Innovation and Strategy: The Correlation

An overview of innovation and strategy

Suppose you ever read about innovation or strategy in a textbook. In that case, you’ll find a myriad of wonderfully inventive frameworks, tactics, and theories that wax lyrical about how a business can craft and nurture the right strategic plan to take on the world.

These are all carefully researched and draw on decades of business lore in an attempt to codify the collective wisdom that we’ve accumulated while building companies. There are lots of great principles that you can learn from these resources.

But the truth of the matter is that the only thing that moves your business forward is the execution. 

How do you put these ideas into practice? 

How do you implement the tactics you seek to use? 

How do you ensure that your strategy is being prioritized in the way that it should be?

There isn’t as much focus on this part of the equation because it’s more challenging to get right. On paper, a strategy can look foolproof. You can spend all your time panel-beating the financial model and the PowerPoint presentation until it’s an absolute work of art.

But when it gets out into the real world, things get messy. Suddenly, you’re dealing with changing market conditions, unpredictable systems, complex teams of people, and more.

And you’ll find out very quickly that you need to have a solid foundation of processes and procedures in place to help you implement the lofty plans you had first imagined.

This requires a paradigm shift in thinking. Instead of waiting for the next Steve Jobs to deliver some divine wisdom, you can create the conditions and environment needed to generate innovation within your organization.

The Big Four

Innovation doesn’t just come from the ether. It’s something that only emerges when you can get things right simultaneously. We like to call them the ‘Big Four’. 

1. The Idea.
2. The Team.
3. The Execution.
4. The Timing.

These four pillars are at the center of any successful innovation, and it’s the companies that combine them most successfully that end up standing out in their respective fields.

You need all four to work effectively if you are to succeed. So let’s dig into each one in turn.

The Idea

Most of the gravitas around strategy and innovation is focused on the idea. When you read about the great companies of our era, you’ll hear of leaders who seemed to receive these fully formed ideas, seemingly from the ether, that would go on to change the very nature of their industry.

This just isn’t true. At least, not entirely true.

Good idea generation is a function of the sort of culture you create within your organization and your ability to validate those ideas systematically. Let’s look at each in turn. 

Your company culture matters because new ideas are fragile and can easily be swept away if you aren’t set up in a way that can nurture them. You want to create an environment that celebrates fresh thinking and creates space for new ideas to be explored.

If you hold on too tightly to the way things are currently done, you blind yourself to potential innovation and disempower your team who won’t feel like they can bring alternate views.

When this gets to a certain point, your people will stop bringing new ideas because they are never taken seriously, and your chance of innovation disappears.

You should be building a company that maximizes the number of new ideas that are considered because that’s what true innovation takes. For every 100 bad ideas that you suffer through, you’ll find that one idea that can completely transform your organization.

And that’s well worth the effort and resources that are poured into empowering your people to challenge the status quo.

The next step is as important though because not every idea is a good one. You need to have a systematic process to validate each idea and decide how to move it forward (if at all).

This is difficult because there is no one-size-fits-all. The probability of any one idea succeeding is predicated on your company’s unique ability to execute on it. As a result, your unique strengths and weaknesses as a company must play a key role in how you think about your future strategic plans.

It’s no good building a long-term plan around skills and functionality that you don’t have in the organization. Because when it comes to it, you’re not going to be able to achieve what you imagined you could.

This internal validation helps you to avoid wasting time and resources on something that isn’t going to work.

You want to play to your strengths wherever possible. Spend some time identifying those things that your company is really good at. 

Where is your competitive advantage? 

What sets your company apart from the rest? 

Where do you have an unfair advantage?

When you use your strengths as a fulcrum, you give that idea a much better chance of seeing the light of day.

In the same vein, you also need to be able to recognize where your company is weak. You can’t do it all and so the more effective you are in identifying the weak spots, the better you’ll be able to compensate for them.

Maybe it means hiring new people who have some complementary skills that can assist you in this area? Maybe it means outsourcing those particular tasks to professional partners who have strengths that you don’t?

All of this internal risk management is a crucial component of validating your idea. Your company’s ability to anticipate any potential problems and have the right contingencies in place will determine just how successfully you can maneuver around them.

If you pretend that these risks don’t exist, you’ll find yourself reactive when things go wrong, and it’s that much harder to right the ship.

The way you systematize this is to have people, processes, and systems in place that look for holes in your plan proactively—these need to be the realists that can poke holes in your plans.

You want to have a range of different views and perspectives at the table so that you can cover all your bases. But you specifically want people who are going to challenge the idea and put it through its paces.

It’s easy in those situations to be the optimist, especially when it’s your idea, but its crucially important that you have a devil’s advocate type who can actively try to poke holes in the idea.

This counterbalance helps to push past some of the emotional attachment to an idea and bring to light any potential risks that could play a role. Some companies call this the ‘red team’ and it’s not something you should ignore. 

With these practical points in play, you’ll find that you’re much more robust against execution risks and your strategy will be more resilient in the real world.

This sort of discipline is what good business is all about, even though it’s never going to grace the cover of entrepreneurship or management magazines.

The Team

We’ve alluded to this above, but the people who are going to execute on the idea are absolutely everything. Even with a great plan and perfect systems, you rely completely on your people to get the job done.

And so, crafting the right team should be one of the most important things you consider as you seek to innovate.

Putting together the right team can mean a lot of different things. First, of course, you want to hire highly competent people who have experience and expertise in your industry.

You want people that work hard but smart. You want people that understand the nuances of the customer’s needs and can relate to them. All of this is obvious.

However, the one characteristic that makes the most difference when it comes to true innovation is decisiveness. Speed of decision-making is severely underrated. The canonical example of this is how Facebook scaled their operations in the early days.

Mark Zuckerberg’s early company mantra was to ‘Move Fast and Break Things’, a perfect encapsulation of what he wanted to see from his teams. His philosophy was that it was better to make the wrong decision fast and then fix it, then to spend time hesitating in an attempt to make the right decision.

This was the core insight that allowed Facebook to become one of the most powerful companies the world has ever seen.

Now, of course, that mantra has caused some troubles for the company at its current size – which we’re seeing play out in the public square at present – but that doesn’t discount the value of swift decisiveness as a principle of execution.

When your team is decisive, they are focused on action. And that’s what takes a strategy that looks good on paper and manifests it in the real world. You want to work with people who are not going to fall into analysis paralysis, but rather are willing to take risks and learn from their mistakes.

This is a psychological paradigm that separates the true innovators from your standard employees. If you can find people who thrive in those sorts of environments, hold onto them for dear life.

The Execution

You’ve got the idea, you’ve got the team in place, and now it’s time to make things happen.

Execution is notoriously difficult because things are much messier than they appear on paper. When you really get your hands dirty, you’ll discover that real innovation is a grind.

It’s not something that is endowed upon you. It’s something that you have to work for, pushing past obstacles and doing whatever it takes to create something new.

In this light, here are some important principles that you should be incorporating to supercharge your execution:

• Aligned Goal Setting. It’s crucially important that everyone is pulling in the same direction for any execution to work. The only way that this happens at scale is for the strategy to permeate throughout the organization through incentives.
  
  It’s common practice at this point for teams and individuals to set various goals and performance metrics that they track and work towards. The key, though, is to ensure that they are all aligned with one another.
  
  As you break down your key objectives into smaller and smaller pieces, you still want to retain the key principles, insights, and objectives that your strategy requires.
  
  When you do this effectively, then those incentives serve as continual guardrails, keeping your enterprise on track and passively encouraging the right sort of execution that will bring your innovation to market.
  
  
• Clear Communication. Communicating your strategy to your stakeholders is something that you should prioritize continually. It’s not a once-off thing that then takes care of itself. It needs to be something you’re hammering home every single chance that you have.
  
  The execution depends on it. Your ability to clearly communicate where you’re aiming, and how you’re going to get there – has a direct impact on what the organization is able to achieve.
  
  That’s not to say that you have to be incredibly charming and charismatic in the way that someone like Steve Jobs was. Clear communication comes in many different forms and it’s in the aggregate that you need to get this right. It’s not just about bold speeches at the all-hands meeting.
  
  It’s about communicating the company strategy through emails, performance reviews, hiring, public statements, working culture, office environments, and more. These small details are the lesser spoken pieces of what it means to innovate in a competitive environment.

• Avoid functional silos. As you scale, it’s natural that your company starts to fall into an organizational structure that separates teams based on their function. It makes a lot of sense when it comes to efficiently deploying your resources.
  
  However, for all the benefit it provides in focusing teams on specific aspects of the organization, there is a risk that they fall into silos which can impede the execution of your strategic plans.
  
  Innovation itself requires overlap. You should be doing all that you can to avoid these silos and encourage cross-functional collaboration wherever possible. When you do this, you allow information, skills, resources, and strategic insights to cross-pollinate – which helps you execution efforts to keep rolling forward unhindered.
  
  The responsibility for this must come from the top though because there are so many competing interests within a large organization, that it needs to be a value that is emphasized and incentivized by management. When functions are working with each other, the execution of your long-term plans becomes much more tractable.

We could go on and on here, but those are some of the key principles that we don’t hear talked about that often. But they are the hidden pieces that lie beneath the shiny innovation you hear about in business lore.

The Timing

The final component that plays a role in innovation is, of course, the timing. Every innovation across every industry is contextual. It’s based on the underlying market conditions at the time and the surrounding socio-economic circumstances that helped to bring it to be.

When you look back on successful innovation, it doesn’t seem like that though. This is because innovation always looks obvious in hindsight. We see how a company transforms an industry and it just seems like it was meant to be. The truth is that we just don’t hear about the others who had the same idea but were too early or too late.

Identifying the right timing for an idea is incredibly difficult. It’s not something that’s under your control and it’s not something that you can force either.

Instead, it comes down to having a sophisticated and nuanced read on your industry and the customers that you serve. So, effectively, the success of your timing comes down to your customer research.

How effectively can you test the waters in your market and see if what you’re imagining will serve a need?

Of course, the very nature of innovation is that you’re spotting something before anyone else does. So, this is very much an art and a science. But what you can do to improve your chances here is to use data to your advantage.

By building systems and processes that constantly analyze data (both internally and externally), you can ensure that your intuitions around timing can be backed up by real information.

For example, you might use internal systems to monitor your own performance – keeping track of how customer behavior is shifting and using those insights to assess the timing of a new idea.

Externally, you might be tracking key industry statistics that point towards where things are going – that can then help to validate whether your new project is too early or too late.

In each case, good data analysis is a must for understanding how your innovation might plug into your organization and the future of your industry. This is something that continues to grow in importance, and it remains a major asset in nurturing innovation that works.

Conclusion

There you have it. The companies that can maximize these four pillars are the ones that deliver true innovation. It doesn’t come merely from charismatic leaders, financial models, and PowerPoint presentations.

Instead, it’s a multi-faceted endeavor built on a foundation of action-focused strategy. Those companies that can execute their strategy with the same vigor and discipline as they used to come up with the plans in the first place are the ones that re-write the history books.