Strategy Innovation Essay
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“Strategy innovation is the capacity to re-conceive the existing industry model in ways that create new value for customers, wrong-foot competitors, and produce new wealth for all stakeholders. ” (Hamel, 1998) This quote is used by Schoenberg to highlight the importance he places on strategy innovation, and the main two drivers of strategic innovation he cites: industry factors and firm factors.
However, although there is wide ranging agreement with this view, there are also several dissenting voices amongst the academic community, who often view other factors, and drivers, as being more important to the success of a firm.
One key area where factors outside the firm and industry have a great impact is in the social and environmental pressures facing business, which many companies have become increasingly aware of over the past decade.
Many management scholars and consultants have argued that these new demands offer terrific opportunities for progressive organizations, and innovation is one of the primary means by which companies can achieve sustainable growth. (Johnson et al, 2005) This argument is backed up by the view that companies that ignore these pressures do so at their own peril, but the reality is that managers have had considerable difficulty dealing with sustainable development pressures.
In particular, their innovation strategies are often inadequate to accommodate the highly complex and uncertain nature of these new demands across the economy and social spectrum as a whole, partly due to an excessive focus on the firm or industry (Hall and Vredenburg, 2003) Indeed, a strategy that integrates the goals of innovation and sustainable development is needed to ensure sustainable competitive advantage, rather than conventional, market-driven innovations approaches.
Sustainable development innovation (SDI) (Hall and Vredenburg, 2003) is in fact driven by science that has yet to be accepted fully by the scientific, political and managerial communities, and the industry sector Amid such uncertainty, sustainable development innovation is often difficult and risky, however when faced with increasing pressure to consider sustainable development, many organizations have revised their business models and innovation strategies, and these changes are often highlighted in corporate sustainability reports and Web pages. Hall and Vredenburg, 2003) Hart el al (2003) looked at the most fundamental part of the strategy innovation process: new product development (NPD).
They looked at criteria such product uniqueness, market potential, market chance, technical feasibility, and intuition, and found that these decreased as the NPD process unfolded. Overall they found that the success rate of NPD usage could be modelled by a model which held true across firms of different sizes, holding different market share positions, with different NPD drivers, following different innovation strategies, and developing different types of new products. Hart et al, 2003) This is yet another indication that there must be other factors at work besides the basic industry and firm drivers. Another viewpoint on the subject of innovation is that the very essence of a company is its values and priorities: what it considers important, and where its investments are made? Thus, a host of values and priorities, and combinations thereof, underlie business strategies. (Grant, 2005) Some firms have a cost-driven culture that supports a value position in the market place, whilst others place priority on delivering a prestige customer experience.
Aaker (2004) claims that innovation, quality, and customer concern are the three values and priorities worth highlighting because they are so frequently seen as drivers of corporate brands, however, the question must always be: has the firm provided customer benefits by being innovative? A reputation for innovation enhances credibility, however, it is not easy achieving an innovative reputation, and firms are often better advised to focus on providing quality and value. Aaker, 2004) Schoenberg’s arguments are also heavily based on the concepts of strategic positioning (Porter, 1980) and the resource based view (Barney, 1996), although he does not make overt references to these theories.
However, the influence of previous strategy writers is clear throughout his piece: “value gap analysis is equally relevant to the Who question of strategy and to market positionings based on differentiation. (Schoenberg, 2003) helps to place his work in context with that of Porter’s (1980) Also, “The implication for those that seek innovative strategies is: does the proposed form of strategy innovation fit with your core competences? ” shows that he is developing Barney’s resource based core competencies, within the context of innovation strategies, in order to ensure that his concepts remain relevant to organisations.
Indeed, Schoenberg clearly states in his conclusion that he believes strategy innovation does not “represent a radical departure from onventional approaches to strategy formulation” (Schoenberg, 2003) and that it is merely a method for combining the two main strategy theories, which have often previously been viewed as being contradictory. Indeed, Johnston Jr. and Bate (2003) outline five phases to help firms innovate: staging, aligning, exploring, creating, mapping, however they warn that it is important to make sure that managers build into their organizations the capability to continuously innovate so that they become more resilient, and better prepared for future changes.
Finally, to be truly considered strategy innovations, new products and initiatives that alter a firm’s business model must first turn a consistent profit, a fundamental necessity of both Porter’s (1980) and Barney’s (1996) models. Strategy innovation has always been about solving problems for customers in ways that they, not the sponsoring company, perceive to be superior or unique from their present way of addressing those problems. Strategy innovation can be incremental, involving minor changes to the firm’s business model, resources and capabilities.
Or it can be a radical departure, as when a firm decides to make a positioning shift, and market its existing products and services to new customer groups. (Johnson et al, 2005) In conclusion, strategy innovations can occur in any part of an organisation: customer service, marketing, advertising, selling, production or distribution. However, whatever their source, successful strategy innovations have one thing in common: They result from discovering new ways to create value for customers, as measured by bottom-line results to the sponsoring company. Tucker, 2001)
New innovations present themselves when companies and their leaders imagine opportunities to do more with their products and services than they have in the past, whether through acquiring or reallocating resources, or altering competitive positioning. Strategy innovation may be spurred by a desire to grow, but this desire should never be allowed to overshadow what the proposed new way of doing business will do for the customers, either existing or future, and the firm as a whole.