While working and researching on how to better train and educate executives on innovation, I got into an interesting discussion with a corporate innovation leader on the role of strategy in the context of innovation.
The essence of the discussion circled around the issue of whether strategy leads innovation or whether the need for innovation leads strategy. Personally, I think strategy comes first as this set the overall direction of the company, but I liked that we had to think about this as it tells us that innovation is now a central part of so many companies and thus it has a big impact on the strategy work. The two are now intertwined and cannot really be separated.
This raises some interesting questions on where you should place the heart of your innovation capabilities and efforts. If you are a consumer driven company, it makes sense to get as close to market as possible as the corporate strategy is highly impacted by the needs of consumers that are changing fast in many consumer-driven industries.
If you are a b-t-b company (that makes products), we often see that the center of innovation is placed under R&D because this is the unit that tweaks the current products and technologies (incremental innovation) and create the future ones (higher level innovation).
It has been like this for many years, but we need a reality check on this. One simple question should make you re-consider if this is the right place for your innovation center. It goes like this:
Does R&D drive the strategic direction of your company?
The answer is no. The market – whether it brings your company challenges or opportunities – is what forces your executives to make the strategy choices. R&D is more like a function that must deliver on this and we rarely see new markets or customer needs based solely on a new technology.
R&D is usually quite far away from the market although many R&D units try to get as much insights as possible by working with relevant internal units and functions and by adopting open innovation processes.
This does, however, not warrant that innovation automatically should fall into the realms of the Chief Technology Officer and the R&D function. I think innovation in many cases should be closer to the market and closer to the people that make the strategic decisions across the corporate units and functions.
Many companies could benefit from re-assessing their innovation set up and by asking the above question. Maybe it is time that companies begin to separate R&D and innovation (in many different forms and across many functions), as those two things are most often quite different from each other.
With regards to strategy, I would say that innovation is more important than R&D.
R&D has an important role to play, but today companies need to go way beyond “just” the products or technologies to win the markets. It is no longer enough to have a good product or technology today; you need to be able to get it to market and all the way to paying customers in the right ways. Think business model innovation here.
R&D as defined traditionally is simply too narrow and thus we need to get more into the innovation thinking when we put this into the strategy context.
I can imagine that this post will tick someone off so let the discussion begin. It would be great to hear some different perspectives on this.
