’s thinking? Innovator, Service leader, Low cost provider?

• What place do you want to hold, and how can innovation help you achieve that?

Other innovation goals

• We’ve looked at three strategic goals for innovation– Organic growth– Disruption– Differentiation

• What other goals do you have for innovation?

Pacific’s commitment to Innovation• From the website (http://web.pacific.edu/x12138.xml)

• The first Commitment of Pacific Rising states that "Pacific is committed to innovation and creativity across the University." This will be achieved through two specific Strategic Directions.

– Expand innovation in academic programs through an ongoing innovation process, support to pedagogy and research and new education and service delivery models.

– Enhance University administrative programs and services through innovation and creativity by targeting fundraising, increasing incentives and improving services and programs.

3 to 5 year corporate goals

• List a few 3 to 5 year corporate goals for your organization

• What are the gaps that innovation may be able to fill?

• What are the expectations of the executive team about innovation in regards to these longer term goals?

Strategic Intent

• Based on research from Hamel and Prahalad, strategic intent is defined as:– An ambitious and compelling dream which

provides emotional and intellectual energy for the company and defines the journey to the future

Align to strategic intent

• We define strategic intent as what you intend to do well or what you want to be known for– Apple – customer experience– Google – management of information

• Our experience is that organizations innovate best when they innovate around their strategic intent

• What is your strategic intent?

Consider Pacific

• What are the key 3-5 year strategic goals?• Is organic growth a driver?• Do we wish to disrupt the market or customer

segments?• How do we differentiate?• What is Pacific’s strategic intent?

Key Takeaways

• Innovation is often thought of as a strategy. Innovation is an enabler for corporate strategies

• Through innovation aligned to your strategies you can accelerate growth, differentiation and disruption

• Without a sense of direction and strategic intent, innovation is difficult to accomplish

Exercise

• Aligning strategic goals and Pacific innovation

Innovation Definitions

Definition of Innovation

• Innovation has as many definitions as there are people in the room

• We often use the word assuming other people have the same definition

• It’s critical that everyone has the same definition for good communication

Let’s try it

• Provide a definition of innovation and let’s discuss

If it’s this hard

• If we, innovation leaders, have a hard time defining innovation, how do we communicate what we expect to our innovation teams and participants

• As simple as it sounds, we need a common definition for innovation, so there’s consistency in approach

Innovation is people putting ideas into valuable action

Innovation is people putting ideas into valuable action

Innovation is people putting ideas into valuable action

Innovation is people putting ideas into valuable action

Innovation is people putting ideas into valuable action

OVO’s Definition

• Innovation is people putting ideas into valuable action– Innovation is not just “creativity”– Innovation is not just idea generation– Innovation requires putting ideas into action –

developing new products and services– Those new products and services need to drive

value for someone

Your Definition of Innovation

• When we say innovation, do we mean:– Incremental or disruptive or both?– Broadly participative or skunkworks?– Centralized or decentralized?– Open or closed?– Directed or suggestive or both?– Generating new products or services or business

models or channels or all of the above?

Common Language

• Who is responsible for creating the definition of innovation for your firm?

• How do you reinforce that common framework or definition?

What’s the definition for Pacific?

• From the website (http://web.pacific.edu/x19590.xml )

• There are three conditions that should be met for innovation at Pacific. Innovation is:– the introduction of a new idea or using something in a new way; – the idea is put into practice which creates change that has value; and – the change has a positive effect on student learning, service, or

organizational performance.

Key Takeaways

• Innovation is a valuable yet poorly defined attribute

• To achieve our goals of consistent, valuable innovation, we need the entire team working to the same definition

• That means we need one clear definition of innovation, communicated to everyone who will participate

Exercise

• Innovation definition exercise