Developing a Product Innovation Strategy
Rose Klimovich | January 21, 2025
Read time: 15 minutes
Chapter 2 of the Body of Knowledge highlights the importance of strategy in product management and development. A critical component of this is having an innovation strategy. Many companies aim to be “innovative” as a path to growth, but how can they achieve this? Think of an innovation strategy as a process leading to a cohesive and effective approach to innovation. Without it, organizations risk missing new opportunities, pursuing conflicting priorities and/or undertaking innovations in non-optimal areas.
Before You Begin:
Cultivating an Innovation Culture
Before developing an innovation strategy, you must foster a culture that supports innovation. This requires a multifaceted approach that encourages creativity, collaboration, experimentation, and risk-taking.
- Leadership’s Role: Leaders should model innovative thinking and openness to new ideas while creating a safe space for experimentation and risk-taking. Failure should be seen as a learning opportunity rather than a setback.
- Encouraging Collaboration, Experimentation and Creativity: Create an environment where employees feel comfortable sharing ideas without fear of criticism. Trying new things in new areas needs to be encouraged and rewarded.
- Be open to risk-taking and dealing with uncertainty: Let teams know you know a project is risky and will be treated as such. If a team fails at something, “Don’t come down on them too hard,” Box co-founder and CEO Aaron Levie says.
Creating an innovative culture is an ongoing process that requires intentional strategies and commitment from all levels of the organization. By fostering an environment where creativity is valued, risks are encouraged, and experimentation is prioritized, companies can enhance their ability to innovate and adapt in rapidly changing markets.
Key Tip: Recognize and reward innovative efforts—successful or not—to sustain a culture of creativity.
Conducting Research
Internal: Understand where your company is today with respect to innovation resources and programs. Can you build on this?
External: Innovation is about the future. So, it is important to have a view of where industries, markets, customer needs and technologies are headed.
- Market and Technology Trends: Identify emerging technologies and industry and market shifts. Talk to suppliers and industry experts to gain other views. Identify gaps and opportunities that can be exploited. Put together a trend map of emerging trends and their potential intersections. Monitor key indicators looking for changes and updates.
- Customer Insights: Use surveys, interviews, and focus groups to understand pain points and desires. Observe your customers to see what they do, what problems they have and what they might need in the future. Try to understand your customers view of the future of their businesses
- Competitive Analysis: Study competitors’ innovation strategies to identify gaps and opportunities. What is your competitive advantage? How does what you plan to do in innovation strengthen or expand this?
View: Develop a view of the future. Look for longer term trends, changes in customer preferences, gaps in the market, emerging customer problems, and new technologies that could impact your product landscape. How do innovation efforts fit with this view of the future?
Key tip: Note that sometimes it is difficult to know what the future holds. You may need to develop multiple views of the future (scenarios) to take this into account. Scenario planning is a strategic planning method where organizations create detailed narratives of various possible future states to anticipate potential challenges and opportunities by considering different combinations of assumptions and events. This allows you to prepare for uncertainties and make informed decisions.
Step 1: Define Your Vision and Goals
- Where to Play: Determine where innovation will have the most impact. Will you focus on incremental improvements or disruptive breakthroughs? Innovation can be close to home or in new areas your company is not in today. For example, Samsung has mainly an incremental innovation strategy (e.g., curved phone screens.) But they also have a development group working on diversifying the portfolio into areas like Artificial Intelligence and digital health. On the other hand, Google has spent more development funding in new disruptive areas – some of which have been successful, and some have not. Some questions to ask:
- How much will it cost to do an innovation program in this area?
- How likely is this to become viable commercially?
- What can we learn in this area even if this does not pan out?
- Establish Clear Goals: Align innovation goals with your corporate mission and strategy. Even better, make innovation a key part of the corporate strategy. For instance, consumer companies like P&G prioritize innovation to solve customer problems and stay ahead of market trends. Determine what you want to achieve with your innovation strategy (e.g., market leadership, diversification, customer retention).
- Example of innovation goals:
- Have 10% of our revenue be in new transportation areas in 5 years.
- Leverage next generation artificial intelligence to streamline our business processes in 3 years.
Step 2: Develop Your Strategy
An innovation strategy outlines how your organization will generate and implement new ideas to create value. It acts as a high-level roadmap to guide innovation efforts. It should include:
- Focus Areas: Clearly define where and how you plan to innovate.
- Alignment: Understand what areas the innovation strategy supports and where it might integrate with other programs.
- Frameworks: Use methodologies like design thinking, agile, and/or stage-gate processes to guide efforts.
Examples of Innovation Strategies:
- Leverage advances in gene editing technology to develop new, targeted therapy for currently untreatable cancer types.
- Look at the next generation of multimodal artificial intelligence to enhance our Internet health applications.
- Explore using next generation materials to develop new types of transportation.
Pro Tip: Be precise about your innovation priority areas and how you see these areas unfolding over the next few years.
Step 3: Gain Stakeholder Commitment
Step 3: Broaden Stakeholder Support
Stakeholders are key to the success of the innovation strategy. Broaden stakeholder support by:
- Communicating Value: Demonstrate how innovation aligns with business goals and share success stories.
- Engaging Early: Involve stakeholders in planning and gather their input.
- Addressing Concerns: Provide risk mitigation frameworks and tailor messaging to specific stakeholder concerns.
- Providing Resources: Offer training, tools, and clear communication about resource allocation.
- Incentivizing Participation: Recognize and reward contributions to innovation efforts.
Example: Companies like Corning and Bristol-Myers Squibb align innovation strategies with clear goals, ensuring commitment across the organization.
Implementation: Turning Strategy into Action
A strategy is only as good as its execution. Implement systems and frameworks to transform feasible ideas into tangible outcomes:
- People: Hire and reward innovative talent. Encourage continuous learning and expertise-building. Help people understand the strategy and goals and their role in this area.
- Processes: Establish processes to help decide which ideas are feasible to pursue and for managing innovation programs.
- Tools: Leverage platforms for collaboration (e.g., Slack, Microsoft Teams) and idea management (e.g., Miro, Brightidea)
- Experimentation: Run controlled experiments to test innovations. Companies like Amazon and Microsoft conduct thousands of experiments annually, engaging millions of users.
- Set Guardrails: Accepting risk doesn’t mean being uninvolved. Use milestones and reviews to manage risky projects effectively.
Conclusion
An innovation strategy is crucial for staying competitive, achieving growth, and adapting to market changes. It requires commitment, time, and a systematic approach to unlock future business success. Start today by cultivating a culture of creativity and innovation and aligning your strategy with clear goals and actionable steps.
Call to Action: What’s your next move? Begin by assessing your organization’s innovation culture and setting a vision for the future.
Additional Resources
Useful Articles:
(1) https://www.hbs.edu/faculty/Pages/item.aspx?num=57045#:~:text=Moreover%2C%20best%20experimentation%20practice%20means,annually%2C%20engaging%20millions%20of%20users.
(2) https://hbr.org/2015/06/you-need-an-innovation-strategy
(3) https://www.boardofinnovation.com/what-is-innovation-strategy-discover-best-practices-definitions-tools-and-examples/
(4) https://www.boardofinnovation.com/guides/
(5) https://www.spyre.group/post/examples-of-companies-with-successful-innovation-strategies
(6) https://hbr.org/2023/09/a-new-approach-to-strategic-innovation
Other PDMA Articles:
About the Author
Rose Klimovich
Rose Klimovich is Visiting Professor of Marketing and Management at Manhattan College in New York. She is also a Digital Marketing and Strategy consultant to small businesses and entrepreneurs.
Formerly, as the Vice President – Product Management and Product Marketing for Telx, Rose Klimovich created the Telx business strategy and developed the investment plan for new products and services in areas including colocation, cloud, Ethernet, and video conferencing. Rose’s team supported vertical markets including Financial Services, Media and Service Providers.
Prior to this, Rose was the Vice President of Business Strategy for AT&T, responsible for strategy development and investment decisions in new markets and technologies. Rose has more than 20 years of experience and achievement in designing, scaling and managing Internet, VPN and data businesses. Rose led AT&T to the #1 share position in VPN and to a leadership position in Internet Services.
Rose has an MBA and a BS in Math/Economics from Carnegie-Mellon University. Rose is Joint Chairperson of the Board of Directors of the Women’s Venture Fund.