Considering innovation as a system and having a goal to embed it within one’s organization is neither an easy task nor an impossible one. If this is the primary objective, and if this aligns with the consensus of all stakeholders, it becomes crucial, before commencing any actions, to adopt a mindset focused on innovation, akin to how one concentrates on developing the organizational direction to enhance revenue and profit.
This implies that to succeed, the same level of effort and methodology must be directed towards developing the organizational strategy and executing the most effective and efficient innovation methods. This involves clarifying the purpose, establishing the right mission (the reason behind the initiative and the desired impact), and defining values (principles guiding all stakeholders). Internal environmental analysis (identifying organizational strengths and weaknesses related to capabilities, resources, assets, skills, and competencies) and external environmental analysis (recognizing external opportunities and threats) are also crucial. Subsequent steps include performing SWOT analysis (aligning external opportunities and threats with internal strengths and weaknesses), conducting scenario planning (suggesting strategic scenarios based on SWOT analysis alignment to set necessary objectives), and identifying value drivers (features distinguishing the value generated from the innovation strategy).
Based on the aforementioned, it’s imperative to create a vision (the long-term goal for the innovation system), establish SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) objectives, select appropriate and balanced key performance indicators (KPIs), develop sound and aligned initiatives (supporting the achievement of selected KPI targets and objectives), and consequently, disseminate the entire innovation strategy throughout the organization at all levels.
Consequently, all stakeholders must align themselves, identify their needs and expectations, and determine how to meet these through the innovation strategy. Subsequently, they should proceed with the execution process, understanding and acknowledging the clear alignment between the innovation strategy and the organizational strategy.
It is essential to view the innovation strategy as a core success domain for the organization, understanding that progress, improvement, and profit growth are interdependent with the innovation system. Moreover, it’s crucial to ensure the involvement of all stakeholders in this system, while embedding continuous improvement as the primary driver in maturing the system over time. Similar to excellence, innovation maturity is an ongoing journey that continually brings added value, which should be appreciated and built upon.
Data management in innovation strategy
The fourth industrial revolution has commenced. Linking it with innovation, transformation, future forecasting, and future change is pertinent, as they are all directly driven by and enabled by data management. Nowadays, the primary infrastructure for any company worldwide transitions from physical premises and branches to the cloud, where data are structured, organized, and interconnected, drawn from various sources such as customer interactions, product and service utilization, service and product development phases, defect management, product degradation, input and output resources.
This transition highlights that numerous data sources have been in place, yet not all have been utilized, analyzed, and transformed into information and knowledge. The shift towards big data and the advancements in artificial intelligence and conditional monitoring have changed the landscape. Decisions are now based on data, not just analyzed to reflect the current state but also organized and correlated to predict the future, facilitating decisions that secure not only the present or short-term future but also the long-term future.
This evolution underscores the importance of starting with the development of the right architecture to link various data sources, leveraging their mutual support and integration for greater benefit. It involves embedding in this architecture the correlation of data from different sources to build new components in the system architecture, adding value to the overall system. Understanding this aspect emphasizes the need to benefit from all data sources and install more sensors in development processes, products, streets, houses, cars, and everywhere, moving towards a products-as-a-service paradigm and eventually achieving the end goal of a planet-as-a-service, where data from everywhere are fed, analyzed, and used to identify new information and knowledge for the benefit of all.
Case analysis
The case study “Apple’s Future: Apple Watch, Apple TV, and/or Apple Car?” narrates Apple’s journey focusing on three products: smartwatches, smart TVs, and smart cars. It highlights how Apple has targeted the market and addressed customer needs to increase global market share and profit while enhancing the brand image. While this approach appears commendable, it aligns with the traditional viewpoint that continuous profit growth sustains a business.
However, from an alternative perspective, Apple has consistently aimed to shift from the red-ocean to the blue-ocean strategy, moving away from competition. The increasing number of competitors, open-source software, and global innovations necessitates larger leaps. Apple’s success also stems from co-creating value with its customers, understanding their needs, and embracing innovation and change.
Another facet is that Apple’s current endeavors represent a short-term strategy aimed at long-term value generation and delivery. Data serves as the primary driver, with all products and services yielding valuable data. This contradicts the notion that customers don’t know what they want; rather, it underscores the importance of understanding customer pain points and co-creating value with them.
Apple’s products evolve based on collected data and usage behaviors, generating new value with each iteration. The incorporation of health data into products like the smartwatch and analyzing consumer behaviors allows Apple to add value beyond traditional usage scenarios. Ultimately, Apple’s strategy mirrors a child playing a PlayStation game, controlling and directing the world.
While this may seem daunting and scary, proper use of data-driven strategies can benefit everyone, provided they are employed ethically and responsibly and not end up as Mikhail Kalashnikov puts it: “The fact that people die because of an AK-47 is not because of the designer, but because of politics.”
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About the Author
Malek Ghazo is a seasoned Senior Management Consultant with over 14 years of experience in the realm of organizational excellence (EFQM, 4G, Malcolm Baldrige), performance management, strategy planning/execution, and sustainability/CSR management. Throughout his career, he has cultivated expertise in developing benchmarking studies on an international scale. His clientele primarily consists of both public and private sector entities, to whom he provides invaluable services in organizational excellence, strategy planning and agile execution, KPIs and performance management models development and deployment, as well as EFQM model adoption and implementation. Geographically, Mr. Ghazo has dedicated his efforts to Europe (with a focus on the UK) and the Middle East, particularly in KSA, UAE, Qatar, and Jordan. Currently, he is engaged in pursuing his PhD at the University of Pécs in Hungary, with a focus on exploring the correlation between circular economy and organizational excellence and sustainability, aiming towards global sustainability.
Attending to the need to differentiate between the various types of innovation paves the way to measure and manage them better toward achieving higher returns. Disruptive innovation, as one of a kind, often starts in low-end or emerging markets. In terms of low-end footholds, low-end customers are offered a service or a product that would better meet their needs than what they currently have. When it comes to new market footholds, a market is offered a service or a product that does not already exist to gain customers and a market share.
When first launched in San Francisco, Uber did not fall under the category of disruptive innovation because it offered a similar service to lower-end customers, who were already used to making bookings for rides.
However, I believe that Uber had a disruptive innovation because when it offered its services, it did not just provide taxi services where people could book a ride. It also allowed regular citizens to use its cars once they met the company’s standards. At the same time, Uber provided customers with an application to track the history of their bookings and current rides and let them know in advance how much it would cost and how much it would cost if they chose a different option.
We need to know exactly what Uber started with while providing its services to determine whether these were the ones that low-end customers wanted and which of them were not available at that time. Also, we may argue that the process was part of sustaining innovation because that type of service was handled later.
The shift in markets between low-end and unserved customers and mainstream markets is important to consider when addressing innovation since it links to your risk tolerance and ability to address challenges in more agile or rigid ways. Mainstream markets require agility, high-risk tolerance, adaptability, resilience, and confidence that what we offer meets the needed added value.
The article then links disruptive innovation with process innovation that keeps developing and also with collecting and understanding customer needs to provide them with what suits them the best. This takes us back to the service-dominant logic where all this has originated, since co-creating value with customers and considering them as the main part of what you can or will offer in the market will be the key to success at any time.
I believe that we do not know what our customers need. We may guess and think we are smart because now we track all they do and, accordingly, using AI algorithms, can predict and understand what they need. However, this does not mean we should neglect their real presence in the value chain. That’s why I think innovation is being targeted as a separate domain where we are giving it a separate and unique focus. Nevertheless, innovation should be referred to along with all the other shifts we have had in the world, where it can be a trigger, catalyst, or driver for a more sustaining, successful, and powerful shift (Clayton M. Christensen, Michael Raynor, and Rory McDonald, 2015). I have reached the conclusion that the full theory of disruptive innovation should only be applied when certain conditions are met.
In my opinion, discussing certain conditions for applying the complete theory of disruptive innovation leads us to the ecosystem in which we all live. This is where many layers surround us and many stakeholders are interested in and affected by what we do. Similarly, such an ecosystem is heavily influenced by megatrends (as described by the EFQM ecosystem) that impact everything around us, such as the SDGs, sharing economy, and disruptive technologies, to name but a few. The megatrends are triggered by global shifts, nature, and climate change, shifts in the industrial revolution, and shifts caused by the outbreak of coronavirus, among others. Theories have been established per certain circumstances and with certain megatrends affecting a smaller world (smaller in a way where we have less population, less technology, fewer changes, and fewer needs). However, such theories, including disruptive technology, should be re-examined in order to adapt them to the new environment, where they might serve as the foundation or baseline for new changes, shifts, and transformations (Andrew A. King and Balhir Baatartogtokh, 2015).
Car sharing, smart cars, electric cars, and autonomous cars are all emerging trends in the automotive industry. These businesses quickly respond to customer demands and take advantage of opportunities that will increase in value over time while also carrying a high-risk tolerance. Automakers currently pursue these strategies to learn from Nokia, which has failed to recognize how quickly the world is changing and how important it is for us to be flexible, responsive, and, in many cases, ahead of others to lead the market.
Ford, in my opinion, is still trying to keep its core business of manufacturing cars while also understanding the market in a way that allows the company to be seen as either a leader or a follower, depending on how it responds to changes and shifts. Leaders are those who use benchmarking to set themselves apart from the pack.
So, for each of the above-listed shifts or transformations in the automotive industry and car usage behaviors, depending on different generations and their needs, it seems that businesses try to benchmark what they need to adapt to with other industries by understanding what the latter has done to adjust to changes and shifts, what innovations they have created, how customers have perceived these innovations, and how they have changed their behavior or accepted new lifestyles.
Accordingly, Ford has decided to continue with its main business of making and selling cars while simultaneously introducing new and additional services to adapt to, follow, and steer the changes in the automotive industry. That leads to a trend towards the usage of automobiles as a service, similar to SAAS (software as a service): Customers utilize cars as a service rather than a product, depending on their needs. This is how Ford has used disruptive innovation, which was mainly based on learning, analyzing, and continuous process of generating value and innovations (Ernest Gundling, 2018).
Innovation entails coming up with something completely new or creating a huge concept. Nothing will change if you just fully accept the realities at work or in your personal life which is why innovation frequently begins with something that concerns and is important to you. This stems from the desire to alter certain things to be better because it is necessary.
Some companies out there are struggling without proper knowledge of innovation. You have a better chance of reacting to changes and discovering new possibilities if you innovate. It may also aid in the development of competitive advantage by allowing you to create better goods and services for your clients.
There are four types of innovation that can take place within a company:
Organizational innovation – this transforms a company’s business processes, as well as the way its workplace is structured as well as its connections with external stakeholders.
Process innovation – the implementation of a new or improved production or delivery is the approach with this type of innovation, including changes in operational processes, techniques, and equipment or software.
Product innovation – referring to the introduction of new or enhanced products or services, this kind of innovation may relate to enhancing technical standards, materials, or software, or even boosting user experience.
Marketing innovation – this refers to the development of a new marketing strategy such as the packaging or design of a product, as well as other pricing or promotional decisions.
Promoting workplace innovation
Rather than aiming to rebuild the entire company at once, consider developing ideas that can be tested in your own community first. As you prepare to take your idea to a much wider stage, this might be an excellent way to fine-tune your efforts and assess your performance. Setting up suggestion boxes around the office or hosting frequent seminars or company away days to explore ideas are just a few examples. This will also create a friendly environment for employees to express themselves without fear of being criticized or ridiculed.
Leaders should always have the courage to take risks and experiment with new ideas. They should also encourage their employees as well and not penalize them whenever they try new ideas and fail. Emphasizing the shared responsibility for innovation to employees at all levels of the organization will foster a feeling of involvement in the movement of the company. The fewer levels of administration or decision-making are in your organization, the more employees will believe their ideas are valued.
Approaching innovation
Business owners should examine the market and customers’ needs and not immediately create a big development to be released in a short period of time. Studying the market and learning how innovation may bring value to consumers is important, especially if you want to propel your firm ahead. By adjusting your product or service to the way your market is evolving, you may explore other possibilities for innovation.
For example, the current market is becoming health-conscious, even more so due to the COVID-19 pandemic. A food industrialist can try to launch new flavors, adjust your ingredients to be more health-conscious, and promote them in a better way to reach customers. For those in the education field, they could organize class conferencing apps like Zoom or Microsoft Teams to ensure the safety of students while continuing their education.
Making plans for innovation
Generally, innovation should be part of your company’s strategic vision of how you want your firm to evolve. Once you’ve spent time researching trends for your business sector, you can then focus your inventive efforts on the most significant areas. Not only will innovation help your firm survive, but it will also help it expand and generate more revenues.
There are a variety of practical methods for determining whether or not your ideas have profit potential. Studying the market or industry trends and being aware of the environment your organization operates will assist you in planning. You can find competitors via a number of ways such as local corporate lists, advertising, and exhibitions. You can also find those with similar products through online searches, information from customers, or pamphlets.
You may also support your innovation-driven development such as gaining financial investors or even through loans. Any route to external investment, however, will need a high-quality business plan that outlines your company and provides specific projections for its future. Depending on their borrowing needs, businesses frequently resort to their banks for a line of credit or loans.
Boosting innovation
Communication is very important to both your customers and suppliers. Building a good relationship with clients will make them realize that the company is providing effective products and services for them to make the business grow better. By communicating with them, you will be able to listen to their opinions and observe their behavior around your current products and services. From there, you can produce new ideas and promote improvements in your current products and services.
You can also expand your business by giving opportunities for suppliers and business partners to be involved in the company’s plans for innovation. This allows them to provide unique ideas as well. Merging your abilities with those of your suppliers or other business partners might help you generate and develop new ideas. Opportunities for business networking might also lead to the formation of potential collaborations.
Conclusion
Although innovation can occur in any department of a company, it has the potential to affect the whole corporation. To achieve innovation through creativity, you have to find the right amount of challenges and don’t be afraid to take risks; failure is not constant and every problem can have a solution. It’s also important to experiment with an idea first before implementing it by involving your employees in conversations so they can also provide better ideas to improve the company.
Digitalization is nothing new in the business industry as the world has shifted toward digitalization for the past few decades. However, the Covid-19 pandemic has catapulted the digital model of business to another level.
In a 2020 study, Salesforce showed that 60% of customer interaction took place online compared to 42% in the previous year. Meanwhile, up to 88% of customers also expect digital innovation from companies during and after the pandemic. This shows how customers start to put emphasis on company value by what they are seeing online. The sudden surge of the online presence of the majority forced businesses to rethink their existing strategy, especially when it was directly related to their customers.
The changes brought by digitalization
The increasing use of digital-based platforms has affected several aspects of businesses. Demand to be available digitally has changed the marketing industry even before the pandemic hit. We can easily spot how large to small companies transitioned their marketing strategy into a digital approach. Even though it sounds like most companies are already familiar with digital marketing, the fast-changing nature of it requires constant learning on what is relevant at the moment.
The second change mostly catalyzed by the pandemic is the change in how companies do their business. Many employees have been forced to work remotely and moved most of their workflow online. Occasionally, companies have been required to modify their products or services to fit the current demand or trend.
The adaptation of businesses on their strategic planning and performance measurement to fit the ongoing and upcoming challenges is a conversation that is often missed. The fast-changing digital world has caused a lot of developments in companies towards important matters that can sustain their business by upgrading and preparing their resources.
Innovation is the key for digital sales
Similar to other sectors, sales activities also demand to have a digital model more than ever. Data shows that digital sales, in general, can boost revenue up to 28%. As much as digital sales sound promising, it also demands a constant upgrade and innovation.
Innovation is one of the most crucial parts to achieving maximum digital sales growth. Just like traditional sales, the ability to engage with the customer is still a major factor in the success of sales. However, the digital model demands companies to be more attentive to the changes in customer behavior. Companies and even salespersons are required to see the need and trends in the market.
The innovation in sales technology is also predicted to have a big impact on how long-term revenue is generated. The use of more efficient CRM and even the use of AI can be a huge booster in sales growth. For example, now the customers have become more digitally savvy, this also means that they are more aware of cyber security. Things such as transparency in sales activities and data collection are just some of the things they look out for. In turn, the growth in technology would also mean an increase in demand for people who are knowledgeable in the digital space and can operate the business.
Needless to say, innovation has become a necessity for organizations. Innovation influences a firm’s performance and helps them to gain a competitive advantage and become market leaders. Companies claim to exert tremendous efforts in embracing innovation, yet many still do not have a clear innovation strategy and are unable to clearly align it with their overall business strategy. Some would opt to just embed it within their values or cultures, or as a business attribute, without having a clear plan and system for its effective implementation.
PwC’s Innovation Benchmark (2017) showed that 54% of the surveyed companies (>1200 respondents) reported that they are struggling in bridging the gap between business strategy and innovation strategy. Companies would make enormous investments in innovation, however, they do not see the returns from these investments. This is mainly because there is no alignment between their innovation strategies and their business strategies.
There is no such thing as the “right innovation strategy”. Companies need to determine and create their own innovation strategy to fit their business needs such as business strategy, culture, and organizational structure. But why would companies go through all this hustle? Why is there a need for companies to create an innovation culture when they may already have a strong business strategy in place?
The answer is simple: it helps companies to have successful innovation management. Innovation strategy aids organizations to know whether there is a need to innovate, to what extent, and in what areas. Accordingly, a company’s innovation strategy should be communicated across their organization; all the way from the CEO down to the most junior person in the workplace.
Katz, Du Preez, & Schutte (2010) highlighted that innovation strategy can be described in two roles: the first one is an improvement role or, in this case, the “improvement innovation strategy”. The second role is a future business role or the “future business innovation strategy”. For the improvement role, innovation strategy does the following:
Aligns a firm’s objectives with innovation objectives;
Acts as a guide for the type, level, and influence of innovation needed to attain a firm’s objectives;
Allocates a firm’s resources between daily operations and innovation initiatives; and
Creates a road plan for a firm to effectively utilize resources for innovation.
In relation to the future business role, the innovation strategy aids firms to determine when and how to selectively abort the past (such as old methods and actions). This will also enable firms to direct their attention towards future business. In other words, the future business strategy would oblige a company to alter its pattern, position, or perspective strategy, which, in turn, pushes the firm to move from the current business and develop future business.
Consequently, there is no doubt that firms today need to innovate permanently within their organizations. However, they must do so in a strategic way. Here are some ideas on how you can do that within your firm:
Revisit your business strategy and make sure it is updated to your current business context.
Analyze your organization’s assets, competition, market opportunities, and the firm’s culture.
Consider the following components when defining your innovation strategy: type, level, impact, risks, collaboration, place, maturity, resources, and drivers.
Determine the right timing for market entrance in case of product or service innovation.
To sum up, there is no such thing as the perfect innovation strategy. It is a strategic management decision that should be carefully taken by the most senior leaders in the workplace. It has to be shared with each and every individual so that it is reflected right from the beginning of the innovation process. Considering the nine components mentioned above is essential to be able to develop your innovation strategy.
The first four components (type, level, impact, and risk) help the company to have the right blend of innovation needed to bolster the firm’s objectives and goals. As for collaboration (impacts the level of financial and human resources), place (assists the balance between the types of resources) and resources (divides the resources between the daily operations, innovation initiatives, and innovation capability improvement), they provide a guideline of the allocation of resources for innovation. The last two components are drivers and maturity which make the company ready to innovate their future business.
