Aligning Innovation with Business Goals

Innovation strategy and overall business strategy

Innovativeness refers to the propensity of firms and enterprises in engaging in and supporting cultures of creativity, experimentation, and novelty and it reflects the willingness of the firm in adopting new methods and ideas in their day to day operations. The innovative strategies of the firm need to stipulate how its innovative efforts will be supportive of the overall strategy of the business. This concept still holds in the current business context since innovation is at the center of entrepreneurship and it is the explicit instrument utilized in driving growth, competitive advantage, and profitability (Vij and Bedi, 2016). Strategies usually involve commitments to sets of mutually reinforcing, coherent behaviors or policies that aim to achieve particular competitive goals. Good business strategies support alignment between the various groups in the firm, give clarifications to priorities and objectives, and aid in focusing efforts around them. Without innovation strategies, innovation efforts become nothing more than a mixed collection of practices that limit the organization's capacity to innovate.

Pisano (2015) points out that the innovation capacity of the firm emanates from the innovation system which involves coherent sets of interdependent structures and processes that dictate how the firm looks for novel solutions and problems, synthesizes ideas, and makes decisions on funding. Firms without innovative strategies fail in making trade-off decisions and choosing elements of the innovation system and it can result in various parts of the company undertaking conflicting priorities. Innovation decisions are the most fundamental strategic decisions of every firm and there is a strong focus on innovation today due to increased competition in domestic and international markets generated through technologies that rapidly change every day. Karlsson and Tavassoli (2016) argue that to guide decisions on how the limited resources for innovation should be utilized in reaching set goals, different innovation strategies are applied by the firms. Decisions have to be made on distributing the resources on the process, product, marketing, and organizational innovations and it can include different combinations of these basic innovation types and how they can be adjusted over time with changing external and internal environments or conditions.

Prajogo (2016) conducted a study to examine the moderating effect of the business environment on the impacts of innovative strategies on the performance of the firm. While the author agrees with the notion that innovation strategies can be driven by the business environment, he argues that from a strategic choice perspective, firms still have the choice of the specific strategies they can implement regardless of the business environment in which they operate. Strategic fits were demonstrated between product innovation strategies and dynamism and between process innovation strategies and competitiveness. Dynamic environments, characterized by constant rates of flux and change, positively moderate the linkages between the innovation of products and the performance of the firm (Teece and Leih, 2016). Competitive environments were found to weaken the effects of product innovation on firm performance while strengthening the effects of process innovations on firm performance.

Hacklin et al (2018) point out that dynamism is suggestive of firms adapting or renewing their business models through seizing, sensing, and transforming to stay competitive especially in volatile environments. Dynamic environments force firms to ‘pivot’ in search of desirable positions and this is characterized by experimentation and tweaking of elements of the existing business model in path-dependent ways of innovation. As a concept, business model innovation involves the migration of value where changes in the structure of the industry and the emergence of new ecosystems necessitate changes in the models of businesses. Ikeda and Marshall (2016) note that innovations have been increasingly occurring in economic ecosystems and have become more open with sustained and effective innovations driving both competitiveness and value creation. These researchers point out that innovation today blends the science and art of future anticipation where an understanding of what the customers want and need even before they know it themselves is required. Such processes can involve either exploitative or exploratory innovation. Exploratory innovations involve radical changes where new knowledge is required to address the needs of emerging markets and customers while exploitative innovation involves incremental changes where existing products, skills, knowledge, and processes are reinforced to address the needs of existing markets or customers (Newman et al. 2016).

Dobni et al. (2015) point out that innovation is everywhere and it is relevant. They note that firms which put innovation ate the top of their corporate agenda generate superior shareholder returns down the road. Findings from the reviewed articles, therefore, confirm that innovation status correlates with performance and it should be given consideration in the overall business strategy to drive profitability and growth.

References

Dobni, C. B., Klassen, M., & Nelson, W. T. (2015). Innovation strategy in the US: top executives offer their views. Journal of Business Strategy.

Hacklin, F., Björkdahl, J., & Wallin, M. W. (2018). Strategies for business model innovation: How firms reel in migrating value. Long-range planning, 51(1), 82-110.

Ikeda, K., & Marshall, A. (2016). How successful organizations drive innovation. Strategy & Leadership.

Karlsson, C., & Tavassoli, S. (2016). Innovation strategies of firms: What strategies and why?. The Journal of Technology Transfer, 41(6), 1483-1506.

Newman, A., Prajogo, D., & Atherton, A. (2016). The influence of market orientation on innovation strategies. Journal of service theory and practice.

Pisano, G. P. (2015). You need an innovation strategy. Harvard Business Review, 93(6), 44-54.

Prajogo, D. I. (2016). The strategic fit between innovation strategies and the business environment in delivering business performance. International journal of production Economics, 171, 241-249.

Teece, D., & Leih, S. (2016). Uncertainty, innovation, and dynamic capabilities: An introduction. California Management Review, 58(4), 5-12.

Vij, S., & Bedi, H. S. (2016). Effect of organizational and environmental factors on innovativeness and business performance relationship. International Journal of Innovation Management, 20(03), 1650037.