There is a common belief, that innovation is largely driven by creativity and – as an outcome – ideas.

While ideas are undoubtedly important, we would contend that in most companies there is no shortage of them. The far bigger challenge seems to be to decide which ones to evaluate or even follow through on.

That’s where strategy comes into play. By answering the fundamental question

“What does the organisation have to do to reach a maximally secure as well as valuable market position?”

it helps decide and agree:

  • which businesses you should be in
  • who your target customers are
  • what your value propositions to them might be
  • and – by extension – which capabilities are essential to creating these value propositions and thereby adding value to your business

If you are clear on this, it is much easier to determine which ideas to follow and where to look for even more innovative ideas.

You would also avoid the problems we recently encountered during a workshop at a typical German midsize company: managers were unsure whether their very plausible ideas to address a foreseeable revenue gap caused by an aging product line would be OK to follow through on. Just because they were unable to tell whether their proposed solutions were in alignment with the company’s strategy.

In short: strategy makes innovation a lot more effective by helping to chose where to sensibly apply resources and follow through on ideas.

(To aid developing your strategy we have created a strategy toolkit – in German for now! – consisting of a short workbook and four canvases. Feel free to download here!)