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Innovation Strategy Models
The study of the world’s largest R&D spenders over almost a decade has allowed us to analyze in detail the innovation strategies that these leading companies adopt. Through surveys and interviews with C-suite and senior executives of the Global Innovation 1000, we found that nearly all the companies favor just one of three innovation strategies:
Click on the elements of the diagram below to learn more about the three innovation strategy models.
These companies actively engage current and potential customers to shape new products, services, and processes; they strive to be first to market with those products.
These companies watch their markets carefully, but they maintain a more cautious approach, focusing largely on creating value through incremental change.
These companies follow the direction suggested by their technological capabilities, leveraging their investment in research and development to drive breakthrough innovation and incremental change, often seeking to address the unarticulated needs of their customers.
It is important to note that we found that none of these three innovation strategies were any better than the others at producing sustained superior financial results, although of course individual companies outperform others within each strategic group. The success of each of the strategies depends on how closely companies, in pursuing innovation, align their innovation strategy with their business strategy and how much effort they devote to directly understanding the needs of end-users.
Over the years we have studied these three strategy models in some detail and identified the capabilities, the goals and cultural attributes, and the front-end innovation process characteristics that are required to be successful with each of these models.
Click on the tabs below to learn more about the various aspects of the innovation strategy models.
In 2010, we set out to determine the capabilities that are the most critical for the success of each of the three innovation strategy models and showed that companies that can craft a tightly focused set of innovation capabilities in line with their particular innovation strategy — and then align them with other enterprise-wide capabilities and their overall business strategy — get a better return on the resources they invest in innovation.
No matter which of the three innovation strategies they pursued, all the successful companies depended on a common set of critical innovation capabilities. These include the ability to gain insights into customer needs and to understand the potential relevance of emerging technologies at the ideation stage, to engage actively with customers to prove the validity of concepts during product development, and to work with pilot users to roll out products carefully during commercialization. Click on the embedded graphic for more details.
In addition to these common capabilities, companies among the top 25 percent in performance within each strategic group depended on a set of distinct capabilities they feel are critical to achieve success, some of which overlap with those of other strategies.
For Need Seekers, for example, directly generated deep consumer insights are key to success, whereas for Market Readers supplier-partner engagement is top of the list of important capabilities. Successful Technology Drivers, finally, typically excel at understanding in detail emerging technologies and trends.
The most successful companies, we found, are those that focus on a particular, narrow set of common and distinct capabilities that enable them to better execute their chosen strategy.
In 2011, we set out to determine which strategic goals and cultural attributes lead to the greatest success within a given innovation strategy, and how those goals and attributes contribute to the capabilities needed to achieve that success.
As when studying the critical capabilities required for success, we found that all successful companies following any of the three strategy models share some of the most important innovation goals and cultural attributes, like the goal of superior product performance and quality supported by a culture of passion for and pride in the products and services offered.
Each model, however, also has distinct goals and attributes; these can be seen by clicking on the embedded graphic.
In 2012, we set out to identify the tools and mechanisms used by companies in each innovation strategy at the “front end” of the innovation process – during idea generation and idea conversion.
As when studying the critical capabilities and cultural elements required for success, we found that all successful companies following any of the three strategy models share some of the most important front-end innovation tools and mechanisms, such as direct customer observation and cross-unit staffing.
Each model, however, also has distinct front-end innovation tools and mechanisms; these can be seen by clicking on the embedded graphic.