Are you simply improving or innovating? Knowing makes a difference

Everyone has a strategy. Simply put a strategy is a definition of the results you want to create and an approach of how you think you will manifest those results. Why do I say everyone has a strategy? Because without a strategy, you would have no basis for making any decision.

When it comes to executing strategy, it is important to understand the difference between executing a strategy and achieving operating objectives. Too often these two are thought of as one and the same, and they are not.

The best way to understand the difference is to think of your organization as a simple manufacturing production line. A production line is set up to produce a certain product and is optimized to produce that product in the most efficient way possible. When it is time to produce a different product, the production line is stopped and retooled for the new product.

Your company, like a production line, has been fine tuned to produce the goods and services for the customers you serve. Every aspect of your company from engineering to finance, from operations to sales has evolved over time to make the production of the goods and services you produce as optimal as possible. You have developed certain norms, rules, metrics and even a culture that has created your success. Achieving your operating objectives is akin to meeting production goals in the “production line” metaphor.

If your plans call for little or no change to the basic way you are operating, then your existing “production line” may be incrementally improved. You may add a new tool such as implementing an ERP system, or improve the training of the people in various departments, but your basic production line, the fundamental way you operate, is not going to change. Strategy planning in this scenario is an incremental strategy, strategies to improve on the existing way we do business.

But lets now look at a different type of strategy, an innovation strategy. Examples of an innovation strategic direction would be moving up the value chain, offering a higher value-added set of products and services, or moving from a product-oriented business to a service-dominated business (or vice versa).

These changes in strategic direction require a shift in how you will do business in the future. You will, for example be moving from selling a technical product to engineers, to selling a solution to corporate executives. You will likely be dealing with longer sales cycles, different approaches to determining the product roadmap and different methods for reaching the market. You might even be facing a different revenue model. In essence the norms, rules, structures and business models that you have used to create success will all likely have to change.

In terms of our metaphor you will be fundamentally retooling the organizational “production line”. But unlike a manufacturing operation you cannot shut down the existing production line to retool it. Executing an innovation strategy requires retooling the organization production line while the existing production line is still operating. In my next blog, I will offer “hidden forces” that you need to consider in either.