An organisation’s managers can help to make profit and create social benefit from innovation by selecting a good innovation strategy. An innovation strategy is a set of actions that primarily influence innovation and are important for the organisation*. For example, developing only high technology products is part of innovation strategy, but selecting a team to develop a single product is not usually part of innovation strategy unless that product will have a major impact on the organisation. A good innovation strategy is one which supports the development and application of the organisation’s innovation.
Some actions are almost always part of a good innovation strategy. Actions that improve innovation context, such as the involvement of a wide range of employees in innovation, are helpful for most innovation processes, and were discussed in the last blog post (). They work well in most organisations.
Other actions may possibly be part of a good innovation strategy, depending on the organisation and their situation. Their inclusion may depend on the organisation’s resources, experience, competitors, and customers, for example. This blog post discusses how to choose these possible actions for an organisation’s innovation strategy, using examples from the Democratic Republic of the Congo. The choices that we examine are shown in table 1.
Table 1. Choices about the innovation strategy
A manager invests resources in innovation when they give people involved the permission to use things that the organisation controls. The things may be finance, material, managerial involvement, labour, skills, or time. Investment is part of innovation strategy when it involves substantial amounts of money or when it could have a significant effect on the organisation.
Investment matters because resources are essential to innovation. Finance pays wages, buys material, and funds product launches. Material is used in developing and testing ideas for innovative products. Managerial involvement provides direction and evaluation. Labour provides ideas, collects evidence, and analyses proposals. Skills improve the work of managers and labour. Time is necessary for completion of the innovation process.
When an organisation has access to resources, whether its own or those of another group such as a bank or partner, its manager has to decide if investing them in innovation rather than alternative uses leads to better outcomes. For businesses, reaching the highest profits is an important criterion for investment. Not-for-profit organisations may have many different criteria for evaluation, and a manager would have to compare outcomes against each criterion. For example, a health outcome from investment in innovation may be compared to an educational outcome from investment in existing operations. Clarity about the organisation’s goals is important when setting criteria for evaluation.
A manager who wants to compare the outcomes from investment in innovation and other uses should think what the other possible uses are, and the prospects for the other uses. One possible use is investment in the organisation’s various current operations. Another possible use is reducing the organisation’s debts or other liabilities.
Managers should also consider the difficulty of the work, the organisation’s ability to do the work, the willingness of staff and managers in the organisation to support the work, the presence of other work, and the demand for the results of the work now and in future. Usually, a manager will not know in advance what the effects of these influences will be, and will have to estimate them. The manager may sometimes prefer a lower risk option to a higher risk option, even if the higher risk option has better prospects.
An example of a strategic choice about resource investment is in the establishment of Activa Assurances RDC. This insurance company was established in the D.R.C. in 2016 by Groupe Activa, the Cameroonian multinational insurer (). During its establishment, Groupe Activa invested more than ten million U.S. dollars, hired and trained senior staff, leased and equipped offices, and set up a network of local salespersons (; ). Groupe Activa’s decision to invest was influenced by their ambition as a company, the D.R.C.’s size and demography, the D.R.C.’s economic dynamism, and the small size of the current insurance market in the country (; ).
Creating a specialised department
A specialised department for innovation is a large, stable, and connected group within an organisation, whose members work primarily on innovation, and which performs or oversees much of the innovation in the organisation. It is an alternative to individuals and small groups innovating without a common connection, or temporary teams innovating.
A specialised department can help an organisation to innovate in a number of ways. It has a focus on innovation with few other responsibilities, as well as devoted resources and time. It brings innovators into constant and easy contact with each other. It provides an established and clear route through which the organisation’s plans for innovation can be implemented, and shows a prominent commitment to innovation that demonstrates to all employees its importance.
A manager may nevertheless decide not to set up a specialised department for innovation, as despite its advantages it has disadvantages, too. There is a risk that innovation will become an activity that is done only by the department, which would lose the skills and ideas of everyone outside the department. Additionally, the presence of a fixed group with its own workers, rules, and procedures may make it more difficult to establish temporary innovation teams in which these things are changed. What’s more, a department risks becoming closed to outside information and approaches, which would damage every stage of its innovation process. Finally, there are the costs of setting up and maintaining a separate department.
A manager deciding whether to set up a specialised department for innovation should consider the following factors. One factor is the importance of innovation to the organisation. If it is very important, then a specialised department may be a good idea since innovation can keep occurring in it even if the organisation has other urgent activities. Another factor is whether innovation can be separated into major projects, distinct from the daily work of the organisation. If it can’t – for example if most innovation is small improvements done by individuals - then a specialised department’s separation from the rest of the organisation may hinder innovation. A further factor is the availability of resources – a specialised department requires financial and human resources, so a organisation with fewer resources may prefer to invest them elsewhere.
An example of a strategic choice about department creation is in the establishment in 2019 of the Accelerator Laboratory by the United Nations Development Programme (UNDP) in the D.R.C. (; ). The Laboratory addresses problems of ensuring people have security as well as essential goods and services if these are not guaranteed, when the problems of delivery are complex and change rapidly (). The Laboratory uses recently developed techniques for innovation in this area: using people from outside the organisation as sources of information, solutions, and evaluation; using computers for evaluation; and running experiments to test solutions. The Laboratory is focussed on innovation, in contrast to the UNDP’s broader focus (), and has dedicated resources (). The UNDP judges the Laboratory’s approach to innovation to be important for its overall aims, and the German government judges that the Laboratory is worth funding. These factors make the Laboratory a viable and appealing choice for conducting some of the UNDP’s innovation in the D.R.C.
Selecting the economic or social sector of innovation
A manager has to select the economic sector for which their organisation will innovate, if their organisation is commercial. If the organisation is non-commercial, then the manager has to select the social sector in which to innovate, such as not-for-profit nursing or public transport. The selection is usually strategic because it affects all of the innovation that the organisation does, with large effects if innovation is important to it.
The economic or social sector in which the organisation innovates can affect the likelihood of a successful innovation. It can affect the ability of an organisation to innovate, as an organisation may be better suited to work in one sector than another. It can affect the ease with which an innovative output can be developed, as it influences the complexity of this output, for example by changing the technical content of products and processes. It also affects the demand for the output, for example with goods in fashionable sectors tending to have higher demand on average than in other sectors. All of these factors influence the likelihood of successful innovation.
A manager should consider and balance the effects on these three factors – organisational ability, ease of development, and demand for the output – when deciding the sector in which to innovate. Ideally, the organisation should choose a sector where it has a high level of ability to innovate, where it is easy to develop innovations, and where there is a high level of demand for the organisation’s innovative output. However, there will often be trade-offs between these factors. For instance, if it is easy to innovate in a sector, there will often be many competing innovators and a low level of demand for any one innovator’s products. A manager should chose the sector with the best combination of the factors for their organisation, perhaps by innovating in a more difficult sector in which the organisation has a high level of skill but face less competition.
When selecting a sector for innovation, a manager should also consider the following influences on selection. A sector with a high level of technical sophistication will present greater difficulties for innovation, and it will be less appealing to innovate in it. A sector with technical demands that closely match the organisation’s skills will increase the organisation’s ability to develop innovation in the sector, and it will be more appealing to innovate in it. A newer sector may have a higher demand for new products, making it more appealing for innovation.
An example of a strategic choice about the sector for innovation is in the industrial policy issued in 2020 by the government of the D.R.C. (; ). The policy identifies the industrial and energy sectors as key areas that the government would like to develop. It plans to create a favourable policy environment which facilitates the private sector’s operation, and so support the government’s goal of poverty reduction ().
Selecting which parts of production to change
Any part of an organisation’s production can be changed by innovation. If the change happens in the organisation’s broad production aims, then it is called a paradigm innovation. If it happens in the processes of production, then it is called a process innovation. If it happens in the organisation’s choice of who they sell to, then it is called a position innovation. If it happens in the goods and services, it is called product innovation. This classification of innovation into the “4Ps” (paradigm, process, position, product) was discussed in a previous blog post (), and in the textbook . The selection of which production parts to change by an organisation’s innovation is usually strategic, as the choice can affect a substantial share of the organisation’s operations or its goods and services.
The likelihood of a successful innovation is affected by the production part that changes. The reasons are similar to those for the effect of the economic or social sector in which innovation occurs. The organisation may be more skilled at innovating in some parts of production than others, some parts of production may be inherently easier to innovate than others, and demand or need for the output may change with the part of production. These factors then influence the likelihood that the innovation is a success.
When selecting which parts of production are innovated, a manager has to assess and balance the factors. One part may be preferred for innovation because the organisation can easily innovate in it, and another part may be preferred because of the high demand for innovative output in it. As with the selection of the sector for innovation, the manager should select the part which would be best overall for the organisation.
The manager should also consider the fit between the organisation’s skills and the requirements for innovation of the production part, and the level of technical sophistication required to innovate in it.
An example of a strategic choice of parts of production for innovation is in the decision by Trust Merchant Bank to expand its network of branches. Trust Merchant Bank offers banking services to individuals and companies in the D.R.C. (), and has expanded its branch network over time (; ). The expansion is a strategic choice to innovate its position by offering its services to more customers, and could also be considered a choice to innovate the process by which it provides the services. The strategic decision to innovate the bank’s position is influenced by its established skills in operating other bank branches in the D.R.C. and the demand for banking services in the country.
Selecting how radical the innovation is
Innovation is more radical if its output is very different from what the output replaces. When a manager selects how radical their organisation’s innovation is, it is usually a strategic choice, as by definition, the choice substantially affects the organisation’s innovative output and its reception by users. But it also substantially changes how innovation is done, as development of more radical innovative outputs faces much greater uncertainty.
Both very radical innovation and less radical innovation can create profits or social benefits. However, the form of the impact changes when the innovation becomes more radical. Very radical innovation can create profits and social benefits by making big improvements in current activities and goods, and then replacing them fully, or by creating an entirely new activity or good. Less radical innovation can create profits and social benefits by smaller improvements and replacements, which may accumulate into substantial changes.
A manager has to balance risk, reward, and technical challenge when selecting how radical their organisation’s innovation is. More radical innovation can offer large profits or social benefits, but it will usually require much more effort to identify and develop, since if it were easy to produce, other people would usually already have produced it. Indeed, there is no guarantee that more radical innovations can be identified, so that if a manager aims for radical innovation they may not succeed in getting it. Less radical innovation typically has lower risk and technical challenge, but also smaller rewards.
When selecting how radical their organisation’s innovation is, a manager should consider the following factors. If the organisation is able to tolerate a high risk of failure – perhaps because it has spare resources, or because the people involved accept risk in general – then the risk associated with radical innovation will be more acceptable. If the organisation accepts delays in obtaining good results, then the longer time-scales associated with radical innovation will be more acceptable. If the organisation has managers who are able to evaluate the progress of an extended innovation process, then the complexity of radical innovation will be more acceptable. If the organisation has people who are good at anticipating the future requirements of their organisation, then the uncertainty of radical innovation will be more acceptable. Similarly, if the organisation has access to extensive information and is able to use it, then the uncertainty and complexity of radical innovation will be more acceptable. If the organisation can easily test different ideas and potential innovative outputs – for example, if they can speak to many potential users about the ideas and outputs – then the uncertainty of radical innovation will be reduced, and it will be more acceptable. Finally, if the economic or social sector is new, then there are likely to be more opportunities for developing innovative outputs that differ signficantly from what they replace, and so radical innovation is more likely to be successful, and is therefore more acceptable.
The strategic choice of how radical to make innovation is illustrated by the innovations made by the Congolese drinks company, Bracongo. The drinks market is relatively familiar and stable, with limited scope for technological innovation. Bracongo’s product innovations are incremental, consisting of flavour introductions and brand introductions (), with associated incremental process innovations, such as selling at new public events. However, in 2020 the company made a more radical process innovation. The appearance in the D.R.C. of the disease COVID-19 in early 2020 caused the government to place severe restrictions on social interactions, and to close restaurants, bars, and discos (). The restrictions changed the drinks market substantially, and Bracongo responded strategically by more radical process innovations that make it easier to buy their products and drink them at home, with the introduction of a mobile phone app allowing online purchase and home delivery within 24 hours in Kinshasa (), and the introduction of a call centre allowing purchases and home delivery, and providing information on sellers and product promotions ().
Selecting the amount of innovation
The amount of innovation here measures how much innovation activity an organisation does. The activities include finding opportunities and ideas, assessing them, developing them, and benefiting from them. They were discussed in an earlier blog post (). Selecting the amount of innovation is strategic because the amount affects the distribution of available resources for the whole organisation, as well as its business operations.
Large amounts of innovation activity can increase the quantity or quality of innovation outputs by the organisation. The activity will often directly result in improved or more numerous innovative outputs, which create profits or benefits when they are adopted. It can also have indirect effects on subsequent performance, as the organisation learns from the experience, so that innovation is easier in future.
A manager should balance the advantages of high levels of innovation activity against its disadvantages, however. One of the disadvantages is that the available resources for innovation will be used for a wider range of activity, and so the innovation may be done less well, and its quantity or quantity may fall. Another disadvantage is that as innovation increases, there may be less demand for its output, so that the profits or social benefits from extra innovation may be small.
When a manager balances the advantages and disadvantages of high levels of innovation in their organisation, and decides on the amount of innovation, they should consider the following factors. One factor is the quantity of resources invested in innovation, as more available resources can support more innovation. Another factor is whether activity can increase throughout the organisation’s innovation process, to avoid blockages in the process. For example, if the organisation generates many more ideas but can’t turn those ideas into products and services, then it won’t generate any additional innovative outputs. A further factor is the demand for innovation, as a higher level of demand can use more innovation output, raising the likelihood of successful innovation.
An example of a strategic choice about the amount of innovation was made by the managers of the Grande Cimenterie du Katanga, or GCK. GCK is a company which started operating in 2012 to mine limestone and convert it to lime and cement (), and by 2019 it produced 400 tonnes of lime per day (). Its innovation strategy is to build a cement plant by 2020 or 2021, capable of producing over 3000 tonnes of cement per day (; ), which would change the company’s processes, products, and market role. The decisions to build the plant and to set the amount it produces were influenced by the company’s available funds and raw materials, as well as the demand for its goods (; ).
Creating a new organisation
An organisation may choose to create a new organisation to do all or part of its innovation. The new organisation will have its own finance and corporate aims, although it may be fully owned and controlled by the original organisation, and it may share personnel. Innovative output may be transferred, sold, or licensed back to the original organisation on the same terms as to other organisations, or on special terms. As establishing a new organisation for handling innovation may substantially affect the original organisation’s innovation, it is usually a strategic decision.
Creating a new organisation for innovation can help to promote the original organisation’s innovation. Some of the advantages for innovation of a new organisation are the same as for the creation of a specialised department, discussed above: a focus on innovation, the easy access of innovators to each other, and the prominent commitment to innovation. In addition, a new organisation can accept higher risks of innovation failure than innovators within the original organisation – it has separate finances, so if its innovation fails, the failure will not excessively damage the original organisation. Such damage could occur if innovators within the original organisation took similar risks.
A manager choosing whether to create a new organisation for innovation should consider the disadvantages as well. They include the costs of establishing the new organisation, and the risk that the original organisation will stop innovating entirely. Further, the separation between the two organisations can lead to less communication between them, and so the new organisation can be less responsive to the demands, preferences, and ideas of the original organisation.
A manager should also consider the following factors when deciding whether to set up a new organisation for innovation. One factor is whether the innovation is an integral part of the original organisation’s other operations, or whether it can be separated easily into the new organisation. Another factor is whether the innovation helps the original organisation’s other operations, or hinders them and so the transfer to a new organisation would make their work easier. A further factor is whether the innovation is too risky for the original organisation, and whether the risk may however be acceptable to the new organisation.
An example of a strategic choice to create a new organisation is from the conglomerate Groupe Achour. The conglomerate consists of distinct companies with the same owners, operating in food import and distribution, manufacturing, and construction (). The conglomerate acquired or formed the companies so that it could innovate by starting operations in the sectors – for example, Cartomo was established in 2005 to manufacture packing cartons. The separation of the companies allows staff and managers to focus on their own sectors, and it is relatively easy because of the difference in their operations.
Partnering with other organisations
An organisation can innovate in a partnership with other organisations. The partnership can take various forms, which vary in the stage of innovation affected, the duration, the formalness, the aims, the control, the resources, and the division of benefits between the partners. The partnership is strategic if it covers a large amount of innovation, or if the innovation is significant to the organisations.
Partnership can help an organisation innovate in a number of ways. It can increase the resources available for innovation, and it can share the risk of innovating, which can help the organisation to participate in innovation since the effects of failure are not as severe. Partnership can also increase the number of ideas available because people from other organisations may have very different ideas from those of people working in a single organisation. People in other organisations may also have very different methods of analysing and developing the ideas, so the variety of methods available increases as well.
A manager who is deciding whether to partner their organisation with other organisations, and what form any partnership should take, should consider the advantages and disadvantages of each form of partnership. For example, when a partnership is formalised in a legal document, the organisations involved are more likely to fulfil their duties, but the partnership could be inflexible and may become unsuitable over time. As another example, a partnership that has more resources is more likely to be successful, but there are fewer resources for the organisations to use for their own purposes.
The organisation’s characteristics influence whether it should enter into a partnership. If the organisation has innovation goals that it cannot fulfil with its available resources, or if the development would be too risky for the organisation, then partnership can be a valuable way to access resources and mitigate risk. If the organisation has managers who are able to establish and maintain the partnership – for example, if they have connections with other organisations that could be used as a basis for partnership, or if they have experience with partnerships – then partnership may be easier to operate, and therefore more useful. Other organisational characteristics influence the form of the partnership. For example, if the organisation is rapidly changing its operations, a formal, long-term partnership may be unsuitable as its terms could become inappropriate quickly.
There are many examples of strategic partnership for innovation by Gécamines, the state-owned mining company operating in the D.R.C. It has formed partnerships to develop mines in the country with Glencore (), Eurasian Resources Group (), China Nonferrous Metal Mining (), China Molybdenum (), and Ivanhoe Mines (), among others (). The partnerships brought in investment and operating skills, although the Congolese government and the senior management of Gécamines has been concerned that the partnerships have not historically given many benefits to the country or company (), due in part to the structure of the partnership agreements (). The government is therefore seeking to restructure the agreements (; ).
Managers may choose to share information about their organisation’s innovation with people outside the organisation. The sharing can work in many different ways. The people who receive the information may have a link with the organisation – for example, they may work for suppliers of products to the organisation or for producers of similar products to those of the organisation, or they may be users of the organisation’s products. They may also be otherwise unconnected with the organisation, such as people in universities or the general public. Information may be released in exchange for information from the people who receive the organisation’s information, or it may be released without any requirement for the receivers to reciprocate. When information is widely released, for example to the general public, information is not usually required in return, as it is difficult to require lots of people to share information, or even show that they received the organisation’s information. Sharing information about innovation is often a strategic choice, as the information is usually a valuable resource for the organisation, and transferring it to other people can have substantial effects on the organisation’s performance.
If a manager shares information about their organisation’s innovation, it can help the organisation’s innovation and performance in several ways. Firstly, releasing the information allows other people to contribute to the innovation, for example by suggesting ideas or developing products or processes that they sell or make available to the organisation. Secondly, it allows other people to develop their own innovations using the information, which can lead them to request the organisation’s assistance in the development, or value the organisation more highly and support the organisation’s innovation. Thirdly, if the information is exchanged for the different information held by someone else, then the different information can be used by the organisation to help its own innovation.
Sharing information has disadvantages too. There is a cost in preparing information for transfer – for example, the information may initially be known by the organisation’s workers but not written down or otherwise recorded, so workers would have to recognise what they know and what’s important, and then record it or explain it in an understandable way. Another possible disadvantage is that people who receive the information may use it to develop innovative outputs that users prefer to the organisation’s own innovative outputs. This is a particular problem for commercial companies, but even for not-for-profit operations, such an outcome can lead to loss of income and even closure of the operation. Managers have to examine both the advantages and disadvantages when considering whether to share information on innovation.
The skills of the organisation and of other people influence the decision as well. If the organisation does not have the skills to innovate easily, and if other people have relevant skills, then sharing information can be valuable way to innovate. Additionally, if the information can be transferred easily, and then used by the recipient – for example, if it can easily be written down – then sharing becomes more appealing as an option.
An example of a strategic choice to share information is from the Université Libre des Pays des Grands Lacs, a university in the Congolese city of Goma. One of the university’s groups, the Centre of Research and Intervention in Psychology and Education, is developing an operational plan for 2020 (). As part of the development, it held a workshop attended by researchers and professionals from across the North Kivu province and neighbouring provinces, as well as by a senior politician responsible for the province’s education. The information sharing at the workshop resulted in the definition of norms and standards, as a step towards its full operational plan ().
Being a first mover
A first mover in innovation is an organisation that is the first to introduce a particular new innovative output. The decision to be the first mover whenever possible is strategic if the organisation undertakes a large amount of innovation, as the decision means that the organisation must develop new outputs rather than imitate existing outputs, and, if the organisation is selling the output, must take the lead in setting prices rather than responding to them.
A first mover organisation creates social benefits for users by helping to start the adoption of the innovative output. The organisation can also create benefits for itself. During the period between the first adoption and the launch of a similar output by someone else, the organisation is the only provider, and can earn high levels of income from it. During the period, the organisation can establish a network of suppliers and buyers that give it an advantage even after other organisations start providing similar output. The organisation can also establish production standards and user expectations that are suited to its own production methods and materials, which can help it to produce in the long term. Further, the organisation can establish a good reputation and brand loyalty with users during the period.
A manager should consider if these advantages outweigh the potential disadvantages of being a first mover. The full development of a new innovative output can be more expensive than imitating an existing output. Also, the organisation cannot learn from other people’s experience with the product, and so the organisation may produce less efficiently and make a lower quality product. If the output has low quality, then users may form an unfavourable opinion of the output and the organisation.
The decision whether to be a first mover is affected by the following factors. One factor is whether the staff in the organisation can anticipate how successful the innovative output will be, and which processes will be best for producing it. If they can anticipate correctly, then the output is more likely to succeed despite the absence of experience with it. Another factor is whether the organisation has many development resources, as they facilitate the full development of new products, and so make innovating first more appealing relative to innovating later. A further factor is whether the innovative output will be adopted widely and quickly by users, because if so, the first mover can become established and benefit financially before alternative producers copy the output.
An example of a strategic choice to be a first mover is from the introduction of 4G mobile telecommunications in the D.R.C. in 2018. The Congolese Government granted licences to sell 4G services on May 9, with the company Vodacom buying a licence immediately and introducing a service for customers on May 11 (). The companies Orange, Africell, and Airtel introduced their 4G services shortly after (; ). There is a strong incentive to be the first mover in the Congolese 4G market, or to follow the first mover quickly. One reason is that there is high demand for mobile services in general (), so early market entry is very likely to lead to a high volume of sales. Another reason is that there is a large fixed entry cost to the market (), so it is an advantage to spread the cost widely by early market entry and sales to as many customers as possible. A third reason is that as a company’s market share rises, it is able to offer a larger network to additional customers, which can increase the value to customers of buying.
* Other writers can define innovation and strategy in slightly different ways. The common themes are that innovation concerns the creation and use of something new, and strategy concerns actions that are important or wide-ranging. For example,  defines innovation strategy as “a commitment to a set of coherent, mutually reinforcing policies or behaviours [that relate to innovation and] aimed at achieving a specific competitive goal” (my added italics).
, , and  are in French. The others are in English.
 Pisano, G.P. 2015. You need an innovation strategy. Harvard Business Review. June. Available at https://www.innoscience.com.br/wp-content/uploads/2020/10/You-need-an-innovation-strategy-2.pdf
 Tidd, J., Bessant, J. 2013. Managing Innovation. Integrating Technological, Market and Organizational Change. Fifth edition. Wiley: West Sussex, U.K., chapter “Innovation – What it is and Why it Matters”
Leave a Reply.
The blog and site are written by James Waters. He is a British economist.