by Peter B. Nichol

Innovation and emergent strategies for competitive advantage

Dec 22, 2016
InnovationIT StrategyTechnology Industry

It’s easy to overestimate your ability to rapidly build value. Building commercialization strategies helps to ensure sustainable competitive advantages with economic benefits.

strategy chess
Credit: Thinkstock

Strategies broadly fall into two categories: Corporate strategy, or “where to compete,” and business strategy, or “how to compete.” Often companies trip and fall awkwardly somewhere between where to compete and how. Today, we’ll adjust that trip to more of a fashionable skip.

Innovation strategies are emergent, not planned.

Finding a strategy

Articles that highlight concepts of strategy are plentiful, but there are few that define the boundary between having a strategy and not having one. Donald C. Hambrick and James W. Fredrickson help us identify what a strategy is not. Outsourcing is not a strategy. Being a low-cost provider is not a strategy. Chasing a global footprint is not a strategy. Surprisingly, operational effectiveness is also not a strategy.

Then what is a strategy?

Strategy (n): the art of sustainable value creation to create unique competitive advantages to shape the perimeter of an organization.

Business strategy, operational strategy, marketing strategy and financial strategy all slide into the dirty fishbowl known as strategy. A strategy is about how people throughout an organization should make decisions and allocate resources in order accomplish key objectives. Hambrick and Fredrickson’s five major elements of a strategy, when applied to innovation, make strategy determination straightforward. Ask yourself these questions to determine if you have an innovation strategy:

  1. How is the innovation adding new value to the core ecosystem interaction?
  2. Are we building value rapidly? Are we creating a new value chain, or tapping an existing one?
  3. Is the product, service or interaction unique, or can it be imitated?
  4. How does our innovation provide a sustainable competitive advantage?
  5. Have we established a viable economic model for scale?

While peering into the fishbowl of strategy, it’s worth the time to assess whether your organization has a strategy. Innovation doesn’t have to be planned — it can emerge under a strategy umbrella.

Innovation from an emergent strategy

Henry Mintzberg was the first to come up with the concept of “emergent strategy.” Emergent strategy, also called realized strategy, is not intentional. In an article published in the Stanford Social Innovation Review, John Kania, Mark Kramer and Patty Russell say that emergent strategy gives rise to constantly evolving solutions that are uniquely suited to the time, place and participants involved. Emergent strategies can bend. They can break right off, and reconnect. They are not linear and can reconnect to form unique value-creating economic benefits.

Leaders track external and internal factors impacting shifts of customer behavior. Monitor these we should; they can impact strategy, business models and operational approaches. Emergent strategies acknowledge that oversimplification kills innovation. For example, defining a product aligned to a specific market segment or attempting to create scale on a foundation of underskilled, overworked and unmotivated resources are strategies oversimplified.

Curious if your organization is leveraging emergent innovation strategies? Answer these questions for a quick pulse:

  1. Do you have a mechanism in place to “sense” environmental business model changes?
  2. Are there processes in place for interventions for exogenous events?
  3. Have you established a co-creation approach for the next evolution of the innovation or your interaction experience?
  4. Is innovation predictable, or is the organization adapting and sensing as circumstances change over time — e.g., watching the competitors?
  5. Is the company dependent on decision-making frameworks, or does the decision system dynamic appreciate the human dynamics that can accelerate change?

Looking over your shoulder at competitors and copying innovation approaches will never result in sustainable competitive advantages. New directions are required.

Moving to an emergent model for innovation may be the answer.

First principle thinking for innovation

We could pigeonhole each company into one of eight types of strategies: planned, entrepreneurial, ideological, umbrella, process, unconnected, consensus and imposed. Mintzberg and co-author James Waters did a great job of articulating how strategic choice drives a strategy in a 1985 Strategic Management Journal article titled “Of Strategies, Deliberate and Emergent.” Rarely does an organization purely adopt a single type of strategy. More often, strategy development is a combination or hybrid of multiple types that together in orchestration establish the organization direction and intent.

Have you ever followed someone in a car going to an unfamiliar location? It can be difficult to follow the car. If they bank right hard and make a right, you have to whip your car to the right, while jamming on the breaks to maintain a reasonable distance. What happens if you lose sight of the other vehicle? The simple version of this scenario is when you lose sight of the car and become lost in an area you’re unfamiliar with and you don’t know which side street they went down or how they are getting to that destination. After all, if you knew how to get there, you wouldn’t have been following them. Then you pause and realize you have other options. You can call them and reset their position. They mention they’re waiting at the small café on Gordon Street, and you race over and continue to follow them until you reach the destination.

Following a friend in a car is similar to how businesses imitate the competition. What if you were unable to locate the car and then received a call that said the car was in Massachusetts. You’d likely quickly head to Massachusetts. But then you receive another call and learn that the car is in Florida. You’d then race down to Florida. However, if more and more reports started coming in saying the car was in South Carolina, Tennessee, Texas and Illinois, you’d realize that you can’t get to all those places. Let’s assume that each spotting of the car in this example was your awareness of a competitor’s strategy. For example, if they launched a new product, service or interaction, your organization could imitate it, but you have no idea of their “real” strategy. Chasing innovation doesn’t work.

Sun Tzu, the famous Chinese military strategist, stated 3,000 years ago: “All men can see the tactics whereby I conquer. But what none can see is the strategy out of which great victory is evolved.” When we look at companies, what we observe is where they have been or the level of success of their latest tactic, not the future strategy.

Original ideas are not born from assumptions in the past. They arise from the strategic and calculated alignment of ideas into seemingly abnormal combinations, creating new causes. Leading organizations use first principle thinking to maintain a competitive advantage. These are foundational propositions or assumptions that can’t be deduced from any other proposition or assumption. In short, you can’t just read and connect the lines. There are no lines to connect.

Whether you’re building the corporate innovation capability or driving results for a department, ask these questions to validate you’re using first principles and not imitating:

  1. Does most of your innovation come from inside the organization, and not from merely asking customers what they want?
  2. When a problem arises, is the first thought to apply approaches the organization has already leveraged? Or to deconstruct the problem to determine new causes?
  3. Are new ideas suggested based on successful strategies of the past? Or alternatively, are new ideas decomposed into the most fundamental components and evaluated for new value potential?
  4. When you ask your leadership team what new strategies should be explored, do you first hear about what your competitors are doing, or do you hear new original ideas?
  5. Can your competitors link together your current tactics to determine your real strategy?

Solving complex problems? Emergent strategies address complex problems. If you first hear about what the competitors are doing, it’s probable that you’re following that car, waiting for a call that will never come. Build a team that can create new ideas that are not necessarily linked to what was done in the past. Emergent innovation isn’t linear.