Using Innovation to Create Business Strategy - Literature review Example

Using innovation to Create Business Strategy Introduction Modern businesses find themselves in a situation where they have to constantly change in order to remain in the market. For most businesses, innovation is therefore not a choice, but a matter of survival. In this regard, there is a direct link between innovation and business strategy. Businesses do not just innovate for the sake of it. If anything, innovation is one the highest costs that a business has to incur, and therefore, if it was optional, they would willingly refuse to use it. In a competitive market, change is not avoidable because of a number of reasons. First, customers are constantly demanding better and even cheaper products, the competitors are always trying to take advantage of this need for better products by customers to mark their territory in the market and most of all, and technology does not remain constant. With all these factors, therefore the need for innovation as a business strategy has to be used for any business. With regard to business strategy, innovation is used to achieve the following; To prepare for change Change is one of the biggest risks that businesses have to deal with regard to their future. Every corporation is started with the aim of operating continuously into the future and to outlive those who started it. This is called the going concern. However, this need for the businesses to remain in operation is always at risk due to the fact that the operating environment will continue to change. Unless the business managers have the ability to deal with this change, their business will be at danger of being pushed from the market. The need for the businesses to avoid being outdated with regard to its business is therefore one that must be considered by managers when developing and implanting their business strategy. They therefore use innovation to prepare for change. In business, the changes that may be needed in the future are always neither clear nor certain. As Esty and Winston (2009) say, constant innovation is therefore one ways to prepare for this change and to hope survive it is to make sure that they have constant innovation. While innovation does not necessarily prepare the business for all the possible changes that can occur in the market, it nonetheless brings the business close its ability to deal with these changes. This use of change in order to remain relevant in the market is used by so many firms. According to Chan and Mauborgne (2015), technology firms are especially at the forefront of constant innovation since the technology sector grows at the fastest rate. In this sector, there is an almost complete change of the technological developments each 18 months and it is expected that even as the technology continues to develop, the rate of technological development is going to be even faster. It is therefore, necessary for these firms to make innovation as part of their strategy in order for them not to be pushed out of the market. These firms understand that if they do not change, change will change them. As Duggan & Duggan (2013) say, there are many advantages in being the change initiator as opposed to be the one being forced to change. Change leaders benefit the most from change and they can use this as their differentiable value. Firms like Google and Apple, Inc. know this very well and they keep ahead of their competitors so as to make sure that they have the upper hand in the market. Instead of just being there waiting for change to come and give them direction, they determine how the technological change will happen and the others follow. This makes them leaders in the markets in which they operate in. Change as a differentiation strategy According to Holt and Cameron (2010), every business must have a strategy that keeps it ahead of the competition. There are various ways to achieve this differentiation. For some firms, innovation and being a technology leader is what helps them to be able to survive. They know that they can use innovation to differentiate themselves from the other businesses in the same market (Douglas & Douglas, 2010). Wal-Mart has been known to be one business that uses innovation to be a leader in its industry. As one of the biggest retailers not only in the US but also in the world, Wal-Mart has used innovation to differentiate itself from competitors. From as early as before the invention of the modern personal computers, Wal-Mart knew it could be able to use the power of computing to innovate better ways to serve their customers. As Stefik and Stefik (2004), they realized that innovation would not only help them to increase efficiency, but would help them to achieve other strategic advantages such as having a bargaining power over their suppliers. They also knew that they could save a lot of cost and that they could then use this to lure customers by being able to transfer the cost advantages to the customers. This strategy helped Wal-Mart to grow at a very fast speed to be the giant it is today. In this regard, it can be argued that innovation can appropriately be used to achieve and to support business strategy. To make change The other way that innovation helps a business to achieve its strategy is that it helps in making sure that the business will be the one that initiates change (Mootee, 2013). Businesses do not have to sit and wait until change comes its way in order for them to be able to start thinking of innovation. Businesses that are proactive with regard to innovation have a much better chance of benefiting from innovation as opposed to those that react to change. With regard to this, there are two ways in which busses can be proactive with regard to innovation. 1- Using innovation as the core strategy Some businesses use innovation as its main business and market strategy. Instead of innovation being seen as something will support the strategy of the business, it is regarded as the central strategy. Firms that have been seen to do this include Google and Apple, Inc. These two firms capitalize on their ability to innovation leaders and use this as their strategy to access the market. They innovate products that even the target consumers do not know they need and deliver the products to the customer. As a result, their success in the market is dependent on their ability to innovate. The main issue with this is that since the innovation is a high-risk process, it can lead to the firms making large losses to even making one false step that will leave the firms at disadvantage. If for instance the firm innovate a product that the market ends up not liking, the firm will have a problem in the market. Firms that use innovation as their main strategy in the market have to innovate disruptive technology (Price, Mores, & Elliotte, 2011). Disruptive technologies have their own challenges in that the markets for which they are target have to change the way they do things. Since people are resistant to change, this can lead to the technology not being accepted and adopted by the market. This has two fundamental impacts on the concerned firm. First, the innovation of such disruptive technology can be very experience and so failing to have this technology being accepted by the market can lead to huge losses. Secondly, if the market does not accept the innovation, what this will mean for the firms is that the firm will have remained behind compared to their competitor and the competitors can use this chance ensure that they push the firm from the market (Harvard Business Review, 2011). 2- Using innovation as the support for strategy There are those firms that do not necessarily use innovation as their major strategy but use it as their central strategy but use innovation as the support for their business strategy. A good example is Wal-Mart that uses technology and innovation to deliver products to the market. The innovation that these kinds of firms use is not disruptive and it is usually low risk innovation. The chance of the innovation to fail for these firms is always low and this means that the firms can be assured that the innovation will almost surely bring in strategic advantage. When technology is used in this kind of way, that is, to support business strategy, the business should be able to make sure that the innovation is in line with the strategy of the firm (Duggan , 2003). As Stefik (2014) argues, having an innovation that is not in line with strategy of the firm can lead to drastic consequences and this will work against the firm. In this case, managers have to know that it is not just any innovation that will help them to achieve their business strategy. Such managers must also be able to know which particular every problem that any innovation is solving. Without this, the firm will have so many innovations that do not help it to achieve its business strategy. Strategic misfit With regard to innovation, the major issue for businesses is the strategic misfit. This applies to both those businesses that use innovation as the main strategy and those that see innovation as a way to support their business strategy. However, it applies more to the second category because these kinds of businesses have different strategy and innovation. With regard to avoiding strategic misfit, the business managers have to look at the following issues; Technology onion Read More