31 Jan Four innovation strategies
Nowadays all companies want or need to be innovative. At least that is what they believe or are told by business consultants. The role models are of course start-ups. That’ s why large companies build themselves innovation labs, creative “speedboats” and even try their luck in unfamiliar waters. But does that really make sense?
Four basic types of innovation
If you look at how companies are approaching innovation today, you will see that there are four basic strategies. On t one hand, there are innovation strategies that build on the existing business models, structures, knowledge and assets. On the other hand, there are strategies that aim to build up new business models, values and capabilities. Some of these strategies are disruptive, i.e. they replace the existing business models, while others maintain them.
This strategy is unfortunately very popular. I say “unfortunately” because many companies, with the intention, or rather wishful thinking, of being a start-up, are wildly pushing innovation out of the ground on greenfield sites. In most cases, so-called innovation labs are set up outside the structures of the parent company. Cool offices, flat structures and a new culture. In some cases this may serve as a “learning factory”, but in many cases the high hopes are turned into castles in the air. The worst thing, however, is that what is learned does not flow back into the parent company and nothing pays off in terms of the existing business model. Large companies are simply not startups!
A simple strategy. Companies with the necessary cash buy in innovators and start-ups to profit quickly and selectively from new technologies. This is a sustaining strategy that contributes to the core business and generate growth. This strategy is often combined with an optimization strategy (re-innovation) to optimize the existing business and scale it with new technologies.
We speak of a cannibalization strategy when companies, based on their current business model, knowledge and capabilities, tinker with new disruptive business models in their domain with the objective of replacing the old business model. This is probably one of the most complex innovation strategies, because it involves a high organizational and cultural change that requires a lot of courage, especially in large companies.
This innovation strategy is based on developing small innovations in the existing business model. Learning and optimizing step by step to scale the business itself and make it fit for the future. This strategy is often misunderstood as optimization and not as innovation. But in my opinion, this is the real goldmine, because this strategy produces fast learning companies that are able to react to almost every change in a fast and innovative way.
Lean Service Design focuses on existing strengths.
The basic concept behind Lean Service Design is based on finding opportunities for innovation derived from customer needs and business objectives along the existing journey. LSD is based on the existing journey combined with the current business model. There is already so much untapped potential in there. So why start with greenfield innovation? But that doesn’t mean that you can find fields of action along the journey that require a new business model. At the end of the day, you will realize that no matter which innovation strategy you choose, everything ends up in “Re-innovation”. Even a startup that is currently on a disruptive path will quickly enter an optimization mode.