Three Things to Consider When Developing an Innovation Strategy

The process of developing a strategy in companies pre-pandemic was nothing more than an exercise in incremental adaptation of last year’s plan. The pandemic proved that the strategy development process needs to be more dynamic if the companies are to be able to swiftly adapt to new conditions when they arise. Furthermore, strategic planning is often a very formal and analytical process by which standardized templates are filled in by highly specialized individuals and then compiled by central planning into a long document.

With the number of companies considering innovation as a viable growth avenue increasing, the need for a clearly defined innovation strategies is today more stringent than ever. However in many cases the flaws of the development process of the corporate strategy presented above, carried over to the innovation strategy development. But this was not the case of Roche Belgium & Luxembourg where, then, Director of Business Strategy & Innovation and Head of  Transformation Office Eva McLellan had another approach. 

Coming from the need of clarity around the innovation investment and a tool that will help in the decision making process around innovation investment, Eva set out to build the company Innovation Thesis. Just like venture capital investors have investment theses that specify the types of startups and markets they invest in, every corporation must have an innovation thesis. An Innovation Thesis clearly sets out a company’s view of the future and the strategic objectives of innovation.

To mitigate against the shortcomings of the traditional process of strategy development leaders need to consider these three things that were purposefully done differently by Eva in Roche:

  1. Define clear goals and metrics for innovation and include them in the strategy

A sound innovation strategy needs to be rooted in clear goals and metrics. Strategy formulation is not an exercise that needs to be completed for the sake of completing it but it needs to serve a purpose. And that purpose is to obtain tangible results from the upcoming innovation investment. Goals such as a certain number of ideas, of a certain kind in the portfolio by a given date, or a certain percentage of revenue coming from new ideas by a certain date, are just two examples of goals that help bring pragmatism to the innovation strategy.

At Roche we started the strategy process by asking ourselves where we want to go next. How can we translate our company’s vision into actionable goals for the innovation investment and how can we measure our progress towards these goals?

Eva McLellan

Eva also added that the strategy formulation started with a good understanding of the current context, and in particular a good understanding of the current business model portfolio. 

Only once goals and metrics for the innovation investment are set, the work on strategy can commence.

  1. Get representation from across the business and external input in order to get everyone’s perspective. 

Traditionally strategy formulation was a process reserved only to a selected group in a company – usually made up of senior executives and employees with ‘strategy’ in their titles. However, in a business environment as dynamic as the one today and with a topic as complex as innovation, companies can no longer hope that a small group of highly specialized individuals have all the inputs necessary to build a sound innovation strategy. Strategy is becoming a team sport.

Given the complexity of strategy formation in healthcare, It is important that everyone’s voice was listened to if we hoped to fully grasp what’s happening in our environment.

Eva McLellan

Therefore, part of the innovation strategy development process at Roche was to interview people from across the business. The process was purposefully optimized for diversity – both individual diversity as well as perspective diversity.

I was not satisfied with interviewing only our leads in finance or in business strategy. I encouraged that we spoke with domain experts as well as generalists. We interviewed junior associates as well as seniors. We participated in external open innovation events like Healthcare hackathons, to open up to external points of view. And we put a premium on the ones that were working the closest with the patients and the healthcare professionals.

Eva McLellan

In other words the strategy formulation was neither top down, nor was it bottom up. It was outside in, and middle out with a lot of people in the company having contributed with relevant inputs. 

  1. Transparency of the process and of the outcomes.

A byproduct of the approach of involving the company at large in the strategy formulation process was transparency and a sense of ownership. Transparency and ownership are critical elements for the implementation phase of the innovation strategy. It is far easier for people to rally behind a strategy if they took an active part in developing it, than it is if the strategy is handed.

In the end, when our Innovation Thesis was ready everyone felt a sense of shared ownership. It was easier for people to understand why some elements were in the Innovation Thesis and others are not when they contributed to the development. It then enabled focused action and decision making around our investments.

Eva McLellan

Involving people through the development process payed dividends in the communication and deployment phases. Involving customers and external perspectives ensure that the company is focused on real problems to solve, and innovating around those. And finally, aliening incentives supports desired behaviors. If people are involved, the outcomes made clear, and incentives aligned, the chances of friction and low support in the deployment phases dramatically drop.

This new approach to strategy, that Eva likes to call “outside in and middle-out”, is not only telling of the changes in today’s business environment but is also an embodiment of the mantra: to truly innovate you need to partner and collaborate, and innovation is everyone’s job.

This article was initially published on the OUTCOME Blog.



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