10 Rules for Strategic Innovators – 1

2014 I am in the midst of reading “10 Rules for Strategic Innovators” by Vijay Govindarajan and Chris Trimble. As I reflect on what I am reading I will write a series of posts – not so much as a review of the book, but the thoughts it triggers.

Before I picked up this book, I was revisiting “Blue Ocean Strategy”, “Business Model Regeneration” and a number of other well-known texts on Strategic Innovation. ‘Blue Ocean’ certainly is about Strategic Innovation, in that it looks at the architecture of value as a starting point before it gets into business models.

Accordingly, once you have understood the dimensions of value you can play around with them in different ways to create unique uncontested configurations, which then become the basis for one or more business models. I will reflect on Blue Ocean Strategy shortly, so will leave this topic for now. My intent of bringing that reference and other books was that there are a number of other sources that discuss “Strategic Innovation”.

The subtitle, which you see on the inside cover flap (should you have a physical old-fashioned object), gives you an accurate gist of what this book is about – “How to build a breakthrough business within a profitable old one”. This book is focused specifically on those businesses that are currently profitable, and for various reasons are pursuing a new strategic opportunity that is distinctly different from the existing business. It therefore does not discuss ways of identifying breakthrough ideas, but focuses rather on execution.

The term ‘Strategic Innovation’ is mentioned often in the context of innovation, though as one can expect, interpretations vary. I have been thinking of it more in terms of the nature of impact innovation has on the enterprise. Strategic Innovation is not just about the degree of impact, or about business models, but rather that which is radically distinct from anything the enterprise is currently doing or done before, and therefore transformational. Strategic Innovation would certainly involve new business models, but the reverse, in my opinion, is not true. One could innovate an existing business model with a significant impact, but it may not necessarily take the enterprise on a radically different strategic path.

Similarly, management researchers seek an organizational code—a set of rules that can reduce dysfunctions, sustain growth, and lengthen the average corporate life span beyond that of a human being. The code will have to enable strategic innovation: a process of exploring experimental strategies.

Strategic innovation involves testing new unproven, and significantly different answers to at least one of the three fundamental question strategy: who is your customer? What is the value you offer to the customer? How do you deliver that value?

I like the notion of organizational DNA. I have been thinking of business architectures as “value design systems” – design systems that once put in place can create a range of value within a range of contexts. The second line in the quote above puts the emphasis on experimentation and testing. I think experimentation is very much a part of the whole innovation process. However, I do not think you can exclude the critical activity of identifying significant opportunities to pursue from the overall umbrella of strategic innovation. ‘Strategic Experimentation’ though is what the authors emphasize on as critical to making strategic innovation real.

Underlying this emphasis on experimentation is the thinking that strategic innovation requires dealing with a significant amount of ambiguity and uncertainty. It is therefore not possible to make concrete plans to execute an idea in the conventional sense, and experimentation therefore is integral to the execution approach, at least in the beginning.

The approaches discussed describe ways to work through this uncertainty, a process termed ‘strategic experimentation’. Correspondingly, if the uncertainty does not exist or has been reduced due to for example another competitor having already tried the approach, then it does not qualify to be termed “strategic innovation” according a list of several criteria in the introduction. Distinguishing strategic innovation from other forms such as process or service innovation, the authors specify that such innovation always involves unproven business models. I wonder if this is necessarily true. Is it possible to come up with a strategic innovation, but you are able to replicate or borrow from a business model from some other domain.

Strategic Innovation is critical in the increasingly challenging business context in order for enterprises to stay ahead and be able to influence their own destiny. With the shift in emphasis in strategy from planning to innovation and change it is a competence business must develop, and this book proposes to show you how.