The Difference between Strategy and Innovation
Strategy and innovation are often conflated. Recently, I even had someone say to me, “last time I checked, strategy and innovation were the same thing, is that not correct?” in a tone just like the one my 2nd grade teacher reserved for the dullards in the class.
No, it is not correct. Not even close. In fact, they are quite distinct, requiring vastly different people, skill sets and processes. Try to do both at the same time and you’ll likely do none of either. That’s a serious problem.
The conundrum is that every business needs both. Without strategy you have no direction, without innovation you lose relevance. They both need to be part of an integrated effort. So it is important to be clear about what each needs to succeed, where to deploy them, who should drive them and what to expect. Here’s a guide that will set things straight.
What is Strategy?
Strategy is probably the most overused word in business. It is often employed, unhelpfully, as a value distinction. If something is “strategic,” then it’s well thought out, if it’s “unstrategic” then some idiot must have done it.
In reality, as I wrote in an earlier post, a strategy is a coherent and substantiated logic for making one set of choices rather than another. In other words, it’s used to make decisions that drive action, whether that entails the overall mission of the enterprise, where it allocates resources or how it implements programs and processes.
Good strategy is clear, never confused. At its best it’s elegant, meaning that it explains the maximum amount of variables in the fewest number of statements. Most of all, everything strategy does is in the service of operational success. There can never be “good strategy, but poor execution,” because assessing capabilities is a crucial component of strategy.
In Good Strategy Bad Strategy, Richard Rumelt points out that good strategy “brings relative strength to bear against relative weakness.” I think that’s about right.
The Role of Failure
One thing that you never want a strategy to do is fail. That’s very bad. It means that you didn’t do your job right. You screwed up.
Failure, on the other hand, is an integral part of innovation, which is usually neither coherent nor substantiated, but a dirty, messy business. After all, if you knew what you were doing, it wouldn’t be innovation, it would be execution.
The practice of innovation, unlike strategy, is about possibility, not direction. It involves a lot of fumbling around, chasing wrong ideas down blind alleys, experimenting and trying things out. The trick is that you fail quickly and cheaply, then move onto the next idea. Eventually you’ll get to something that works. If you can survive you can thrive.
Edison tried and failed thousands of times to invent the lightbulb before he got it right, then he sold a bunch and made a mint.
And that’s why the difference between innovation and strategy is so important. Strategy is a primary function of senior management. Innovation is not and shouldn’t be. Once they get involved, buy-in increases, costs rise and failing quickly and cheaply becomes very, very hard.
Innovation as Combination
One important aspect of innovation is combining old things in new ways. As I noted before, breakthrough discoveries often adapt ideas from far flung contexts.
Darwin borrowed from geology and economics, Einstein was deeply influenced by Humean skepticism and Google transformed a practice from the academic world into a new approach to searching online. The list goes on.
That’s because innovation is most important when you get stuck, when you’ve hit a wall and conventional wisdom is no longer so wise. Time tested approaches begin to fail. A new path needs to be forged.
Innocentive, an open information platform, finds that most of the solutions come from people working outside the field. A molecular biologist, for example, might find that a problem that stumps industrial chemists is very similar to one that has long been solved in their field. Newcomers have fresh eyes and can often bring a fresh perspective.
Of course, the best time to innovate is before you get stuck and start to lose customers. Small failures can be productive, but a big failure can kill you. That’s why innovation and strategy have to meet up somewhere and why there is so much confusion.
The Path to Innovative Strategy
As I noted above, strategy is best when it’s simple and clear. If something worked yesterday, it will most likely work today. Unless you have a good reason, it’s best to go with what you know works and you can do well.
Unfortunately, that’s not always possible. As I’ve previously written, business models don’t last very long anymore. Technological cycles are becoming shorter than corporate decision cycles and disruption is becoming the order of the day. That’s when innovative strategy (notice the adjective) becomes imperative.
And that’s how innovation can inform strategy and why it’s important to have an ongoing innovation effort that is separate from the overall corporate direction. All of those failures provide useful knowledge and experience that can be combined to form a new strategy.
It is, after all, the failures of innovation that can inform the future success of strategy.