The strategy shift framework, a new model for the practice of strategy, considers strategy and innovation as two sides of the same coin – conceptually exclusive, yet interdependent. At the core of the strategy shift framework is the 10 percent rule. Companies should reduce or eliminate activities of low value by 10 percent and increase value added activities by 10 percent. The value-added activities should be grounded in best practice related to leadership, resources, processes, and knowledge management systems. Traditional strategic tools will always be needed.
However, our research, based on two Global Innovation Surveys of 843 companies, has shown that highly innovative organizations combine innovative practices within their strategic processes. The research found a polarity between high and low innovative organizations. The polarity manifests itself in a variety of strategic processes that together change how organizations make decisions. The five recommended strategy shifts that follow were derived from the two research studies and represent the five most polarized areas between high and low innovative organizations.
This article is summary of a peer-reviewed article published in Strategy and Leadership on May 14, 2021. It is the copyright of Emerald Publishing Limited, ISSN 1087-8572. DOI 10.1108/SL-11-2020-0136. The article was written by C. Brooke Dobni, Professor of Strategy ([email protected]), Mark Klassen, Assistant Professor of Accounting ([email protected]) and Grant Alexander Wilson, Lecturer of Management ([email protected]). They are faculty members of Edwards School of Business, University of Saskatchewan, Saskatoon, Saskatchewan, Canada. C. Brooke Dobni is also the founder of InnovationOne®, LLC. If you want a full copy of the article contact Emerald Publishing Limited at https://www.emerald.com/insight/content/doi/10.1108/SL-11-2020-0136/full/html.
Strategy Shift No. 1: Manage innovation culture to lead strategy.
Employees look to their leaders to craft the strategy and create the context for its execution, so the strategy shift is much more about leadership taking ownership of the innovative culture. In the Global Innovation Surveys, being able to effectively communicate innovation goals and vision was a major difference between high and low innovators. Executives in highly innovative companies had thought through their innovation agendas and developed actions plans for execution. High innovators relentlessly stick to their innovation plans. The research found that low innovators often changed their leadership focus and sponsorship, which negatively impacted their innovation culture.
Strategy Shift No. 2: Move outside to strategically collaborate.
Collaboration with external entities – vendors, customers, universities, startups and financiers, for example – is proving to be materially successful for highly innovative firms and presents a strategy shift to innovation. Low innovation companies are bound to internal strategic planning workshops, whereas highly innovative organizations integrate external input into their processes. Highly innovative companies create knowledge management platforms to not only collect information but share and transform this knowledge into better decisions. Our research found over a 20 percent difference between high and low innovators related to knowledge management systems that fostered collaboration. High innovative firms utilize real-time collaboration infrastructure. As a result, they are quicker to identify value-creating strategies and more efficient at bringing them to market.
Strategy Shift No. 3: Incorporate advanced technologies.
The third shift is to incorporate advanced technologies that inform existing strategies and spur new ideas. Not only were technologies such as data analytics and artificial intelligence more widely adopted by high innovators, according to our research, but these technologies are now being used beyond singular “project” level initiatives and becoming engrained in the operational foundations to drive innovation. As examples of how this works in practice, a low innovator will enact a data analytics project to gain insight into a product, service, or program.
In contrast, a high innovator will embed data analytics into continuous analysis and predictive decision making. As a result, strategic choices are informed by real-time insight from predictive models embedded in the operations. Strategy shifts to reduce, expand, or disrupt are now becoming automated. High innovators also used advanced technologies like artificial intelligence as well as supporting technologies such as crowdsourcing and innovation management software.
Strategy Shift 4.: Utilize innovation methods and tools.
Overwhelmingly in our organizational-wide surveys, employees told us that they lack the empowerment and process to advance new ideas efficiently and quickly. High innovators have invested in methods and tools to move ideas forward and the investment is paying off. There is also evidence that methods and tools establish environments for idea creation. The research found that high innovators create space and time for ideation and innovation. Design thinking and stage-gate processes, our survey found, were the highest scoring innovation methods to advance innovation ideas.
Strategy Shift 5: Measure innovation.
Our research has consistently shown that high innovators have a much better innovation measurement platform. In many respects, this is the most basic strategy shift – getting back to simple measures that are visible, understood and aligned to the innovation agenda. Every employee in these organizations know exactly what the strategy is, and more importantly, their role in achieving it. Our research shows that high innovators are not afraid to invest in the long-term and measure accordingly. Conversely, low innovators emphasize short-term financial measures.
Operationalizing a strategy shift.
Strategy shift involves a permanent change in thinking, and therefore it requires a long-term perspective. We know that organizations are not prepared to abandon their current strategy frameworks for something that may offer more disruption than they are willing to take on. Recognizing this, we refer to them as shifts, not changes to the way strategy is executed. This is an important distinction as businesses do not have to abandon existing approaches but will have to modify them. Simply put, strategy shift requires an organization to spend less time on basic strategy practices in favor of more time on considering two things: what no longer provides sufficient value and what might generate transformative value in the medium to long term. Divesting or expanding out of the core business requires organizations to follow the five strategy shift principles.
As much as the current market necessitates changes and requires pivots, so to does the current strategic frameworks. The time is now for an update to strategy; the time is now for a strategy shift.