I spent the week developing and facilitating an innovation strategy with one of the most recognized CPG companies in the world. It’s been fascinating and challenging work. One of the challenges is the word strategy itself. It has become a bit of a business “suitcase word” used as a catchall in attempting to articulate what we’re working on and how we’re going about the work.

The other challenge is the lack of customer-based evidence informing the development of a strategy. Sure, we commission market sizing studies, opine on the “size of the prize”, and even cite market trends in these types of meetings but much to a critical default, rarely do we bind empathy work to our strategy work.

The gap between customer empathy and innovation strategy is surprisingly wide. In our work this week we’ve been exploring methods to close that gap and bring empathy-based evidence into the equation of our strategy work. We’re treating the strategy as a hypothesis to be (in)validated in the market using empathy and experimentation to drive our work.

This week I wanted to share my top-of-mind opinion on the anchors necessary to develop an impactful, empathy-based innovation strategy.

1. Allocation

Key Question: Where will we use our capabilities, resources, capital, and time?

Allocation is a hard anchor to tackle. Most of us have scarce resources and even scarcer time. The opportunity cost of pursuing the wrong customer pain points, categories, and projects often forces us to hedge our strategy toward the incremental, safe side of the spectrum. The method we’ve been exploring is attempting to “break frame” from the stories we tell ourselves inside of the building to generate bold, impactful opportunities to probe outside of the building. There are many methods of opportunity sourcing including customer listening, technology advancement, invention, collective business intelligence, and primary research (truthfully, you need a mix of these to source projects in your portfolio). For our project, we focused on leveraging the collective intelligence of the organization to generate areas to go out an explore customer pain points. 

The abridged version of the method is as follows:

This leaves us with a prioritized group of potential pain points to act as a springboard into empathy work. The empathy work should validate or invalidate our assumptions about the viability of our hypothesis of the opportunity area and category we want to pursue in our strategy. (I recognize this is an extremely brief and over-simplified version of the method, but more to come).

2. Goals

Key Question: What impact do we hope to achieve both externally and internally?

Goals define our desired future-state in tangible terms. Goals include financial targets, product cadence/throughput, profitability/gross margin, and internal transformation objectives we aim to achieve with our strategy. Balancing longterm/stretch goals with proximal goals provides a solid milestone roadmap for an innovation group to chase. For the strategy team, the key to goals is commitment. Often we try to build consensus around goals. We regress to a “team mean” chasing agreement around the goals. A better operating system is to foster “team commitment” to your goals.

Commitment means:

Learning how to commit to what you need to achieve, why it’s important, and how you will be accountable is critical to developing an effective innovation strategy.

3. Capabilities

Key Question: What abilities do we need to build to be successful?

Capabilities are uniquely about us as a team. They include the internal skill sets, partnerships/networks, and core advantages we own as a business. A meaningful innovation strategy identifies the gaps in the capabilities we currently have in relation to the goals we aspire to achieve.

Yet most of our capability assessments are packed full of assumptions. We assume we don’t have the right digital skills. We assume we need to build better tools. We assume we are lacking the right channel distribution. To ensure your strategy isn’t baked with a bunch of underlying, sneaky assumptions, the guiding force in your capabilities assessment should be evidence. What evidence do you have about your organizational abilities? What are the thresholds of a “skill” and how are you meeting or missing them? What sources of data can you mine to inform your core capability assessment? Adding evidence to the equation often provides a different story than the one we tell ourselves internally.

4. Alignment

Key Question: How do our goals, allocation, and capability areas align with business strategy, culture, and market trends?

Alignment means pressure testing our strategy hypothesis against existing evidence in three areas: business strategy, organizational culture, and market forces. Testing our hypothesis for alignment with the overall business strategy, risk profile, “DNA” of the organization, and outside market trends helps identify potential future landmines we may be unaware of. How does the rest of the organization view innovation’s role? What are the expectations for incremental revenue and impact to the business? What are the industry’s growth markets? What are the consumer trends and timelines?

The temptation here is over-alignment. We must guard against allowing the business strategy and market trends alone define what the innovation strategy should be. Part of innovation’s role is to challenge and influence the rest of the organization, the market, and the company culture. To be successful, innovation strategy has to find the balance between being too dependent on the core business and too far unhinged from the mothership.