Innovation is the heartbeat of the modern economy. It determines success or failure, growth or stagnation. Yet, while everyone talks about innovation, many companies fail to systematically anchor it. Why? They underestimate the importance of a clear innovation strategy and its integration into the overarching corporate strategy. Without this, innovation often remains fragmented – a collection of uncoordinated projects that fail to reach their full potential. But how exactly does an innovation strategy help companies become future-ready, and how is it developed? Let’s dive in.
An innovation strategy must not be viewed in isolation. It is a part of the overall corporate strategy and must align with the company’s overarching goals, vision, and values. While the corporate strategy sets the long-term direction – such as market positioning, competitiveness, and resource utilization – the innovation strategy answers how new business opportunities, products, or processes will be developed to achieve these goals.
The world spins faster today than ever before. Three major drivers propel innovation and challenge companies:
Technology Push: Advances in technologies such as artificial intelligence, renewable energy, or blockchain constantly create new opportunities. Companies that adopt these technologies early secure an advantage. For example, OpenAI’s introduction of ChatGPT inspired businesses worldwide to develop new applications in customer service, content creation, and data-driven analytics.
Market Pull: Customer demands are evolving rapidly. Consumers today seek personalized products, sustainable supply chains, and digital services. Only those who understand the market remain competitive. Netflix, for instance, recognized the growing demand for on-demand content and revolutionized the entire entertainment industry.
Environment: Stricter regulations, societal pressure, and new values such as sustainability compel companies to act more environmentally friendly. Consumers increasingly demand less plastic packaging and carbon-neutral products. The success of companies like Patagonia demonstrates how sustainable innovations can align with societal trends.
Companies face the question: Do we wait for changes – or actively shape them? This is where the innovation strategy comes in.
An innovation strategy is the roadmap that navigates a company through the complex field of innovation. It defines how a company prioritizes innovations, allocates resources, and responds to market changes. In short: it ensures that innovation is no accident.
A good innovation strategy answers key questions:
Such a plan provides direction and ensures that all employees work toward a common goal. Without this clarity, ideas often remain unused, and the company loses valuable time – and market share.
“Innovation is no coincidence, but the result of a clear plan.”
There are different types of innovation strategies that companies can choose based on their industry, goals, and environment. These can be categorized into six groups:
Market-Oriented: Strategies aimed at capturing new markets or better serving existing ones. An example is Apple, which redefined the smartphone market with the iPhone.
Customer-Oriented: Focused on customer needs and desires to develop products and services that provide real value. Airbnb was born from the idea of offering travelers a personal and flexible alternative to hotels.
Competition-Oriented: Aimed at gaining an edge over competitors through innovation. Tesla sets standards by not only offering electric cars but also charging infrastructure and energy products.
Technology-Oriented: Companies focusing on breakthrough technologies to change markets. OpenAI and SpaceX are examples of leveraging technological leadership as an innovation strategy.
Time-Oriented: Strategies prioritizing rapid innovations to seize market opportunities. Fashion companies like Zara rely on quick cycles to always offer the latest trends.
Cooperation-Oriented: Collaboration with partners, startups, or research institutions to drive innovation together. Volkswagen, for instance, works with QuantumScape to develop solid-state batteries.
Companies can pursue these strategies individually or in combination, depending on their starting point and goals.
Why should companies invest time and resources in developing an innovation strategy? Because the benefits are immense:
For example, BMW follows a clear innovation strategy focused on sustainability and electromobility. With the “i” series, BMW has not only created a new segment in the premium sector but also significantly enhanced brand perception.
Die Entwicklung einer Innovationsstrategie ist ein strukturierter Prozess, der sicherstellt, dass Innovation nicht nur ein theoretisches Konzept bleibt, sondern praktisch, messbar und zielgerichtet in die DNA eines Unternehmens integriert wird. Der Prozess kann in vier klar definierte Schritte unterteilt werden: Analyse, Gestaltung, Formulierung und Implementierung.
The analysis forms the starting point of any innovation strategy. Without a deep understanding of internal and external influencing factors, companies risk blindly investing resources. This phase answers critical questions such as: Where do we stand? What forces are shaping our industry? What are our strengths and weaknesses? Key elements include:
The aim of this phase is to draw a clear picture of the framework conditions and identify the levers for innovation.
The analysis is followed by the classification, which aims to set the strategic direction. This is the moment when the framework for innovation is set. Methods for this are, for example
The design defines the rough course along which innovations are pursued – always with a view to the company’s long-term goals.
The formulation of the innovation strategy is the step in which the findings from the analysis and classification are condensed into an action-oriented plan. This process answers the question of “how” and “what” is to be implemented in concrete terms. An effective formulation comprises the following steps:
1) Goal setting: defining the goals for innovation. Specific measurable goals can be defined here, e.g.
…or other criteria can also be defined. An example for an infrastructure company could be to guarantee availability and security.
2) Define focus areas: Based on the analysis, a decision is made as to which sectors (e.g. agriculture) and/or key topics (e.g. service, sustainability) are of overriding importance for innovations. The analysis can also be used to narrow down which types of innovation should be pursued:
Example: A company in the construction industry decides to use digital platforms for project management in addition to traditional construction.
Implementation is the decisive step in bringing the innovation strategy to life. Without consistent implementation, even the best strategy remains theory. The most important aspects of implementation are
1) Resource planning: the strategy must clearly define what resources – time, budget and skills – are available for innovation. This is a critical point, as innovation often requires long-term investment.
2) Define KPIs: Key performance indicators (KPIs) are defined to measure progress. Examples:
The formulation creates a clear plan that translates the innovation strategy into practice and lays the foundation for implementation.
Create an innovation portfolio: The innovation strategy must include specific projects and initiatives that are categorized in an innovation portfolio. Methods such as the BCG matrix (prioritization of projects according to market growth and competitive position) or the McKinsey matrix (evaluation according to innovation potential and strategic relevance) can help here. Example: A car manufacturer could prioritize projects in electric drives, while less promising projects such as combustion engines are scaled back.
Communication and culture: Managers must clearly communicate the innovation strategy and create a culture that encourages experimentation, mistakes and learning processes. One example of this is Amazon, which promotes “Day 1 Thinking” – a principle that demands constant innovation and customer orientation.
Structural anchoring: Innovation must be anchored in the organization, for example by setting up innovation teams, labs or interdisciplinary project groups. Companies such as Bosch have created their own innovation centers to research new technologies and business models.
Use OKRs: Objectives and Key Results are an effective tool to ensure that all teams are working towards the innovation goals. Example: One objective could be to develop a new prototype within six months.
Monitoring and feedback: Progress is regularly reviewed so that the strategy can be adjusted if necessary. A good example is Tesla, which continues to set market standards through iterative improvements in vehicle design and production technologies.
The development of an innovation strategy is a dynamic, multi-stage process that starts with thorough analysis, finds a clear direction through design, sets specific goals and priorities through formulation, and finally comes to life through implementation. Companies that consistently follow this process lay the foundation for sustainable success and competitive advantages in a rapidly changing world.
Are you ready to actively shape the future? Contact us and discover how a customized innovation strategy can transform your company.
eisbach partners is a consulting firm specializing in sustainable growth, helping companies to generate long-term and renewable business growth without compromising the environment and quality of life. They work with innovation-oriented leaders of large corporations and successful mid-sized companies to identify new opportunities, generate initial revenues and deliver sustainable growth. eisbach partners takes an individual and tailored entrepreneurial approach, based on their experience as successful entrepreneurs and consultants, to work side-by-side with their clients to mobilize their untapped potential.
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