The importance of integrating strategy and innovation processes.

As difficult as it is to get a group of people to agree on a definition of innovation, it is even more complicated to get people to agree on what constitutes strategy.

Strategy is about positioning for sustainable competitive advantage, making choices about which industries, products and services to deliver, and allocating resources to achieve the unique competitive position an organization is aiming for. Ultimately, the goal of strategy is to achieve long-term, sustainable, superior performance.

The focus of strategy is on creating value by satisfying customer needs and wants better than anyone else. The execution of strategy is driven by creating a set of options in which to invest the company’s resources, be it products or services, business models or brand development. Doesn’t this sound a lot like what innovation is trying to achieve?

In order to focus the resources of an organization on developing the most effective innovations possible, those innovations that will generate the most customer value and create new things that will serve customers better than anyone else, the efforts of the company’s people need to be closely tied to achieving business strategy, achieving the vision of what the company can be.

In the process of discovering what customers are doing, innovators create new options to meet unarticulated needs. By generating new options, this process allows a company’s leaders to see new opportunities to grow – that their existing strategy has not taken into consideration. New opportunities then lead to a new vision for what a company can be.

Strategy and innovation are tied so closely together that it is hard to know where one stops and the other begins. What matters most is that the processes for developing strategy and the processes for uncovering and meeting customer opportunities are combined in a systemic manner.

Strategy development is not just setting next year’s budget, no more than innovation is just focused on the next product extension. The business imperative is to help a company’s senior leadership to see and understand the link between these two, iterative processes. When these two elements are combined, executives will have a better mechanism for focusing their growth efforts and ultimately minimize their business risk.