IA-Forum: Your workshop in the upcoming Association for Strategic Planning Annual Conference is titled: Innovation Strategy: Balancing the Tension between Exploration and Exploitation. What do you mean by “Exploitation”?

Chris Hafner: Established enterprises, incumbents, have product(s) and/or service(s) in the marketplace that generate revenue and associated profits.  How should an enterprise reinvest those profits?  Exploitation refers to further exploiting your existing position in the market – expand existing product lines, improve the product, streamline the process, extend the platform.  Exploration refers to investing in ‘disruption’, innovative products, new business models, or emerging technologies.  With precious finite resources, how and when should you shift the allocation, the ‘investment mix’.  This is the challenge enterprises face.

IA-Forum:  Creating an innovation strategy is difficult for many business organizations. Why?

Chris Hafner: True innovation requires an ability to sense and respond to complex signals in the marketplace.  It requires an embedded risk management philosophy, not a risk management department.  Understanding your innovation approach and innovation options are critical.  Will you innovate on product?  Will you innovate on process?  Will you innovate on platform?  If you innovate on a product, will you focus on component innovation or architectural innovation?   The other challenge is that many enterprises talk about innovation in one context, but treat it in another.  For example, a consumer products company wants to ‘bring more innovative products to market’.  Instinctively someone will have the idea to ‘measure innovation’ and put in on the balanced scorecard and embed innovation into employee incentive plans.  This is the canary in the coal mine for true innovation.  Suddenly a packaging or kitting change is considered an innovation, a new flavor is now an innovation.  The scorecard looks good, personal incentives accomplished, but there is a lack of true innovation – innovation has become diluted.  A common reaction is to pull innovation out of the ‘day-to-day business’ and create an innovation unit.  This may work well in the short term, but until an enterprise adopts a strategy for embedding innovation into their culture, they will not achieve their full innovation potential.

IA-Forum:  Change is rapid in business environments. Given such rapid change, how can an organization balance bottom-line performance and innovation strategy?

Chris Hafner: I don’t summarily subscribe to ‘the rapid speed of change’ as a new business challenge.  The data would indicate that the ‘speed of business’ has been relatively steady over the past 75 – 100 years (see The creed of speed, The Economist, Dec 5th, 2015 issue:http://www.economist.com/news/briefing/21679448-pace-business-really-getting-quicker-creed-speed).

The conference workshop deals with this dilemma through use of a simulation game, allowing the participants to experience this dilemma in a competitive, time sensitive environment.  We can then look at the game ‘winners and losers’, analyze their thought process, and discuss the tensions they experienced and how to manage those tensions in a real world environment.  The near term, quarterly bottom-line performance is the exploitation aspect, the innovation strategy is the exploration aspect.  You have to manage them, not balance them – if they are in balance you are stuck.  You need a framework and approach to determine how and when you shift the resources more heavily in one direction versus the other.

IA-Forum: What steps do you consider key to developing an effective innovation model?

Chris Hafner: You have to understand ‘what’ you want to innovate – product? process? platform?  and ‘how’ you will innovate – component? architectural?

If you are a true disruptor you need a strategy to shift demand from being inchoate to choate.  You may also need to have a nascent market strategy.

IA-Forum:  What skills will your workshop offer attendees, at the ASP Conference in March?

Chris Hafner: In the workshop, we will learn how to recognize and deal with the tensions between exploitation (near term revenues) and exploration (future revenues).  We will provide participants with frameworks to better define their innovation strategy, including a new framework coming out of Oxford University’s Said Business School.  This is a highly interactive workshop where participants take centre stage and are engaged throughout the workshop.  The best part of this workshop isn’t just the learning and frameworks, it is that through the approach and game playing the participants get to know one another better and build relationships that provide value well after the conference has concluded.

Chris Hafner is Vice President, Strategy; Director of European Operations at Newton Consulting. 

Mr. Hafner has more than 20 years of experience as a senior strategy leader, having led complex global programs and projects across a wide variety of industries. He is a Fellow of the Strategic Planning Society and serves as chairman of its board of trustees. As Vice President, Strategy, Mr. Hafner facilitates Newton’s internal company strategy development and execution, as well as leads Newton’s global strategy and business consulting services. He will be leading a session on innovation strategy at the upcoming Association for Strategic Planning Annual Conference.