The Role of Innovation in Strategy

By David Silverstein and Dr. Phil Samuel

What is strategy? Definitions abound—but one thing they all have in common is a focus on differentiation and competitive advantage in the longer term through problem solving.

In this age of best practices, big data and increasing automation, the risk of companies in any given industry converging on all-too similar business models is increasing. Best practice information tends to be ubiquitously shared through conferences and the Internet. Access to data and the power to analyze it are increasingly being commoditized. And automation tends to ensure everyone does things the same way. The result—knowledge and intellectual property are no longer an advantage but have become commodities in most industries. The companies who are able to create new knowledge faster than their competitors will have an advantage in the new era.

And that’s why a systematic approach to innovation—an approach that delivers differentiation in products, services, even business models—is more important than ever before. Innovation is the key competency—the most important skill set—of strategically driven enterprises.

Innovation is the most important skill set of strategically driven enterprises.

Innovation in Strategy Creation

Any company can choose a direction, but only truly innovative companies can choose a direction that is different than that of their competitors. And only the most innovative of all companies can respond to the ever accelerating changes in the environment, such as customer needs, competition, regulations and trends. The tools of innovation include the means to identify and understand both business and societal needs and to develop novel approaches to meet those needs. That’s the essence of strategy. The rest of strategy comprises the choices we make to deliver our novel approaches to meet our customers’ needs in a profitable and sustainable way.

Innovation in Strategy Execution

Your strategy is the long-term blueprint for your business. How do you build a company capable of adapting faster to accelerating changes around you? What needs do you satisfy and for whom? How do you do it in a profitable, sustainable way? How do you finance it? How do you defend your position? How do you create an environment where the creativity and talents of every individual is fostered? Along the way, though, there are always problems to be solved. Some problems are straight forward. Perhaps the solution is evident and easy to implement. Perhaps the solution can be purchased. But in truly differentiated businesses, some of the problems we encounter are so unique that no obvious solutions exist.

Problems that are common among competitors present an opportunity for you to differentiate.

That’s when we need to embrace innovative problem solving capability. In more competitive businesses, where companies tend to look more alike than not, problems that are common among competitors present an opportunity for you to differentiate by developing unique solutions that are unknown or unavailable to competitors.

Of course, product and service innovation is also a key element of strategy execution. Many companies are on the hook for delivering new products or services on a regular basis—always being expected by their customers to “raise the bar.” In these companies, a systematic and predictable capability to innovate is a must. Whether through R&D or product\service design and development, for many companies innovation is an everyday part of managing the business and accordingly is a fundamental component of strategy execution.

David Silverstein is the CEO and founder of the Lean Methods Group. He is a frequent public speaker and author. Phil Samuel, Ph.D., is the Lean Methods Group’s chief innovation officer. He is a frequent speaker and author on the topics of innovation, strategy and performance improvement and hosts the Chief Innovator Online blog.