For innovation initiatives to have the most impact, they must be tied to the strategic objectives of the company. Too often, I've seen R&D managers working in the dark, not knowing what is important to the company or to the customer. If R&D managers don't know their company's priorities, they can't be proactive in suggesting initiatives that could have a strong business impact and can’t manage their R&D portfolio to support business needs.

Instead, the most effective companies create a multidisciplinary process that brings together representatives from different parts of the company to collaborate on the strategic plan.

Typically, strategic planning occurs yearly. Then, each quarter the achievement to plan is monitored and reviewed. In a corporation with different divisions or business units, the leadership of the business unit of R&D work together to define the direction and plans for the coming year.  From the business side, product managers, marketing and sales managers define the potential of different market segments. R&D managers or Innovation Excellence managers can propose different programs of research and development as needed to meet strategic objectives and innovation initiatives.

In this way, strategic planning is both top-down and bottom-up. It is top-down in that the long-term vision is set at the Leadership level.  But it's also bottom-up, in that different projects in the portfolio are reviewed to understand their financial value and timeline.  For example, the strategic planning team can look at the company's portfolio of projects and see that it has ten projects with a value of $X and a budget of $Y. From that, the team can determine whether the existing set of projects addresses the strategic needs of the company, or whether new ideas are needed to close the gaps.

Let's look at how innovation initiatives support business objectives during the planning process.  Say you're a company that sells paint to the construction industries.  Your company's strategic plan calls for entering Southeast Asia, and your existing products does not have a product aimed specifically at that market.  You bring together a team of marketing and R&D to define what a product for this market should be. The marketers begin describing characteristics of this new region, such as the typical applications, types of construction and materials used in the region. The R&D people take this fact and propose developing a new kind of exterior paint for buildings that reflects heat based on the applications and the climate. Specifically, the new paint would reflect heat not just by being light in color, but through its heat reflective chemical properties as well. This notion thus leads to a new product initiative: changing the formulation of existing paints such that they will reflect heat.

In short, the company’s strategic plans for geographic expansion drove the targeted development of a new innovation: a new type of building paint aimed at the Southeast Asian market. Further, R&D understands the priority that this initiative must have when it is asked to review its own portfolio and prioritize the new development against other new developments.

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