In our recent webinar, Alex Osterwalder, Tendayi Viki, and Carol Hill dove deep into the pressing issue of the innovation ambition vs. capabilities gap in established companies. Let's unpack the key insights shared in this webinar that can help bridge this gap.

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1. The power of a clear innovation strategy

Innovation without direction is like sailing without a compass. Our speakers emphasized that a well-defined innovation strategy is crucial for guiding decision-making and resource allocation. Here's what you need to know:

Modern strategy making is twofold: Explore & Exploit

Let's talk about how modern strategy works. It's not just about planning for the future or managing the present—it's about doing both, simultaneously. Alex broke this down into two interconnected worlds that every business needs to navigate:

1. "Explore": Is all about experimenting, trying new things, testing them, and potentially developing entirely new business models or markets. It's exciting, but it can also be uncertain.
2. "Exploit": This is where you manage and improve your existing operations. It's about making what you already do even better.

Here's the kicker: innovation should be happening in both of these worlds. In "Exploit," you're looking for those incremental improvements that can boost efficiency or enhance your current offerings. In "Explore," you're reaching for those big, transformative ideas that could reshape your business or even your entire industry.

Now, you might be thinking, "That sounds great for big corporations, but what about us smaller companies?" Well, here's the truth: this approach is crucial for businesses of all sizes. Even if you're a younger company, you need to balance managing your current business model while also innovating for the future. Trust us, it's never too early to start thinking this way.

The real art of strategy lies in skillfully balancing these two worlds. It's about knowing when to optimize what you have and when to innovate for what's next. It's not always easy, but getting this balance right is what creates a robust, future-ready organization.

So, take a moment to reflect: How are you balancing "Explore" and "Exploit" in your business? Are you giving enough attention to both? Remember, the goal isn't perfection, but progress. Start small if you need to, but start somewhere. Your future self (and your business) will thank you for it.

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The strategy smell test

Roger L. Martin suggests a simple test—if you can make the opposite choice without looking stupid, it's not a strategy. For instance, "We want the world's best quality" isn't a strategy because no one would choose the opposite.

Align innovation activities

Ensure your innovation efforts, mergers & acquisitions activities, and corporate venture capital are all aligned with your overall strategy. Disconnected activities lead to wasted resources.

Actionable takeaway

Gather your leadership team for a 1-2 day workshop to define your innovation strategy. Make sure it clearly outlines where you want to innovate—new technologies, markets, value propositions, or business models.

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2. Overcoming common innovation hurdles

Even with a clear strategy, many organizations struggle to execute. Let's look at some common hurdles and how to overcome them:

The "hero innovator" problem

Many employees with great ideas don't know where to start. They become "hero innovators," trying to navigate the organization's complexities alone. This often leads to frustration and wasted potential.

Solution: Create a transparent process for idea submission and evaluation. Make it clear how ideas can be proposed, what criteria they'll be judged on, and what support is available.

Unclear decision-making

When decision-making processes are opaque, it creates uncertainty and slows down innovation efforts.

Solution: Establish clear decision-making processes. Who makes decisions? How often do they meet? What's the budget? Make this explicit across the organization. For example, at Pearson, they set up product councils with clear budgets: $0 for idea generation, up to $50K for exploration, and up to $250K for validation.

Lack of resources

Innovation requires time and money. Without dedicated resources, it often gets pushed aside in favor of day-to-day operations.

Solution: Consider creating dedicated innovation funds and protecting time for innovation work. This might mean setting aside a specific budget for innovation projects or allocating a certain percentage of employee time to innovation activities.

Actionable takeaway: Create a visual guide of your innovation process, from idea submission to funding and execution. Make sure every employee knows how to navigate this process.

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I can tell how much you prioritize innovation just by looking at your agenda.”

Rita McGrath,

Professor at Columbia School of Business, author of "Seeing Around Corners"

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3. Making time for innovation

As Rita McGrath wisely noted, "I can tell how much you prioritize innovation just by looking at your agenda." Time is often the scarcest resource in innovation efforts. Here's how to address this:

EBITDA relief

Leaders are often hesitant to invest in innovation because it can negatively impact short-term profitability metrics.

Solution: Work with your CFO to remove innovation costs from EBITDA calculations. This prevents innovation from negatively impacting short-term profitability metrics, allowing for longer-term thinking.

Paid resource replacement

Innovation work often competes with employees' day jobs, leading to burnout or neglected innovation efforts.

Solution: Allocate budget for temporary resources to cover the day jobs of employees working on innovation projects. For example, a financial industry client set aside budget for temporary resources to support BAU teams while employees participated in 12-week innovation sprints.

Dedicated professional teams

When innovation is treated as a "side gig," it often fails to gain traction.

Solution: Create teams that own the innovation process, tools, and methods. These teams should see projects through from start to finish—handovers often lead to failure. As Alex emphasized, it's not about creating a separate innovation department, but about having dedicated teams for specific innovation projects.

Actionable takeaway: Audit your team's calendars. How much time is truly dedicated to innovation? Work with HR and Finance to create policies that protect innovation time.

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4. The Strategyzer journey: a case study in innovation

To illustrate these principles in action, Alex shared Strategyzer's own innovation journey:

Strategyzer's path offers a real-world example of strategic innovation in action. Starting with a mix of advisory services, coaching, e-training, and software, the company made several pivotal decisions based on market feedback and internal capabilities. They shifted focus towards recurring revenue models, integrated their coaching services with their software platform, and eventually developed packaged programs that gained traction with both SMEs and large corporations. Throughout this process, Strategyzer demonstrated the ability to make tough choices, reallocate resources, and adapt their strategy—embodying the balance between "explore" and "exploit" we've discussed. This journey wasn't without challenges, but it showcases how a clear strategy, willingness to experiment, and data-driven decision-making can drive meaningful innovation.

This journey illustrates the importance of having a clear strategy, being willing to experiment, and adapting based on market feedback. It's a real-world example of balancing "explore" and "exploit" in action.

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Conclusion: bridging the gap

Bridging the innovation ambition-capability gap isn't about grand gestures or innovation theater. It's about creating clear strategies, transparent processes, and dedicated resources. It's about empowering your teams with the time, tools, and support they need to turn ideas into reality.

Remember, innovation is a journey, not a destination. It requires continuous learning, adapting, and sometimes, pivoting. But with the right approach, you can turn your innovation ambitions into tangible results that drive your business forward.

So, take a moment to reflect: How are you balancing "explore" and "exploit" in your business? Are you giving enough attention to both? Do you have clear processes for innovation? Is innovation time protected in your organization?

Remember, the goal isn't perfection, but progress. Start small if you need to, but start somewhere. Your future self (and your business) will thank you for it.

Ready to take the next step in your innovation journey? Explore our programs and tools and let's bridge that gap together.