Strategy is about making choices between a number of feasible options to have the best chance at “winning”, and innovation is just one of the means to achieve your strategic goals.
Without a good one, it’s actually quite difficult to achieve long-term success and orient your business for speed in order to secure competitive advantage.
What is Innovation Strategy Development?
We can break down the term innovation into two main elements; innovation and strategy. Innovation is the process of creating new ideas, production or work methods, and strategy is the planning of how to use them for the best competitive advantage.
Innovation Strategy Development is simply the intersection of those two areas; the creation of plans to turn new ideas into profitable products and services.
The biggest difference between strategy and innovation is quite simple – strategy is about looking towards the future, and innovation is about making it happen.
Innovation is not only a mindset, but also a process, and it’s a cornerstone of growth and competitive advantage.
Innovation Strategy Development at a glance
Innovation Strategy Development is made of six core elements and two key characteristics.
- Four elements
It must be a clear and motivating goal. It must be high-quality, actionable strategies that flow from the goal. It must have the necessary resources. It must be done quickly.
- Two key characteristics
The right mindset. To get it done quickly and correctly, you need to be dynamic, but to govern in the right way, it needs to be disciplined.
You need both to get in the habit of rapid learning and adaptation.
The 24-month Innovation Burst
Innovation Strategy Development is best done in 24-month bursts.
Ideas are developed, prototyped, and tested with customers in small succession, and the results of those tests are used in a new round of ideation.
This way, the company focuses on strategic changes to make its products and services desirable, disrupting the status quo, and building a sustainable competitive advantage that can be used in its profitmaking plans.
Those bursts must focus on a combination of cost and revenue.
As stated in a previous article, revenue is the true measure of value for a company. The profit generated by your product or service is the difference between the value you give to the end user and the cost of making it.
For this reason, all innovation efforts must be aimed at increasing customer value (price/usability/quality/utility) and speeding up getting it to market (price/cost/process/time).
To succeed in innovation, you need to have other plans ready to accommodate the market if you succeed.
The first in this series of plans is the product portfolio.
This plan should be developed to accommodate the changes in products the market might need if the first innovation gambit works.
Facilitating a smooth transition between products is necessary for a thriving company. This allows you to reinforce the value of the new benefits you offered the market or mitigate the disadvantages of the ones you just retired.
The new product or service may need to be built with light to no touch of insurance with the old one.
The second in this series of plans is the innovation portfolio.
It involves the oversight of new ideas and experiments that may feed the product portfolio, or a future new product or service.
Your company needs to evaluate which ideas are generic, and which are actionable. Research if a product or service must be completely new – meaning your company has no experience in the area, or if it can be built incrementally – meaning we have experience but in other industries, or the scale is different.
This practice will help us gain further benefits in terms of character, reputation, and survival rate.
Most of all, it will give us clarity on how to proceed with each idea, and will allow us to build the right kind of project team and guard against getting lost in analysis.
It would be normal to have new projects every month at this stage, and to keep an average of 3-5 ongoing projects at any point in time.
In any case, the more projects you have going at the same time, the more likely you are to have at least one that succeeds and sustains your growth.
This step is less of an immediate concern for startups with a high momentum and a clear path towards success, but it has substantial impact on the probability of future success of those same startups.
That said, startups have more time than established companies to experiment with them, and more agility to redirect resources to pursue a good idea and pivot decks when they are no longer viable.
Product and service development
The third in this series of plans is the product and service development plan.
In this plan, we use the first two elements described above to plan the creation of products and services. Those two elements must be included, but in addition, we will use the product and service portfolio, and test our assumptions with the market.
If this plan is well implemented, we will have 4-5 products and services that need to be built and tested with the market. If this plan is not well implemented, we will end up with a series of assumptions to test with the market, but no acknowledgement of how and when to act or what to do when one or two of those assumptions are wrong.
This plan will be simple if we are a startup, but otherwise, we will use more resources from our available budget.
The fourth in this series of plans is the action plan.
This plan is part of the innovation portfolio that is mentioned above. It’s the one that focuses on streamlining the way we are going to turn our ideas into new and profit-generating products and services.
It’s what ties all three other plans together. It’s what makes sure we do the following:
Act based on the results of our customers as we go along, and Adjust our process as we go along
Without an action plan, it’s easier for us to act randomly, and more difficult for us to make incremental adjustments that lead to sustainable competitive advantage.
By taking this step, we protect ourselves against the “waterfall methodology” problem, and ensure that all the resources we need are available and ready to be used.
We can use a “lean startup” methodology, and follow something like a “Three-mode” approach to product development.
This approach allows us to be responsive to the market, and quickly adapt the product or service based on evolving customer needs and feedback.
This approach has three steps; design, develop, and test.
In this step, we think about what the product or service should do, and how we will do it.
In this step, we build our idea based on the design we came up.
In this step, we ship the product, and we put it in the hands of our customers to use. We observe how they use it, and we adjust and improve the product until they are satisfied with the value they get.
In this approach, we use the same process we used in the action plan, but usually, we get some of the information we need during the action plan itself.
Price and value
This is a concept that must be clear throughout all stages of a business.
In the product development stage, we need to be thinking about how we generate value, and how we deliver that value to our customers.
In the product or service portfolio stage, one of the strategic questions we need to ask are “What types of products or services are we going to be offering, and how will we price them? What are we trying to achieve with that?”.
In the innovation portfolio stage, one of the strategic questions we need to ask are “What types of ideas are we going to be pursuing, and how will we price them? What are we trying to achieve with that?”.
In any stage or at any time, there is a clear understanding of how we deliver value, and what type of value we’re delivering, we will have a better sense of how to maximize our profits.
It is also a major factor that determines the structure of your company, and how flexible or rigid you need it to be.
The investment stage is about how we receive external funding, and how we use that funding to get more external funding.
There is a specific set of questions to ask for each of these types of funding.
For the purposes of innovation and for startups, start with equity.
There is a special set of equity investment questions that need to be answered. It’s important to know what you will get from the investment, and why you got the investment.
Another important aspect of equity investment is that it provides a time constraint. Equity investors want to see results in X amount of time, and a plan to get there.
For funding that is not equity, it’s necessary to take a couple of steps back and translate what you want to accomplish into a series of steps that describe the strategy for getting there.
The clearer the strategy of your company is, the easier it will be for you to acquire financing.
The exit phase is about how to make money and get your business off your hands.
There are three exit options
- Maintain the business internally and sell it,
- Sell the business to another external investor, or
- Sell the company to another company.
Whatever the choice may be, it must take into account what you see as your exit date. If you don’t have an exit strategy, chances are, you’ll be losing money.
And finally, there is a final opportunity here that you shouldn’t miss.
This opportunity is to transfer your successful business into a charity or foundation that supports the message you want to spread in the world.
Even though this is not a purchasable exit option, it’s still one that you should take into consideration.
A Value-Based Business is a Fintech Company
A value-based business, patterned after the principles of a value-based profit model, will make sure your company is sustainable. It will make sure you are getting the maximum value and use from all your investments and budgets, including the time you give to your business. All in all, it will make you feel great, because there’s nothing worse than not doing what you love.
Small businesses are the backbone of the world’s economy. We rely on them for everything we buy. The only way to keep them in business is to make sure they have profit in their pockets!
In the new world of fintech the foundations of business are changing. The potential to create value for one another is bigger than ever before. It’s our job to show others how simple it can be. Let’s make sure we give ourselves the tools we need to do so!