With COVID disruption of demand, supply and how and where work is done in 2020, the focus for many is on managing near-term costs, cash flow to cover operating costs (especially labor costs), and near-term revenue. Many business leaders are left asking, is innovation strategy worth it right now?
In a nutshell, many executives are working torridly “in the business,” managing the day to day, while a smaller number are taking the time to step back and work “on the business” long term.
New Products Delayed and Product Offerings Being Cut by Some Retailers
It’s true that the market is flooded with face masks and hand sanitizers. From what we’ve heard, however, there are many planned 2020 new product launches that have not been launched or are months behind, even in businesses that have been stable or growing during COVID.
In many industries, the idea that the market will return to its “normal” patterns of demand appears highly questionable. For example, several supermarket retailers are not using historical demand planning models, as they anticipate unprecedented demand spikes in future months.
Restaurants such as McDonald’s, Subway and Taco Bell have cut back their menu choices.
Reexamine Existing Innovation Strategy Given Current and Future Changes in Demand and Supply
If your company has a long-term innovation strategy, does it make sense to reexamine it? From my perspective, the answer is overwhelmingly “YES.” The expectations around demand, supply and how we live and work that created that innovation strategy have been disrupted. The original work that looked at the market size and growth for new products needs reexamination from an objective, unbiased point of view. Are the current products in the pipeline still a good use of organizational resources? Why will they be successful in 2021 and 2022?
Alternative of “Fail Fast” (for Businesses that Can Execute this Strategy)
If you currently don’t have one, is an innovation strategy worth it for the next one to three years? Wouldn’t it be better to just try a lot of things, fail fast and learn? The answer will depend on the business, of course, but many larger businesses are not nimble enough to execute the “fail fast” approach. And many smaller ones lack the will to commit to this approach.
Innovation Strategy Portfolio: Mid- and Nearer-Term Focus for Many Businesses
Many firms work with a innovation strategy portfolio that includes a smaller number of big bet, breakthrough innovations, a middle category of adjacent innovations, and a larger number of core innovation, e.g., product line extensions.
A “typical” innovation portfolio might be 70% core, 20% adjacent, 10% breakthrough, but there are variations by industry, as shown in the example chart below.
In these times, it may be hard for leaders to focus on the breakthrough category, so that the adjacent and core areas will likely receive greater emphasis.
In September 2020, a corporate executive who has focused exclusively on breakthrough innovation for years said:
“Today there are no budgets for the type of work needed to pursue breakthrough innovation. We’re focusing on the existing product lines, and minimal investment, for instance one focus group per year… We aren’t doing any quantitative research.”
Questions for Your Business to Consider for Innovation Strategy
The case for why businesses generally need an innovation strategy is clearly outlined, along with some key questions to address, in this HBR article. Included are some good questions to consider:
“1. How will innovation create value for potential customers?
2. How will the company capture a share of the value its innovations generate?
3. What types of innovations will allow the company to create and capture value, and what resources should each type receive?”
If your business is exclusively focusing on the near-term, that leaves the door open for competitors to leapfrog you with a better product offering. How can your business afford not to update your innovation strategy or to create one if you don’t have one?
Want to talk through if innovation strategy is worth it in the current environment? Contact us.