Welcome. The innovation process is a complex, uncertain and challenging task. The first step in the innovation journey is knowing in which direction you want to go. In other words, to survive in today's ever changing business environment, organizations need an innovation strategy. Hi, again, I'm Murat Tarakci. The topic of this video is Innovation Strategy, an area about which I actively teach and conduct research. We will discuss what innovation strategy is and why it matters. At the same time, I will present several tools and methods to help you craft an innovation strategy for your own organization. How cool is that? Let's start with a question. Which of the following statements can be considered as innovation strategy? The answer is none of the above. Unfortunately, these statements don't go beyond being a wish list. Anyway, innovation strategy is a central integrated an external oriented gameplay that dictates how to generate, capture, and deliver value. More simply put an innovation strategy answers questions such as where to invest your resources, how to protect your innovations, and which organizational structures and processes you need to set up. Why does an innovation strategy matter? Having an innovation strategy is important simply because no organization has an infinite amount of budget or resources. Because the business landscapes also continuously changes, organizations need a clear strategic direction to make smart resource investments so that they can stay competitive in the future. An innovation strategy is different from a firm's overall strategy. The business strategy aims at what the firm, as a whole, wants to achieve, and how to achieve that goal. Although these what and how questions sound familiar to the ones in innovation strategy, here they capture a broader scope. What and how questions in a business strategy relate to the product categories, market segments in which the company positions itself relative to the competitors. Consider IKEA's business strategy, for example. IKEA positions itself in offering relatively inexpensive and contemporary furniture to young people. IKEA tries to differentiate itself in that market by offering high quality products for very low prices. A business strategy should also define the reach and stretch of these objectives. IKEA's strategy has so far been based on organic growth rather than acquisitions, wholly owning the stores rather than having joint ventures or franchises. Business strategy also defines the sequence of strategic actions such as when to expand or launch advertising campaigns. Business strategy should explain how the firm plans to generate revenues. If you consider the IKEA example again, the profits rely on scaling, standardization, and high volume of operations, where embedded supplier relationships are the main focus. A firm's innovation strategy and business strategy should align and support each other. If the business strategy targets low cost manufacturing, then the firm needs to define its innovation strategy towards investing in, for example, small improvement projects that target operational excellence. The link between innovation and business strategies also explains what not to innovate. If the business strategy is about creating economies of scale and production of standardized products in large volumes, the firm then should not invest in developing customized design products or services. A useful tool to align business and innovation strategies is called: business roadmapping. Roadmapping allows a firm to link to their organizational and technological capabilities with their strategic goals. Let's have a look at an example. With an eye on the timing, roadmapping visualizes whether the current capabilities and technologies employed in products and services can help the organization in achieving its objectives. In case current capabilities and technologies are not sufficient, these tools also allow organizations to think about when and how they can acquire those needed capabilities and technologies. For example, they may set up a partnership with a university, such as The Rotterdam School of Management, to acquire the technologies and knowledge they need. Or launch leadership development programs to inject leadership skills to their employees. We have discussed that an innovation strategy should align and complement with the business strategy. Let's take a short break from this theoretical discussion and hear about the innovation strategy of Philips from its own CEO Frans van Houten.