You Need an Innovation Strategy

Many companies struggle to sustain innovation performance despite significant investment. The author argues that this failure is rarely due to poor execution alone, but rather a lack of an explicit innovation strategy. Without a clear strategy, firms often adopt a "grab bag" of popular best practices—such as crowdsourcing, open innovation, or decentralized R&D—that may be mismatched with their specific competitive needs. Because every innovation practice involves trade-offs, adopting one without a coherent system to support it often leads to conflicting priorities and inefficient resource allocation.

A robust innovation strategy serves as a guide for making difficult trade-offs. It must answer three fundamental questions:

1. How will innovation create value for customers? Whether through improved performance, convenience, or cost reduction, the firm must choose a specific value proposition and stick to it.
2. How will the company capture a share of that value? Firms must identify complementary assets or business model features that prevent imitators from eroding their competitive advantage.
3. What types of innovation should be pursued? Using the "Innovation Landscape Map," companies must balance routine, disruptive, radical, and architectural innovations based on their technological and business model needs.

Innovation strategy is not a static document but a hypothesis that must evolve with the market. Senior leadership is responsible for orchestrating the complex system of processes, structures, and talent required to execute this strategy. Leaders must resist the "home-field advantage" of focusing solely on routine, incremental improvements. Instead, they must proactively allocate resources to more radical or architectural projects that support long-term growth. By providing clarity on priorities, leaders can overcome the natural resistance that arises when different functions—such as marketing, R&D, and finance—have competing views on how to weigh innovation trade-offs.