When we talk about an innovation strategy, we can refer to different ways to get to build it:
a) Trying to find out the future and explore the different scenarios that are most likely to occur.
b) Be aware of the increasingly accelerated changes in our entire environment, and prepare to adapt as quickly as possible.
When talking about the innovation portfolio we said that it was a preparation for the creation of the future because it explores the best possibilities of success in the future and the new opportunities or options for the development of the organization. It is also a tool to diversify risk.
How to explore possible futures?
If we choose the path of creating an innovation strategy based on the exploration of different possible scenarios, we will have to face the attempt, in one way or another, of how to anticipate, find out, understand, and try to align ourselves with the future.
If we opt for an adaptation to changes in our environment and a “pull” innovation based on understanding and solving problems and satisfying the needs of our customers, we will have to be prepared to do so and react quickly.
In no case is it an easy task, forecasts are always wrong, it is a paradox of strategy.
The future is uncertain and the most certain is that the changes will be accelerated and sometimes disruptive.
Therefore, we cannot talk about “predicting the future”, it is not about making a forecast, but about trying to understand trends, which are the driving forces behind the changes, and define those that seem most important to us. With this,to create and explore some possible scenarios, the most probable and / or relevant.
This is the objective of what we call “scenario planning”.
In the end we should be able to answer the question:
Why and where are we going to innovate?
The why:
Maybe it is not necessary, but we could make some reflections to explain why. Surely, we already have them assumed.
The reason for innovation and the need to prepare for the future is brutally simple: change is accelerating. All changes are happening faster and some are increasingly disruptive.
If things did not change, we could continue doing what we have always done and there would be no need to innovate. If markets were stable, if customers were predictable, if competitors did not introduce new products and services, and if technology remained constant, then we could all continue as we are doing. Improving, naturally.
But all the evidence shows that the changes are accelerating more and more, even more radical, and unsuspected. And that opens up many new types of vulnerabilities.
On the other hand, technology advances relentlessly and gives us new elements to innovate even altering some market paradigms and even society.
Markets are not stable, more and more segmented, and new driving forces emerge that make customers and users increasingly aware and unsteady. Competition increases and products or services age faster.
So, it is worth asking: “Are we driving having in mind the real vision of the changes that are taking place? How does this uncertainty affect us?”
Adaptation
Obviously, it is about adaptation, but it is very different to do it with a certain explored idea of the possible scenarios that we can expect, or that one of these suddenly comes true and we have to adapt quickly and on time. They are two different strategies that are implicit throughout this presentation.
Preparing for changes brings considerable advantages while not changing carries a large number of negative consequences. We must seek in innovation the way to sustain and develop our activity and the generation of added value.
The actions are carried out with the oriented work of the entire organization, which result in a flow of innovations that impact the market and improve our position. This means the commitment of the entire organization to design and implement our own innovation strategy and management model. Innovation is essential to the strategy of any company or organization, and, in fact, it’s the way in which the strategy is executed. Now, we simply cannot imagine organizations or companies, not only technological ones, but also in the sectors of energy, medicine, agriculture, industry, distribution, and transport, etc. and even education, without thinking in “Innovation”.
Therefore, the relationship between strategy and innovation is vital, and the important role that innovation plays in transforming strategic concepts into realities in the market tells us that innovation is today, more than a necessity, an urgency for those who have not yet a practice.
If we want to complicate our future, we just don’t innovate or change anything.
Scenario planning
In any case, trying to find out the future and explore new scenarios is a recommended exercise, especially due to the quality of the debates that can be produced around the process, the ideas that will surely emerge, together with the different qualitative approaches that will appear.
The point is to deduce the driving forces of the changes, define those that can affect us the most, and deduce some possible scenarios while assigning them a certain degree of probability.
And most importantly, define for each of the scenarios, which strategy can be more favourable for our permanence, development and success.
These exercises should be carried out in groups, made up of people who know very well the subject, activity, product, or service to which we are dedicating ourselves. People internal to the organization but also external.
The process
It’s better to do it in a structured way and with a moderator or facilitator of the appropriate techniques for it. It is preferable with various working groups that are changing and specializing in the course of the exercises.
As in any process, there are some risks here in these exercises:
- There is the danger of groupthink, the tendency for people to agree with others in a peer group, without too much critical thinking. These agreements are usually biased and often have a weak foundation.
- A second risk is that of tunnel vision, looking into the future very partially or narrowly and missing important elements that are outside the tunnel.
- A third risk is associated with relying on many predictions that, when not true, make carefully prepared plans useless or worse.
- Obviously, there is a fourth, which is that of dispersion. Contrary to the second, but that can lengthen the process indefinitely and tire and bore the participants, without reaching well-founded conclusions.
- And a fifth, permanently lurking at the level of each participant, is to avoid cognitive traps. [1]
Sessions typically begin by examining key trends and driving forces by studying a detailed set of materials that are prepared in advance. A team of “experts” should work in collaboration with your own innovation team to identify all the issues they need to explore and then prepare the materials.
It is advisable to prepare a space that allows us a work and discussion environment, where much of this information can be placed on panels or screens and that helps everyone to see the big picture.
It’s about being able to interact and connect individual opinions into larger and more meaningful patterns. After assimilating the trend information, participants identify and select a couple or three of big and important trends or driving forces that have a lot of impact in the future, and that are also quite or very uncertain.
Trends
In a very general and global framework, without going into specific, regional, market or segment particularities and with no concrete activity, product or service, a list of current trends could be:
• Increasing and total digitization
• Impact of robots
• Growth of artificial intelligence (AI) and learning machines (ML)
• Blockchain
• IOT (Internet of Things)
• Cyber Security
• Computers with Quantum technology
• Crisis & climate change
• New ecological models
• Globalization or proximity?
•Energy
• Biomedicine
• Growing inequality
• Growing urbanization
• Opposing cultures
• Revolution and counter-revolution
•Etc.
We can try to define each of these trends to a greater or lesser degree and quantify how they can affect us, positively or negatively.
The various teams could each model their two relevant problems or axes by preparing a 2×2 square matrix, or 3D 3×3 with respectively 4 or 8 possible scenarios and exploring which would be the remarkable changes that in each case would be relevant of the four or eight big scenarios resulting.
The process helps each of us identify key trends to watch out for, so as things change, we notice what’s important, they can give us early notice, and they can help us prepare for appropriate changes to our plans.
So it’s not a prediction activity, but rather an in-depth discussion of the big picture – what’s driving the change and how things might go.
Outputs
It is important that the exercise helps to develop relevant conversations between the participants. It is good to repeat that we are not trying to predict the future, but to explore what would probably happen within scenarios that we have created and that have a certain probability of affecting the economy and society in general, and also our activity.
In this way, as the social and economic situation changes, and as markets or segments move, we will have thought about the consequences for ourselves and can make the right decisions more quickly.
The last and most important step in the scenario planning process is exploring strategic options. That is, what strategies can favour us in each of the scenarios.
This will also help us understand that while some strategies will be effective only in a very limited set of future conditions, others, however, may work in a wider variety.
The framework could and in fact in many cases we will have to take it to a degree, the highest possible, of concretion. In other words, looking at a more specific sector, region, activity, product or service. Then the trends in these cases will also be included within those described above.
This is important to almost all organizations and businesses for a few reasons:
Therefore, the linear order, which does not necessarily need to be followed, but rather there must be iterations between the different stages and teams at all times, would be the following: [2]
It is a long process, and therefore expensive, with uncertain results that will only improve with experience. You learn with practice and error, because with a high probability there will be many errors, exactly as with forecasts. It’s maintained as a regular process, and it’s adapted to revisions and modifications that the facts will force us to make.
Alternatives
If your company does not want or cannot afford a process or exercises like the ones described, then yes, it is best not to focus on innovation based on this strategy. Among other things because, although with very good will, it would probably be defined on very weak bases and with little possibility of being useful. This forces to verify frequent errors of appreciation and continuous rectifications, which in general will undermine trust and credibility in all innovation management.
There are other options, such as a “PULL” innovation strategy based on a process of continuous and agile adaptation to changes in the environment and in customers. Between them:
- A “Design thinking” type strategy aimed at solving customer problems but also internal problems of all kinds. See: Design Thinking vs. Technological innovation.
- An open innovation approach based on intimacy with the customer, listening to the “Voice of the Customer” and the QFD methodology.
- Nor would it be very appropriate, in these cases, to try to adopt a positioning strategy such as technological or product leadership in a given segment, due to the risk of not making introductions or launches at the right time, too early or too late.
- Perhaps the most appropriate thing would be to closely and constantly monitor the development in our sector and place ourselves in a position to follow the leader or leaders.
- In the case of BtoB, that is, when our clients are not the end users of the chain, it may be useful to align the innovation projects to our main clients that we have previously classified as “winners”, that is, that we consider with more likely to develop successfully in the future.
They are other methodologies that do not deny the need for us to have a clear strategy, whatever it may be, and that we apply it throughout the organization.
The basic fact is that innovation and strategy should go together and focused on the same goal: a clear vision and a continuous practice of exploration externally and to the future.
[1] Cognitive distortions are those wrong ways that we have when processing information. That is, misinterpretations of what is happening around us, generally due to negative approaches. Some examples are: Overgeneralization, Personalization, Filtering focusing on negative details, All-or-nothing thinking, Catastrophizing, Drawing early conclusions, Exclusively emotional reasoning, Dismissing the positive.
[2] Langdon Morris. The innovation masterplan. 2020. ISBN 978–8676338831
