Strategy + Open Innovation
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Top CEO’s recognize that excellent strategies resulting from effective strategic planning together with the aggressive pursuit of open innovation are important to the growth and future of their business. However, they do not always fully grasp the close correlation between these two critical aspects of business.
As a business consultant and keynote speaker who focuses on Strategic Innovation, it is my desire to raise senior executive’s awareness of the synergistic power of integrating these two distinct, but related disciplines. Although each is in itself a powerful business driver, together it is possible to achieve exponential results through the combination of strategy + open innovation.
Just as lighter fluid acts as an accelerator to fire, open innovation can provide an accelerating dynamic to corporate strategy and vice versa. Rather than viewing these two crucial business activities as separate silos, understanding the interrelationship will positively transform both their performance as well as the results that ensue.
Strategy and open innovation are really two sides of the same coin. Innovation Empowers Strategy and Strategy Directs Innovation. Sounds circular? That’s because it is circular. The two activities should feed each other in one continuous loop.
When I say that innovation empowers strategy I am referring to the fact that through open innovation new strategic opportunities are revealed to the organization. Innovation is by definition: “Change that creates a new dimension of highly beneficial performance.” It is these new dimensions of beneficial performance that open the way for new strategies. For example, if a particular innovation initiative results in a new product or your company’s entry into a new marketplace, these clearly require the development of new strategies in order to properly implement.
Likewise, it is the organization’s strategic plan which determines the direction in which you’re people will focus their innovation efforts. This prevents you’re people from wasting valuable resources on merely creative ideas which hold no real potential for moving the organization forward. Creativity is wonderful, but unless it is actively directed toward achieving the desired strategic outcomes of the business, namely sustainable growth and profitability, it simply dilutes productive efforts.
Some years ago, the Vice President of Manufacturing for a company that produced bio-feedstocks for other research companies requested my assistance. Their R&D budget amounted to more than one half of the company’s total operating expenditures. The vice president’s primary concern was that although the company was highly profitable, the vast majority of their revenue resulted from legacy products which would soon lose patent protection. Their pipeline of new products was full, unfortunately they had been unable to successfully commercialize any new products coming out of R&D for several years.
It was clear that the researchers were very intelligent and actively pursuing new breakthrough products. However, it soon became clear to me that they were doing so within their own silos. Each PhD researcher had total autonomy as to what potential products their team conducted research on. Also, this was done without any collaboration with either the marketing department or manufacturing. The steady stream of new products which emerged from the pipeline during the prior several years either had no viable market or we’re discovered to be extremely difficult to scale from test tube and beaker into commercial production. This company represented the classic example of wonderfully creative and innovative R&D which was literally destroying the company’s future.
In stark contrast, meaningful R&D and in fact all innovation initiatives across the entire organization should have the clear objective of creating highly beneficial ‘new’ value. It is the active, continuous loop of open innovation and strategy which can result in the synergistic integration of the two activities, thereby maximizing the benefit to the company.
Synergistic Integration of Strategy + Open Innovation Objective
Establishing the synergistic integration of strategy and open innovation should be a clear and critical objective for all employees to pursue. Only in this way will the company be assured of obtaining the optimal benefit from the resources employed. This is not a difficult task, however, it does require the active and sustained leadership of the executive team in both encouraging and enforcing this objective.
by John Di Frances
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