How to Align Innovation with Your Corporate Strategy

By: Jeffrey Baumgartner

For any corporate innovation initiative to succeed, it is important that it is aligned with corporate strategy. Jeffrey Baumgartner shares a simple three step approach to help ensure that this happens and to avoid common pitfalls.

For any corporate innovation initiative to succeed, it is important that it is aligned with corporate strategy. This is more likely to occur naturally when senior management takes the lead with an innovation initiative – and this is a key reason why top management buy-in is a major factor in the success of any innovation process. But when middle managers or innovation consultants reporting to middle managers take charge of your innovation activities, there is a good chance that these actions will generate many good ideas, but few of those ideas will be relevant to your business’s strategic aims.

To make matters worse, many innovation tools are designed for random, rather than focused, idea generation. You need the latter in order to align idea generation, and hence innovation, with strategy. Suggestion schemes which invite random ideas may encourage incremental improvements. But, in my experience, few big ideas are proposed and those which are seldom fit with strategic needs. This results in a high level of idea rejection and substantial time wasted in preparing idea proposals which must be rejected irrespective of their intrinsic quality. After all, if your corporate strategy is all about selling apples, great ideas for improving the flavor of oranges will do you little good.

There is a good chance that these actions will generate many good ideas, but few of those ideas will be relevant to your business’s strategic aims.

And when suggestion tools are opened to the public, in so-called crowdsourcing activities, the results are worse. If middle to low ranking employees are less than clear on corporate strategy, non-employees and customers are likely to be even less clear. Indeed, an evil competitor could easily take advantage of a crowdsourcing web site to submit and build enthusiasm for ideas that contradict your strategy. This can result in wasted time, the need to reject powerful ideas and embarrassment.

If you think such a scenario is unlikely, consider then presidential candidate Barak Obama’s suggestion tool (set up by his election committee and not Mr. Obama). A pro-marijuana legalization group submitted and promoted numerous proposals on legalizing. These quickly became the top voted ideas on the web site. In view of the abhorrence American government has towards the legalization of recreational and the pressing importance of solving problems associated with the economic meltdown, the war in Iraq and other issues, these ideas were less than useless. Worse, other top ideas bore little relevance to the key – or strategic issues – of his campaign.

The result? The suggestion web site became an embarrassment and was quietly closed. A huge amount of effort was completely wasted and a lot of ideas that might have been relevant to strategic issues were either never submitted or lost to the less relevant ideas that were promoted to the top.

A three step approach

It does not have to be this way! A simple three step approach using some very basic methodology is all you need to align your innovation activities with your strategy. You simply need to ask some probing questions, follow creative problem solving (CPS) in idea generation and have experts judge ideas using clearly defined business criteria..

Step 1: Ask many questions

In order to align innovation to strategy, you need to know how well your firm is meeting it strategic objectives. Arthur VanGundy, in his book, Getting to Innovation, recommends establishing Q-banks of questions related to strategy and then posing these questions to stake holders in a two or three rounds. The first round would include very general questions in order to identify strengths and weaknesses. Based on the answers, a second round would ask more probing questions in order to identify more clearly defined problem areas. Depending on the results of this second round, a third round might be needed.

According to VanGundy, questions should be divided into categories such as “Our Organization”, “Our Customers”, “Our Brand” and so on. Questions in the first category might include “What does our organization do?”, “What are our core competencies?” and the like.

This exercise is important for identifying areas where innovation can lead to dramatic improvement. Nevertheless, be warned, you may find that you may not like some of the answers you receive. In a sprawling organization with poor communications (most large companies, in fact!), you may find that you are not getting consistent answers to basic questions about what your company does, core competencies, values and so on.

Do not see this as failure. Rather see it is a fantastic opportunity for breakthrough innovation!

Step 2: Pose innovation challenges based on strategic needs

With the information gleaned in step one, you are ready to formulate innovation challenges based on the answers to your questions. For instance, if you find that your products do not reflect your brand values in the eyes of your employees and customers, you need to frame challenges that resolve this problem. These challenges might focus not only on the products themselves, but on marketing communications, packaging and possibly even pricing.

Once your innovation challenges have been formulated, you need to focus on generating ideas (see article “The Idea” below for more about ideas) that address your challenges. Idea generation can be done using innovation process management software, brainstorming, experimentation, and a host of methods depending on the challenges and the stakeholders.

If you are putting a specific team in charge of addressing a particular challenge, be sure that it is a diverse team. For instance, if the challenge relates to marketing (such as “How might we better demonstrate brand values in our marketing communications?”), do not put a team comprised solely of marketing people in charge of idea generation. Alone, they are unlikely to generate the breakthrough ideas necessary to innovatively solve your problem. By the same token, do not exclude them. Their less than innovative performance to date may be part of the reason your marketing communications does not reflect brand values. But they do have expertise and they will need to implement the solution. But complement them with people from various departments and, ideally, business partners and customers.

If you are using software based tools for idea collection, be sure that the tools enable you to run ideas campaigns. Suggestion schemes, whether ad hoc solutions using e-mail or Sharepoint, or custom designed web applications; may be useful for collecting incremental improvements, but do not permit the focus necessary for aligning ideas with strategic needs.

Step 3: Evaluation

After investing substantial effort into their idea generation activities, it is amazing how many organizations and innovation professionals blow it by putting ideas to a popular vote in order to identify which ideas to develop further. Votes are fine for democracy, but full of poop for innovation! Indeed, voting for ideas has two serious flaws. Firstly, popular votes tend to favor incremental improvements. Such ideas are easier to envision than breakthrough innovations and, hence, people are more likely to vote for the incremental improvements instead of the more radical ideas. Secondly, when participants in an idea generation activity know they will be rewarded for having “the best” ideas, they actually think less creatively than if there are no rewards or if they are rewarded for having the most creative ideas. This has been demonstrated in research.

Hence, voting for ideas encourages less creative thinking and selects incremental improvements. This is clearly not a recipe for breakthrough innovation! If you are absolutely obsessed with idea voting and understand that voting is unlikely to select ideas that align with corporate strategy, then at least specify criteria by which the vote should take place. Criteria should be along the lines of “vote for the most creative idea”, “vote for the idea you would LEAST like to see our competitors implement” or “vote for the idea which offers the greatest potential value to the firm.”

But a better approach is to assign a team of experts, ideally from diverse backgrounds, to pre-form a criteria based evaluation, perhaps using an evaluation matrix, in order to judge whether or not an idea has the potential to become an innovation for your firm.

An evaluation matrix is very simple. Start with a list of several criteria (we find five works best) and  ask your experts to compare each idea to each criterion on a sliding scale (we use zero to five points). Once you are finished, each idea has a score representing how well it meets your evaluation criteria. Thus ideas can easily be compared for potential value add. Most importantly, the evaluation criteria can and should be designed to emphasize strategic concerns.

Diversity and numbers for idea generation; expertise and focus for evaluation

Note that while it is often effective to have a large number of people involved in generating ideas, it is best to have a relatively small number of experts actually evaluate the ideas. This is because during idea generation, you want to encourage divergent thinking and this is best achieved through a diverse group of idea generators. At this stage of the process, non-experts may bring a fresh open mind and a touch of naiveté to idea generation and this can result in some outlandish and highly creative ideas.

However, when it comes to envisioning the implementation of ideas, you need experts who can determine how well an idea actually meets strategic needs, likely implementation costs and more.

Conclusion

As noted, the steps necessary to aligning your innovation initiative with your strategic needs are simple in principle: identify strategic issues where innovation is necessary, focus innovation on those issues and measure idea viability according to strategic issues.

However, discipline in setting up the initiative as well as top management buy-in are needed to ensure the initiative is a success. Poorly conceived suggestion schemes in which generated ideas are based on the whims of the idea submitters and selection is based upon the same people’s votes, will result in incremental improvements that often bear little relationship to corporate strategy. This is not only a waste of time, money and resources, but can be highly demotivating to employees (or the public in the case of crowdsourcing), who see a lot of effort made for little result in terms of idea implementations.

If you are hiring an innovation consultant or other service provider to support your firm’s innovation initiative, ask her how her services will align YOUR innovation with YOUR strategy. If you are not happy with her answer, look elsewhere.

By Jeffrey Baumgartner