Aligning innovation to organizational strategy February 5 2009

Aligning innovation to organizational strategy February 5, 2009 All materials © Net. Centrics 2008 unless otherwise noted

Welcome • Our goal for the next hour is to examine the importance of aligning innovation to strategic goals and outcomes – Align to goals and strategies – Define what innovation means – Defining and embracing “strategic intent”

What We Want to Accomplish

Goals for this section • Examine the linkage between innovation and strategy • Identify how innovation supports or enables key strategies • Identify the “strategic intent” of the organization • Position innovation as an enabler for the university and its strategy

Key Points • Innovation is not a strategy – it is an enabler to a strategy – Too many times innovation is viewed as a strategy rather than an enabler to help you achieve a strategy • Firms that are innovators align innovation to enable key strategies – Define your key strategies, then determine how innovation can help you achieve those strategies • Align innovation to strategic intent

Identifying Corporate Strategy • What are the 3 most important strategies of your organization today ?

Strategy and Innovation • Unless we’ve missed the mark, you didn’t say innovation is a strategy, yet it is often treated that way • Innovation isn’t a strategy, it is an enabler to important corporate strategies • Innovation fails most often when innovators chase “interesting” ideas that aren’t aligned and don’t support corporate strategy

Strategy > Innovation • Your strategic goals define what your firm wants to accomplish • Innovation helps shape the possibilities for incremental change or disruption of products, services or markets aligned to those strategies

Strategic Overview • • Usually growth or acquisition oriented Usually 3 to 5 year projection About markets or customer segments Communicated internally and externally

Innovation and Corporate Strategy • Most organizations embark on an innovation program with one or more of these goals in mind: 1. Organic growth – gaining customers, revenue or profits from new products and services 2. Disruption – upsetting the existing order in a market, creating something new 3. Differentiation – demonstrate a unique offering or business model

“Organic” growth • In this definition we mean growth based on extending or expanding the existing model, not growing through acquisition

Growth Gap • Firms that seek organic growth typically have a three to five year growth goal in terms of revenue. • The difference between the revenue total today and the goal in three to five years is the growth gap.

Your “Growth Gap” • What’s your goal (for example, student headcount) in three years time? • What amount of that goal can you count on today doing what you are doing? • The difference is the “growth gap” • Can innovative products or services help you grow organically and fill that gap • Alternatively, can innovative thinking help you identify acquisitions to fill that gap?

Disruption • Often firms will disrupt another market when their “home” markets or products have grown stale or commoditized • Apple disrupted music distribution with i. Tunes, the real value driver behind i. Pod • What’s the cost of disrupting? Why will your firm be successful? Are there any risks associated with disrupting your market or an adjacent market?

Christensen’s Model From Christensen’s Innovator’s Dilemma

Disruption • What organizations are disrupting your offerings? How? • What are you doing to counteract or prevent that disruption? • What competitors or markets are you planning to disrupt?

Differentiation • In any industry, there are three clearly defined positions – Innovator – Customer Service leader – Low cost provider • Every other firm is a second or third option in one of these categories • How does innovation help Pacific differentiate?

Three Clear Differentiation Strategies

Differentiation • What place do you hold in your customer’s thinking? Innovator, Service leader, Low cost provider? • What place do you want to hold, and how can innovation help you achieve that?

Other innovation goals • We’ve looked at three strategic goals for innovation – Organic growth – Disruption – Differentiation • What other goals do you have for innovation?

Pacific’s commitment to Innovation • From the website (http: //web. pacific. edu/x 12138. xml) • The first Commitment of Pacific Rising states that "Pacific is committed to innovation and creativity across the University. " This will be achieved through two specific Strategic Directions. – Expand innovation in academic programs through an ongoing innovation process, support to pedagogy and research and new education and service delivery models. – Enhance University administrative programs and services through innovation and creativity by targeting fundraising, increasing incentives and improving services and programs.

3 to 5 year corporate goals • List a few 3 to 5 year corporate goals for your organization • What are the gaps that innovation may be able to fill? • What are the expectations of the executive team about innovation in regards to these longer term goals?

Strategic Intent • Based on research from Hamel and Prahalad, strategic intent is defined as: – An ambitious and compelling dream which provides emotional and intellectual energy for the company and defines the journey to the future

Align to strategic intent • We define strategic intent as what you intend to do well or what you want to be known for – Apple – customer experience – Google – management of information • Our experience is that organizations innovate best when they innovate around their strategic intent • What is your strategic intent?

Consider Pacific • What are the key 3 -5 year strategic goals? • Is organic growth a driver? • Do we wish to disrupt the market or customer segments? • How do we differentiate? • What is Pacific’s strategic intent?

Key Takeaways • Innovation is often thought of as a strategy. Innovation is an enabler for corporate strategies • Through innovation aligned to your strategies you can accelerate growth, differentiation and disruption • Without a sense of direction and strategic intent, innovation is difficult to accomplish

Exercise • Aligning strategic goals and Pacific innovation

Innovation Definitions

Definition of Innovation • Innovation has as many definitions as there are people in the room • We often use the word assuming other people have the same definition • It’s critical that everyone has the same definition for good communication

Let’s try it • Provide a definition of innovation and let’s discuss

If it’s this hard • If we, innovation leaders, have a hard time defining innovation, how do we communicate what we expect to our innovation teams and participants • As simple as it sounds, we need a common definition for innovation, so there’s consistency in approach

Innovation is people putting ideas into valuable action

OVO’s Definition • Innovation is people putting ideas into valuable action – Innovation is not just “creativity” – Innovation is not just idea generation – Innovation requires putting ideas into action – developing new products and services – Those new products and services need to drive value for someone

Your Definition of Innovation • When we say innovation, do we mean: – Incremental or disruptive or both? – Broadly participative or skunkworks? – Centralized or decentralized? – Open or closed? – Directed or suggestive or both? – Generating new products or services or business models or channels or all of the above?

Common Language • Who is responsible for creating the definition of innovation for your firm? • How do you reinforce that common framework or definition?

What’s the definition for Pacific? • From the website (http: //web. pacific. edu/x 19590. xml ) • There are three conditions that should be met for innovation at Pacific. Innovation is: – the introduction of a new idea or using something in a new way; – the idea is put into practice which creates change that has value; and – the change has a positive effect on student learning, service, or organizational performance.

Key Takeaways • Innovation is a valuable yet poorly defined attribute • To achieve our goals of consistent, valuable innovation, we need the entire team working to the same definition • That means we need one clear definition of innovation, communicated to everyone who will participate

Exercise • Innovation definition exercise