What is Strategic Innovation?

Strategic Innovation is a relatively new discipline within the field of strategic management.

Why do we need Strategic Innovation?
In recent years criticism of the traditional approaches, tools and techniques – (1) strategy being too focused on operational effectiveness, (2) strategy being an too analytical and incremental process focusing too much on beating the competition and defending a maybe outdated strategic position by using (3) tools that were not invented for the problems at hand – lead to the assumption that strategic management, as it is practiced by companies today, is not suited to gain a unique position in the market. A position, which enables a company to build and sustain lasting competitive advantages and guarantee the necessary success and streams of revenues to assure the long term survival of a company.

Because of this criticism and the disadvantages, new approaches to strategic management have been developed. Regrouped under the term “Strategic Innovation” they represent a new way of thinking about strategy and offer new approaches to the development of strategies that enable a company to attain such differentiation necessary for competitive advantage. These new approaches are as much about new tools and new processes, as about a completely new mindset, when it comes to thinking strategically.

Defining Strategic Innovation
If you look at common definitions of strategic innovation from academic and professional publications, you can observe the following three outcomes of strategic innovation:

Strategic innovation leads to either:

1. new business models (including a new value chain architecture), or
2. new markets (either by creating new ones or reshaping existing ones), or
3. increased value for both the customer and the company

or a combination of these three.

Drawing upon the above said, strategic innovation can be defined as:

• a framework of interdependent content, process and context dimensions,
• facilitating the application of creativity and innovation to strategic management
• in order to enable strategic differentiation and competitive advantage,
• by challenging conventional logic and redefining the company’s business model, redrawing market boundaries, creating new markets and value improvements for customers and the company itself.

The following figure illustrates the sequence and outcomes of strategic innovation.

 

For a more detailed definition, please refer to the report on pages 22 ff.