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The Difference between Strategy and Innovation

2012 June 13
by Greg
Innovation and Strategy

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.

- Greg

22 Responses leave one →
  1. Stuart permalink
    June 13, 2012

    Good post, Greg.

    Some good clarification of misunderstood and often misused terms

    [Reply]

    Greg Reply:

    Thanks Stuart!

    - Greg

    [Reply]

  2. June 13, 2012

    Greg-
    If “… strategy is a coherent and substantiated logic for making one set of choices rather than another.” and you noted previously that “Strategy is a blueprint” than why would the strategy failing mean “…you didn’t do your job right” or “You screwed up”?

    I’ve always viewed strategy as a best guess based in solid data. There are still a lot of variables outside of your role as the strategy creator that could cause a strategy to fail. Even the greatest architect can have their masterpiece fail due to faulty materials or incompetent builders.

    Thoughts?

    [Reply]

    Greg Reply:

    I think that’s true. No strategy can be a sure thing. Like anything else, sometimes your best efforts go awry.

    However, a failed strategy is a failure and you make effort you can to avoid it.

    On the other hand, failure is an integral part of innovation. You expect to fail on a regular basis.

    That’s a pretty big difference.

    - Greg

    [Reply]

  3. Dean Black permalink
    June 13, 2012

    thank you.

    [Reply]

    Greg Reply:

    You’re welcome:-)

    [Reply]

  4. Matt Horsley permalink
    June 13, 2012

    Greg,

    I agree with most of your post and like your reference to Rumelt’s book; it is a very good one at explaining strategy. I also agree that strategy is overused.

    The one point I think you need more detail on is that I’m not sure a “failed strategy” can be simply labeled a “failure” without more analysis on what failed. If outcome didn’t achieve a defined goal, then yes, the outcome is a failure. Yet the evaluation of a strategy is more than just the outcome, it needs to drill down and ask: Was it that diagnosis of the key problem that was wrong? Was our guiding policy misguided because the situation was not how we interpreted it originally? Did we fail to adapt our coordinated policies in the face of changing information and new obstacles? As Rumelt nicely points out, a good strategy is an educated hypothesis about a future direction to deal with a certain challenge that is nearly always ambiguous because we can’t control all variables. You can have very bad strategy and still have a successful result due to a variety of other factors.

    Best, Matt

    [Reply]

    Greg Reply:

    Matt,

    I hear what you’re saying and other people have made similar comments, but I disagree. A failed strategy means you lose a lot of money. It means people lose their jobs and can’t support their families. It’s a very, very bad thing.

    I’ve run a lot of businesses and had my share of failed strategies. They weren’t intellectual exercises. They mattered.

    I do agree that bad strategies sometimes can succeed through dumb luck and turn out for the best, but the relationship isn’t transitory. That’s affirming the consequent.

    - Greg

    [Reply]

  5. Matt Horsley permalink
    June 13, 2012

    Greg,

    Thanks for response.
    I absolutely agree with you that if you are defining failed strategy as an outcome of “losing a lot money and people losing their jobs and not having an ability to support their families”, then I am in total agreement that is a bad outcome and a failure. That is how you are defining it and that’s fine. No one would disagree with that. I also didn’t intend to deny your experience of bad strategies, which certaintly sounds like ended up leading to failure.

    My intent was to ADD on to your perspective to benefit your readers that unfortunate/failed outcomes do not necessarily = failed strategies nor the conclusion that people didn’t do their jobs. I’ve observed experiences were poor performance/outcomes were due to better positioned competitors with more resources. Since this article was about strategy, I wanted too add that perspective.

    Best, Matt

    [Reply]

    Greg Reply:

    Yes. Well, we’ll somewhat have to agree to disagree. Although I think you’re right that a failed strategy doesn’t mean that people didn’t do their jobs, it does mean that someone screwed up, somewhere.

    It happens to all of us (well…at least to anyone who tries to accomplish anything of importance). When it does, you pick up the pieces, learn from it what you can and move on.

    Anyway, getting back to the original point, when you are practicing innovation, you are supposed to fail. If you’re not, then you’re not doing it right. And that is a major difference between strategy and innovation.

    - Greg

    [Reply]

    Matt Horsley Reply:

    Agreed with your points on innovation!

    By the way, I never disagreed with you, I was highlighting that your analysis of the situation or analysis of strategy can be enhanced by inclusion of the points I made. Good luck, look forward to reading future posts.

    [Reply]

    Greg Reply:

    Fair enough:-) Thanks for your comment.

    - Greg

  6. Jean-Louis permalink
    June 14, 2012

    Hi Greg,
    another interesting post. may i contribute a few thoughts.

    Strategy might also be defined as the battles you don’t want to fight.

    Innovation is too often confused with invention and/or discovery. I appreciate that you highlight the difference.

    From my experience, innovation is a tool contributing to the coherence of a general strategy. A successful strategy needs a very well understanding of the business environment, the competition and own’s position on the product life cycle and company life cycle.

    A one size fits all strategy or it worked before so it should work again is to be seriously evaluated with respect to the above paragraph. I like zero base strategizing when it comes to such important decisions.

    best to all.

    [Reply]

    Greg Reply:

    Interesting ideas. Thanks Jean-Louis!

    - Greg

    [Reply]

    Dean Black Reply:

    My PhD dissertation is about innovation in the military, circa 1972. I have come to appreciate how fascinating innovation can be. Reading these posts, and Greg’s excellent analysis I can see many people are as fascinated as me with these two topics. My interest broadened when in 2002 I was asked to help develop a corporate strategy for the Defense Department as a whole. That project was quite a challenge. Nevertheless, the project revealed to me more about innovation that is not evident at first blush. I now tend to see innovation as a word akin to, say, “soccer”, for example. I could easily choose “golf”, or “bowling”. This is not to say innovation is a game, and I hasten to emphasize it is much more than a “tool”, as one of our peers has suggested. The man whose approach to innovation helped me understand better what it is all about, was a man named James Bright. He explained the ten tactics of innovation. When you work your way through the ten tactics of innovation you realize innovation is like soccer, or golf; there are tactics, approaches and skillsets one needs to ensure the innovation succeeds, or the innovative process bears fruit. But, how does strategy fit in? I really have to agree with the one assessment herein that strategy is about choosing what not to do. At one point I used to think of strategy as a search for the most effective action verb that would describe how, where and when your company was going to do what it needed to do. However, action verbs are best left to mission statements. Instead, strategy is about identifying the imperatives – must dos – and the competencies – how best to do, mindful of one’s weaknesses – and the warnings – the better dos, mindful of what’s coming down the pike. To summarize, to me innovation is a vocation, or calling – the entrepreneur’s bailiwick or passion; while, strategy is venue or setting that speaks to methodology and context underpinning the effort.

    [Reply]

    Greg Reply:

    Thanks Dean. Sounds like you had fun:-)

    - Greg

    [Reply]

  7. June 14, 2012

    Great post! I really like the fact that you took your time and separate the two. There are indeed people who mix them up or believe they are one thing. I was one of them up to the point I realized innovation has more to do with passion and it basically grows out of it.

    [Reply]

    Greg Reply:

    Thanks Denise. Passion is certainly a big part of it (and essential for emotionally dealing with failure). I’ve written more on that if you want to take a look: http://www.digitaltonto.com/2010/the-passion-economy/

    - Greg

    [Reply]

  8. June 15, 2012

    Hi Greg – thanks for the very (as always) interesting post!

    In my books, The Truth About Innovation ,i> and The Strategy Book and Adaptability , I use the following definitions:

    “Innovation is a new idea made useful (by whatever means) while strategy is an attempt to shape the future (by whatever means)…”

    Failure is the price of innovation rather than it’s objective. The objective of innovation is to make new ideas useful. This means that learning fast is better than failing fast. It’s possible to fail without learning, and it’s even possible (sometimes) to innovate without failing.

    Strategy is about shaping the future. A failed business is not the same as a failed strategy. This is why Plan B matters most. My research and experience has taught me that a business that has a strategy that doesn’t work can learn from that, just like an innovator, and keep doing new things, big strategy changes and little strategy changes until they find something that works. Until they have adapted themselves or their situation successfully. All failure is failure to adapt, so the only strategies that really fail are those that fail to be adapted.

    The difference between innovation and strategy is that innovation is, by definition, about new ideas, while strategy may (or may not) be new. The similarity between innovation and strategy is that they both involve the potential for failure, and they both require adaptation and learning to be able to succeed and keep succeeding.

    Thanks again for a great post!

    [Reply]

    Greg Reply:

    Thanks Max!

    I think you make a good point that failure is not an objective of innovation, but it is an expectation.

    Jamie Dimon and JP Morgan recently failed in their risk management strategy. It cost them billions. As I noted above, Edison failed thousands of times and made a mint. I think that’s a crucial difference.

    I also think the concept works well as a litmus test. When someone says they want to innovate, they should have some expectation of failure. When you build a strategy, you know that there is some chance of failure, but you do everything you can to prevent it.

    - Greg

    [Reply]

  9. June 18, 2012

    Greg: It is worth noting that the number of comments on this topic is somewhat significant. I think that points to the importance of this topic as well as the degree that we all have some opinion of what a strategy is and what it does. Your post is cogent and spot on. In the chat #hcsm the discussion frequently talks about SM as a strategy and not a tactic. There are few of us who try to correct that. SM (i.e. Twitter, FB etc) is just toys for execution. In reality it is the goal and subsequent strategy that dictates a tactic. In fact in learning/education/medicine I would say that you identify a goal first and what are your outcomes you want to achieve (how will you measure success). And then back into a strategy and tactic. But I may be pushing my limited IQ with that process.

    Just to dramatize strategy etc. My wife was a creative director at a medical ad agency. I was the lowly AE. Whenever I wrote a creative brief to begin the creative process I would be beaten if the strategy was not clear, concise and brief. Or if it was stupid. The real test of a strategy at least in communications and marketing is to see if a creative director can create an ad or message easily that captures that strategy. I would say look at the Apple Ads Chiat/Day (I’m old school with them) is given and develops strategies that just scream for excellent creative execution. We’ve all seen dumb ass ads. Those are from dumber assed strategies. Everyone should learn to write strategies at the feet of creative directors.

    [Reply]

    Greg Reply:

    Great points Mark!

    - Thanks.

    [Reply]

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