How to get big growth in tough markets.

Strategic InnovationYou can't cut your way to growth. And since this recovery looks like it will take some time, neither can we rely on a booming economy to deliver for us. Businesses will have to make it happen themselves by finding new sources of profitable growth, and one solid way to do this is through Innovation.

Indeed, research has shown again and again, that the businesses that invest in R&D and innovation during the toughest phases of the economic cycle, come out the strongest. And those that don't innovate, either in their core markets, into new markets, or into new commercial models (new ways to make money from what they do) often don't make it out of the cycle at all.

Innovation capability is patchy in most organisations. A manufacturer might innovate well in product design, but not in production processes or sales methodology. They may innovate well in their core markets, but not into emerging or untapped markets. And organisations rarely look to innovate around the fundamental business of how they make money. 

Why? Because they take a tactical approach to innovation. This means they 
focus their innovation efforts in specific, narrow areas, often on solving tactical, rather than strategic issues, leaving them vulnerable to being outflanked by more visionary competitors. If this sounds like it might apply to your business, read on.

Taking a more strategic approach to innovation will increase your competitive advantage, accelerate growth, and open up access to new, more attractive markets. But it means taking a more innovative approach to all aspects of the business.

Here are ten things you need to have in place to make innovation a core part of your strategy.

1. Clear scope for business: what you are, and aren't - where you will play, and where you won't. This makes the decisions about which ideas are worth testing, simpler, faster and more objective.

2. Pipeline of ideas: these may come from employees, partners or academia, market and competitor research or customers themselves. Who in your organisation is putting in the effort to continually solicit and get these ideas collected, defined and filtered?

3. Strategic challenges: a clear strategy should help identify the big uncertainties, risks and potential scenarios facing the business in thefuture. Are you clear what these are in your business? What are you innovating in response?

4. Simple priorities: most businesses look at potential size and likelihood of delivery in order to value opportunities. Innovation is about taking risks and pushing boundaries, so forget "likelihood". Instead, look at "potential size" versus "cost to fail" to prioritise efforts

5. Dedicated people: part time teams don't innovate well - they have too many draws on their time and ultimately, they are measured on their day-job. If innovation is core to strategy, it will need dedicated resourcing with good people who are absolutely passionate about making it work

6. Senior sponsors: new ideas are fragile and easily destroyed. Innovators need air-cover from senior players in an organisation - preferably execs who have been innovators themselves - in order to survive and thrive. Do your executives regularly discuss their innovation portfolios?

7. Fast route to failure: failure is inevitable in innovation - if you're not failing, you're not trying, so the faster and cheaper you reach the point of failure, the more quickly you will home in on winning innovations. How easy is it for your people to rapidly and cheaply prototype concepts and get them in front of customers?

8. Frequent gateways: at Shell, less than 10% of innovation ideas make it to market, so the pipeline needs aggressive weeding right the way through to ensure the best opportunities get the focus and funding in the later stages. Frequent gateways also drive pace and clarity, and keep the sponsors engaged with the projects

9. Second chances (and third): occasionally great ideas will be kicked out of the process. The archives of 3M have dozens of examples wherepassionate people didn't give up, but scrounged time and parts and worked on their own time to make their ideas work. Don't be too hasty topermanently kill an idea if someone is prepared to put themselves on the line for it

10. Feeback and reward: celebrating failure just as much as success, praising efforts and creating champions, this is the flywheel that keeps the whole innovation cycle running. Who does this now in your team? And how visible is it to the rest of the business?

Final Thought: A strategic approach to innovation doesn't need to be expensive, but it does need to be energetic and embedded into the heart of the organisation. What can you do over the next few months to accelerate the pace of strategic innovation in your business?