Strategy of Innovation vs. Innovation Strategy

Whether the companies are private or public, shareholders are demanding a vision for the future. How will these old, inflexible companies survive in industries facing disruption from scrappy, nimble, three person startups with zero budget that are miraculously gaining market share?

Blockbuster CEO Jim Keyes, speaking to the Motley Fool in 2008 said, “Neither RedBox nor Netflix are even on the radar screen in terms of competition.” Fortunately, most legacy companies have learned from Blockbuster and Kodak that to stay competitive, companies need to innovate or the revenue will plummet.

So what’s a CEO to do? “Our strategy is to innovate.”

In response to disruption, every day another company announces the launch of an accelerator or plans for “digital transformation” (whatever that is).

But what’s a strategy to innovate without an innovation strategy?

Holding On

Consumer behavior and market forces are changing fast and the world seems to be covered with a deluge of new technology and new competition on every side. Holding on for dear life and maintaining the status quo is not a strategy; it’s a recipe for drowning in a wave of disruption.A guy drowning in a wave of disruption

Everyone knows this, and it’s hard to find someone who thinks that companies can ignore disruption. But “go innovate” often translates to “go do stuff” without any guarantee that the “stuff” is even relevant in the industry.

A better strategy? Just about anything.

Strategy vs. Process

When the strategy is “innovate,” the implementation of that strategy looks a lot like process.

All the buzzwords come out to play. We start our growth boards. The innovation steering committee meets once a quarter. We do our portfolio mapping. We set up a stage gate process for our brand new corporate accelerator.

Portfolio mapping divided by 4 stage gates process partition

It’s not that these things or processes in general are inherently bad.

There are some great accelerators out there, and buzzwords are only problematic when they are used without purpose or understanding. These may be smart, necessary ideas, but they are not a strategy. They are tactics at best, and process at worst.

“Process feels like strategy. But in reality the two things are quite different.”

Tendayi Viki

We mistake process for strategy because implementing process feels like we’re in control. It’s satisfying. It’s safe. It’s what corporations know how to do.

That’s a strategy of innovation. To implement a process and “go innovate” without having a clear understanding of what we are trying to accomplish and how we’ll know when we succeed.

We cannot let a nice, clean process that looks good on paper be our innovation strategy. Click To Tweet

Strategy, Process, and Tactics, oh my!

We need to start by understanding the differences between strategy, process and tactics. They’re common terms and they feel familiar, but that familiarity is what conceals the confusion.

Let’s start with the element that precedes all of them:

Vision

Vision is our desire to create the future.

It’s us, thinking about the world as it is now, and the world we want to live in. What do we want it to look like? What are the changes we should make? How will we make people happy? Where should we go?

A vision goes beyond a pithy one-liner for the company website (although those are great, too).

“GOOGLE: To organize the world’s information and make it universally accessible and useful.”

Google’s vision statement is elegant, but hidden in that statement is an understanding that the amount of data in the world is constantly doubling. We’re smothered in notifications and every fact in the world is at our fingertips.

But human beings are incapable of sorting through all of that raw data and turning it into truly useful information that can answer life’s critical questions. (Like figuring out if Black Panther would beat Batman in a fight. #wakandaforever)

From Google’s understanding of the exponential data production trend and what the future looks like, the company has a vision statement of what service it can provide in that future. The complete vision is not simply what Google would like to do, but rather, a description of the future and how the company will be a part of shaping that world.

If innovation is a journey, let’s imagine that we’re in Florida and our vision of the future is moving to New York.

A map of a moving from Florida to New York

(Note: It’s traditional to insert a military example when discussing terms like strategy and tactics, but I’ll skip it in favor of something more universal.)

Strategy

Strategy is a weird word. It can mean “a careful plan or method” according to Merriam Webster or “a high level plan to achieve one or more goals under conditions of uncertainty“ according to Wikipedia.

Both sources use the word “plan.” So we can start there and say that a strategy is our general plan for creating our vision of the future. It’s our understanding of the world as it is now, what the future should look like, and an idea of how we can get to that future.

Personally, I don’t like the word “plan” as it implies a checklist that should be followed. When things don’t go according to plan, it doesn’t necessarily mean we’re abandoning the strategy. It means the situation doesn’t match our expectations, and we have to adapt our actions to fit reality.

Sometimes that means ditching the strategy entirely, but more often than not, we keep the same strategy and just implement that strategy differently.

Google’s strategy for organizing the world’s information may be to invest heavily in machine learning and artificial intelligence so as to better parse data into small nuggets of information that are easily digestible to humans.

That strategy is not a plan or a checklist. Google might invest in several internal machine learning or artificial intelligence products. They may invest in external companies. They may invest large sums of money or very little.

Strategy is not a Plan

A strategy is a heuristic for making decisions under uncertainty.

A scale showing the balance of money and time

It’s a mental shortcut for effective problem solving. These mental shortcuts help us to make decisions quickly. They make up  the core of the high-level plans we make.

In our journey, if we’re heading to New York, our strategy could be to go north.

It is not a complete plan or checklist mapping out which roads to take or which airlines are best. But when a bus pulls up and we have the option to get on, we can ask, “Is this bus going north?” as a mental shortcut to decide if we should get on or not.

Spoiler alert, “go north” is a mediocre strategy, but we’ll use it in our example. A slightly better one might be “go north unless cheaper, faster transportation is available by going another direction.”

If strategy is a heuristic for making decisions under uncertainty, then tactics are making those decisions. Click To Tweet

Tactics

Tactics are the acts of making decisions in the face of immediate circumstances that cannot be foreseen. Click To Tweet

Our vision may feel clear, but how we get there isn’t clear. There are always unknowns. We may detect trends, but how they manifest and the pace of change might vary significantly.

In the face of unknowns, we need to constantly make decisions. We must re-evaluate and assess our position.

If the strategy is to go north, one tactic might be to take a plane. Another might be to take a taxi. Another, to ride a bike. We have to decide on the tactic based on the current facts and available resources.

A person who has to make a decision whether he has to go by plane, taxi, or a bike

We might want to rent a car, but perhaps we only have enough cash on hand to take a bus. We might enjoy taking a bike, but our legs can’t peddle the 2,500 miles from Miami to New York.

If Google decides to purchase Iris.ai, that would be a tactical decision based on information that only become available after Google had already set it’s innovation strategy. After all, Iris.ai didn’t exist when Google first created its vision or developed its strategy of investing heavily into machine learning and artificial intelligence. It would be impossible for Google to predict which companies will be founded in the next five years, or even five months, let alone know which ones will be successful enough to warrant M&A dollars.

Tactics depends on facts that cannot be predicted.

Process

Process is the automation of tactical decisions. Click To Tweet

It’s a set of rules that dictate what we should do in any given circumstance. It’s a checklist. It’s a plan that cannot be modified or changed because…well…those are the rules and giant corporations are great at following the rules!

A set of rules that have to go in order

Heading to New York, the applicable rule might be to take the first mode of transportation that is heading north if we can afford it.

This process has been decided by our C-level executives. It has been carefully vetted by our Governance Risk and Compliance department. It has also been implemented by a company-wide training program whose graduation ceremony ends in stapling a laminated copy of the rules on our forearm.

Let’s get back to our example. We’re in Miami and we have $100. A taxi pulls up honking at us. It is headed north.

This process dictates we hop in. We take the taxi about 70 miles north and then we’re stuck in West Palm Beach. Yay process.

Even with a mediocre strategy like “go north,” a decent entrepreneur (or intrapreneur) should ignore process when faced with a tactical decision that the strategy could not or did not foresee.

In this case, it makes far more sense to make a decision based on the facts on the ground and to check for discount plane tickets, rather than to just get in a cab to demonstrate northbound progress to the C-level. At the very least, let’s check if a bus might get us further in the long run.

We need to avoid a standardized process making an automatic decision when faced with situations where a tactical decision based on facts is necessary.

Process is not the Enemy

That’s not to say all process is bad.

A square with a knife and a sword with hate expression

If we had to make a tactical decision about where to put each foot when walking down the street, we’d probably never get anywhere.

I routinely get lost in thought on my walk to work and can’t remember a few blocks, but I still arrive safe and sound. Sometimes, having autopilot is useful.

So while process is the automation of tactical decisions, in cases of extreme uncertainty where our strategic plan offers unclear or contradictory guidance, most tactical decisions should not be automated.

If the decision is not risky and uncertain, then it may be an important decision, but it has little to nothing to do with innovation. Thai food or pizza is a critical dinner decision for me, but it doesn’t qualify as innovation.

Innovation exists in a world of extreme uncertainty.

Perhaps Google decides that purchasing Iris.ai fits with its strategy, but the M&A department has a rigorous system of rules in place to dictate an acceptable valuation. If we imagine the rule is $500,000 USD per engineer at the company, and say Iris.ai has 10 engineers, that’s a maximum offer of $5,000,000 USD.

If Iris.ai asks for $20,000,000 USD, then the deal may be immediately rejected based on the basic parameters set. Process just killed a strategic acquisition. Yay process.

Remember, everyone thought Facebook was crazy to buy Instagram for $1B USD based on standard valuation.

The Full Picture

We have a vision of where we are and where we want to be. To get there, we have strategy, which will help us make choices and guide our actions.

We will surely face obstacles along the way. Some will be predictable and expected. Others will be a complete surprise.

For things we predict, we will have a process to follow. For those that are unforeseen, we will override the process and make tactical decisions.

The full picture consisting of process, strategy, tactics, and vision

Lessons Learned

A true innovation strategy must go beyond dictating tactics and setting up processes.

“Go Innovate” is not a strategy. We need a strategy for how and what we innovate.

Our strategy should be a guide for our innovation efforts. It must set clear boundaries as to which behaviors and tactics are, and are not, acceptable for the innovation strategy.

  • Don’t mistake process for strategy.
  • Tactics are decisions based on new facts.
  • A strategy is not a plan, but a mental shortcut for how to implement the vision.
  • Everything starts with a vision of how the world should be and our place in it.

What should I write next? Tweet and let me know:

What are the critical ingredients of an innovation strategy? Click To Tweet

Or

How can we make strategy and process work together? Click To Tweet

Discussion (0 comments)

  1. Pingback: Estrategia de innovación frente a innovación en estrategia - cocreanet

Got something to say?

This site uses Akismet to reduce spam. Learn how your comment data is processed.