Innovation - Part of a Business Strategy

The definition of business strategy includes ‘corporate planning which focuses on the overall purpose of the business’ (thebusinessplan.com). Craig and Grant extend this stating that is it also ‘concerned with how a firm competes within a particular industry (1995, p94). Some organisations have one strategy and some have many, likewise it is probable that strategies will exist at a number of levels within an organisation (Bowman and Asch, 1987, p37).   

Therefore it is assumed that an innovation strategy fits into the business strategy, on some sort of level, ‘coming into play when required to achieve the goals of the organisation’ (Gordon-Hall, 2011). Innovation strategy I think is most likely to be a part of a firm’s ‘operational level’ strategies, as innovation can be ‘concerned with how functions contribute to the business’ (Bowman and Asch, 1987, p37), and gaining the ‘benefits of specialisation’. In essence the innovation strategy will be part of a linked set of operational strategies e.g. marketing or manufacturing, which combine to make the overall business strategy (Bowman, 1998, p5).

The innovation strategy can be changed to accommodate many different generic purposes, depending on the organisation and its culture and/or its business aims (Gordon-Hall, 2011). Some of these can be the likes of; cost reduction, differentiation, niche markets, re-positioning, diversification, supply chain etc…, for the purpose of interest I am going to focus on diversification within the innovation strategy (Gordon-Hall, 2011).

Diversification is the strategy of ‘entering product markets different from those in which a firm is currently engaged’ this strategy can be implicated by an ‘acquisition or a new business venture’ (Aaker, 2005, p262). There are two subsections to diversification, related and unrelated. Unrelated diversification generally relates to a ‘lack of meaningful commonalities’ with the new market and may not always be justifiable (Aaker, 2005, p263). However related diversification, has ‘meaningful commonalities with the core business’, this provides the business with the potential to ‘generate economies of scale or synergies based on an exchange of assets or competencies’ (Aaker, 2005, p263).

Diversification deems to be a huge course of action for a business to undertake, presenting an element of risk; this must mean that there are certain motives behind it that make it worth while. A basic motive would be in order to grow and develop as a company; however a somewhat larger motive would be the potential to develop ‘excess resources’ allowing the business to have ‘cash, manpower, reputation’ and the likes that can be used elsewhere and ‘utilised in the core business’ (Porter, 1987). Another motive is the element of ‘ego and glamour’ involved in diversification, suggesting that the ‘chase in buying and selling’ is somewhat ‘invigorating to many managers’ (Porter, 1987). All of these motives seem rather superficial on the surface, however, Porter concludes with the key issue that, under all of these motives diversification ‘makes no sense unless the corporation adds value’ and ‘makes the business better off’ (1987).

Lastly it is important to know what makes innovation strategies work. Firstly it is important to develop new strategies that will add value and be valued by the company in the future and secondly it is also very important to accept that short term failure is sometimes part of long term success when developing strategies (Gordon-Hall, 2011).

References

Aaker, D A. (2005). Strategic Market Management. Seventh Edition. UK: Wiley and Sons Inc.

Bowman, C. (1998). Strategy in Practice. Hertfordshire: Pretence Hall.

Bowman, C. Asch, D. (1987). Strategic Management. London: Macmillan Press Ltd.

Craig, J C. Grant, R M. (1995). Strategic Management, Resources, Planning, Cost Efficiency and Goals. London: Kogan Page Ltd.

Gordon-Hall, J. (2011) Inovation Strategy – designed to achieve competitive advangage. Lincoln, Lecture Slides.  

Porter, M. Competative reflections and Round Table Discussion. European Management Journal, vol. 6, 1 (1987).

The Business Plan – You guide to better business planning. (2011) [online]. Available from: http://www.the-business-plan.com/business-strategy.html [Accessed: 14 November 2011].