About the author
Jochem Verburg is co-founder of Mobina and has an interest in improving business processes using information systems. He just completed his Master Business Information Technology and during his graduation project for Mobina he studied several important aspects of the innovation process of industrial SMEs. He shares some important lessons in this series of blogs.
This is the second article in a series of three blogs about Jochem Verburg’s graduation project. The first blog post described the usefulness of open (process) innovation. Next Monday, a blog will be published about the void between idea generation and the final project: the pre-project phase.
This blog, I will discuss the usefulness of strategy in (innovation) projects. Earlier, Prof. dr. ir. Hans Wortmann already wrote about the need for a strategic vision to keep important knowledge in-house. This blog will discuss the different degrees of formalization in strategy and the usefulness of a vision in idea generation.
A lot of research has proven the importance of strategy and strategic alignment for long-term success. Analyzing the environment, for example using a PEST or SWOT analysis, can help companies identify threats and opportunities. Setting directions for the future, makes sure you can work towards a sustainable competitive advantage in a coherent way.
Many SMEs don’t explicitly create and communicate a strategy. This doesn’t mean they don’t have one. People in the organization will be well aware of the main competitive edge of the company, like customer service or quality. Most entrepreneurs see themselves primarily as a manager and why would you take a lot of time to create a formal strategy while so many other urgent tasks await? You can put priority on one innovation today, but if the customer asks for another innovation tomorrow, everything changes.
Traditionally, strategic planning was a rigid process of formulation and implementation. However, this is not necessary to pick the fruits from strategic planning. A focus on the strategy formation process can already lead to a lot of advantages and doesn’t have to take a lot of time. Make sure you know your competitive edge and the environment. Be aware of what makes your company stand out from the competition, but also make sure you adapt your strategy to changing circumstances.
Defining and monitoring strategy
There is no best way to define and communicate the strategy. However, many guidelines and frameworks can help you to ensure a complete view. A famous example is the balanced scorecard, which looks at strategy from four perspectives: customer; internal; innovation and learning; and financial. Other useful tools are the SWOT analysis (strengths, weaknesses, opportunities and threats), the PEST analysis (political, economic, socio-cultural and technological, with a lot of additional variants), and Porter’s five forces (threat of new entrants; threat of substitutes; bargaining power of customers; bargaining power of suppliers; and industry rivalry).
These are just a few examples that help you make a complete picture of your (competitive) environment and can help you to create a strategy. Each framework has its own advantages and disadvantages. Therefore, it’s probably best to use a combination to ensure the best result.
Do you want to take control of strategy realization as well? You can establish key performance indicators to make the strategy and goals even more tangible. Measuring these KPIs, for example using operational data or collecting additional data, can cost a lot of time but also shows whether the organization is moving in the right direction. This allows both managers and employees to take corrective action in an effective manner. Make sure you have a complete set of KPIs, so you’re not steering on the wrong metrics. If you only measure the speed of your car and forget about the needed fuel (or electricity), you won’t reach your destination.
You can write the strategy down in a large document but can also use keywords or a presentation to make it more flexible. Writing it down, makes the strategy more tangible and helps to communicate it to the whole organization. It can help both management and other people in the organization to make more well-founded decisions and contribute to the future of the company.
Strategy to support the innovation process
A great advantage of focusing on the strategy process is that it can lead to ideas for new directions (e.g. entering new markets with the same product, or delivering additional services to the existing market), that have not yet been explored. It makes sure the company is not steered by accidental discovery of possibilities (e.g. through technology push) but will actively pursue sustainable competitiveness. Confronting people with strategy can help them look at their work from a different angle. The insights can trigger people to come up with new ideas, which don’t fit their existing reference frame but can help the company in the long run.
Paradoxically, the strategy process can help both the divergence and convergence of ideas. It does not only lead to a larger range of ideas, it can also help focus the efforts of the company. Awareness of the important factors for long-term success, can help to identify those ideas that are worth exploring. It makes sure you don’t only pursue those projects that lead to immediate financial gain, but also execute strategic projects.
The strategy does not have to be the basis for every project, but don’t be afraid to invest in projects to reach qualitative goals. Technology push can still be a very useful source of ideas, but the strategic process ensures you identify whether the technology fits the long-term vision of the company (for example by monitoring the in-house knowledge). Define and communicate the reasons behind every project, may it be short-term financial gain or producing knowledge for the future, to make sure everyone in the project and line organization can help achieve the best results.
Strategy in Mobina
Using Mobina you can generate ideas for innovating your processes. You can let users enter our reference model with an open mind, but you can also use Mobina to coherently prepare for the future. A vision on the future can help to identify which ideas are useful to achieve long-term goals. In Mobina, you can tag ideas with strategic goals to easily create an overview of these ‘strategic ideas’. The strategy process can also be great input for generating more ideas, since it leads to exploring more options. Our reference model contains strategy processes and documents, which you can use to analyze the environment and formulate a strategy.
I believe it is important for every organization to keep the strategy in mind if you want to achieve long-term success. An owner/director will often have a strategy (or at least a vision and ambition for the future) in the back of his mind, but it is important that also the rest of the organization is aware of this. If the focus is on the process and not on a rigid fixed direction, strategy does not necessarily compromise the flexibility of the company. It can provide a large advantage by increasing idea generation and the effective usage of resources. Every company should find its own balance to make efficient and effective use of the strategy, but only a few hours of attention can already make a huge difference in the long run.
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