Innovation…Don’t be Misguided part 2

Part 1 of this series concluded that operational effectiveness is not strategic innovation. Nonetheless, this does not diminish the role and importance of operational effectiveness, as it remains essential to superior performance; instead, it highlights the risks associated with mislabeling operational effectiveness as strategy. “The danger of confusing between strategy and operational effectiveness is that it can result in organizational complacency: something that is never good for the strategy process” (Prasad 2010, p.17). Indeed, as research shows, managers often use ‘strategic innovation’ as a term to describe any process or initiative regardless of whether there is any strategic value or even whether it is rooted in strategy itself. With the flawed understanding that managers will utilize this information to make difficult decisions, executives often communicate these supposed strategies throughout the organization (Hambrick and Fredrickson 2001). As an increasing number of competitive products make their way into the marketplace, it is vital for suppliers to stave off complacency and evoke a true market-driven strategy, as opposed to rooting supposed strategy in operational effectiveness.

Similar to Afuah’s (2002) assertion that customers’ valuation of a product is a function of the characteristics of the product, suppliers must understand how much end-users value each underlying characteristic in order to generate competitive advantage. This understanding can be achieved, often radically, through organizational change, starting first with the realization that strategic innovation is about being different and to deliver a unique mix of value, and not simply an efficiency gain to similar activities performed by competing suppliers and integrators.

In order to realize innovation, all organizations will find it necessary to change. In this sense, vision and strategy shape and direct change, indicating what needs to change and where; thus, strategy should be viewed as being central to change (Burnes 2004). Considering that managers are often the ones who facilitate organizational change, what is labeled as innovation, or more importantly the basis on which the strategic innovation is formulated, is vital to successful corporate change. Fortunately, most suppliers and manufacturer’s have the people, technology, products and, in some cases, the brand needed to facilitate this change. Furthermore, many organizations have the operational effectiveness to leverage these resources (i.e. manufacturing and training). What is necessary, however, is accurate market knowledge and end-user input, which identifies how to create value for customers. Put differently, if assumptions fail to accurately reflect key elements of the business environment, the end result is not only inappropriate strategy (Palmer et al 2009), but also ineffective change management as organizations adapt to realize those potentially misconceived strategies. Therefore, it is key for organizations to accurately gauge market realities and let those realities influence (if not dictate) corporate innovation. Between suppliers and manufacturer’s, development appears to be driven by “one-up-manship” as opposed to by a true customer value proposition. Often times reviewing current specifications and overall functionality of various systems, products and process configurations within the market validates this suggestion. In some cases designs have been copied or agreements reached where competitive products are merely re-branded (think of the smart phone industry). Depending on the sector, it could be suggested that reviewing products or services presently on the market will indicate trends towards promoting specifications of current and prior competitive products, as opposed to a true product evolution, backstopped by end-user driven requirements. This practice can lead suppliers to dilute their efforts, ultimately attempting to do lots of things, but doing nothing really well (Johnson et al 2008).

References:

Afuah, A. (2002) ‘Mapping technological capabilities into product markets and competitive advantage: The case of cholesterol drugs’, Strategic Management Journal, 23(2), 171-179.

Burnes, B. (2004) Managing Change, 4^th ed., Harlow: Pearson Education Ltd.

Hambrick, D.C. and Fredrickson, J.W. (2001) ‘Are you sure you have a strategy?’, Academy of Management Executive, 15(4), 48-59.

Johnson, M.W., Christensen, C.M., and Kagermann, H. (2008) ‘Reinventing your Business Model’, Harvard Business Review, 86(12), 50-59.

Palmer, I, Dunford, R. and Akin, G. (2009) Managing Organizational Change: A Multiple Perspectives Approach, 2^nd ed., New York: McGraw-Hill.

Prasad, A. (2010) ‘Strategy as “Inferior” Choice’, Journal of Management Research, 10(1), 15-24.