Last week I had an intersting discussion with the Head of Corporate Strategy of a multinational German company. The question that we discussed was: “Which implications will Open Innovation have on the strategy process of global companies – Where are opportunities, what needs to be modified?”. To better understand my discussion partner’s perspective we first had a look at the strategy process of his firm:
- At a corporate level this company is running an annual cycle which is updated quarterly. Its main purpose is to set the direction for the company. The Board also establishes a set of strategic priorities and performance targets.
- This process is interwoven with the Business Unit planning. They have a three-year planning horizon and collaborate in their strategy development with the innovation management.
- And finally there is the Regional Level planning. Regions have the responsibility to deploy innovations. For the strategic planning, the regions split targets and innovation information on operating unitsa and set annual targets and budgets. These are consolidated, checked against the Business Unit plans and then presented to the Board.
In our discussion we worked out 10 points where Open Innovation and the strategy process´touch:
- The strategic planning process should be continuously monitored – Not only for process management reasons but also for increasing the innovativeness of the strategic planning via adaptability to changes and internalization of new ideas
- Separating the quantitative part of the strategic planning from the qualitative makes the strategic planning process more innovative since it allows for active internalization of external ideas
- Being outward-oriented in strategic formulation increases the innovativeness of the strategic planning process
- A clear strategy combined with a good internal coherency directs all of the company’s resources towards common goals and hence provides guardrails for Open Innovation and consequently a wider stream of new ideas. Consequently, Open Innovation makes strategic planning more innovative by promoting acquisition of new knowledge and building of new capabilities
- A balanced and carefully selected mix of individual and shared targets / rewards is a key driver for cross-functional collaboration and thus makes the strategic planning process more innovative
- Using a balanced mix of input and output-related innovation metrics rewards new ideas generation and thus makes the strategic planning process more innovative
- A culture that promotes experimentation and sees failures as learning experiences increases the innovation pace and hence influences the strategy formulation
- Future growth areas should be investigated continuously by multi-functional teams whose time allocation, budget and rewards are directly linked to this task
- Co-creation tools and customer-insight experiments are a valuable source for new ideas and make the strategic planning process more innovative
- By commercializing unused Intellectual Property Open Innovation (Inside-out) adds new growth businesses