Strategic Innovation a Key to Creation of Profit


With the increased competition among the businesses, it has been essential for the existing as well as new companies which are entering into the industry to innovate with the product they bring to the market, innovate in the strategy pursued by them or to innovate in the processes performed by the organizations in providing services to the customers. The term strategic innovation implies the generation of new idea, which can be applied to the product, process and service offered by the organization in order to achieve the dynamic growth in terms of increased profit from the operations.

In the competitive business environment, strategic innovation should not only be a priority for the organizations, but it should act as a major driving force for the purpose of exploration, expansion and success. One of the integral components of strategic innovation is design thinking. It implies thinking creatively by making the use of technology, individual values and business practices, so that the values can be created for the customers and ultimately benefits the organization in terms of increased profit. Design thinking has been used by many reputed companies as a business model, such as Apple, Procter & gamble, GE, etc. Using it as a business model will result in great success (The seven dimensions of strategic innovation, 2008).

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Strategic innovation serves as an important tool in creating value by developing a business strategy that reinforces the creativity in business. The strategic innovation is not only essential for the existing businesses, but it is also important for the new businesses, which enter into the industry; otherwise, it would be difficult for the new companies to earn profit from their operation and it will ultimately become a major barrier for their survival. One such example of the implication of strategic innovation is strategic decision group at Stamford University. In order to address the complex program concerning the strategic innovation, they have developed a certificate program, which was known as Stamford strategic decision making and risk management. It enables the business leaders and professionals in developing innovative models by promoting creativity, which ultimately leads to the value creation and achievement of the greater results (The seven dimensions of strategic innovation, 2008).

Another such example of successful implementation of strategic innovation is Nestle, which was founded in year 1866 and is the world’s biggest food and beverage company. The research and the development center of Nestle have invented a new espresso technology that is an easy to use espresso machine containing the flavor of coffee powder inside. The company has marketed its new innovation product in the market of Italy and France and the market entry strategy chosen by the company was based on a well established business concept of what, who and how to market the product. As a result, its invention failed in the market despite the new product technology.

Then, it has decided to remodel its product innovation into the strategic innovation. It has decided to develop its own model of going to market by way of invention of Nespresso club and its new way of what, how and who of doing business has resulted into a successful strategic innovation. Thus, the strategic innovation is very much crucial for new as well as existing organizations in order to earn extraordinary profits, otherwise it becomes difficult for the new companies to earn profits from the market and hence they are ruled out of the market. Apart from this, the innovation in the product and processes will not be sufficient to achieve the competitive advantages over others. A new organization needs to focus on large number of inventions as performed by Nestle for achieving better results.

Topic sentence

The role of strategic innovation for the survival of new companies in the industry

Summary of the paper

As the paper discusses the importance of strategic innovation for the survival of new companies, it starts with an introduction about the topic, which includes certain real examples of implication of strategic innovation by some companies. The paper proceeds with a description of key terms concerning the topic and also includes a brief description about the opinions of various scholars under the heading literature review. Finally, some key ideas based on the literature review are discussed and also a paragraph stating the conclusion of the paper is included. The paper also contains a separate part for references, which includes the sources from where the relevant matter will be taken for discussion.

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Definition of Key terms

The key term, which has been used, is the three dimensions of doing businesses, i.e. what, how and who of doing business. What implies the problem, which needs to be solved in order to satisfy the customers, how implies the procedure of solving such problem like value architecture, business model. Who implies for whom such problem is solved, which is normally for the target group. Another major term used in the paper includes innovation management skills and business management skills. An innovation management skill implies the important skills possessed by the individuals, so the innovation can be managed in an effective way. As in case of Nestle, initially, it was unable to manage the invention of its new technology, but later on it managed in an effective way. This implies that the management skills were lacking on the part of the managers of Nestle. Further the business management skill implies the management of the business in an effective way.

Literature review

The literature review conducted in relation to the importance of strategic management will be helpful in identifying its role in the creation of profit for new companies and how crucial it is for them to implement such strategy in order to survive. According to Moeller, Stolla and Doujak, innovation is very much essential for the businesses, but the companies should innovate beyond the products and processes.

As per the study published by business week, it is about more than 60% of the companies which has regarded innovation as a top 3 priorities in the year 2005, whereas its importance has been reduced sharply in the year 2006 and has been regarded as a top priority by only 40% of the companies. Thus, the significance has been shifted from simply innovation to the strategic innovation, which implies experimenting with new strategies and also the combination of what, how and who of doing business. As in case of Nestle, its focus on the new ways of marketing the product brings in larger benefits in terms of increased profit; hence the organization should consider strategic innovation as an important tool for achieving higher profit. Thus, the companies need to consider all the dimensions of innovation, so that more of the focus will be on strategic innovation in achieving the sustainable growth businesses (Moeller, Stolla & Doujak, 2008).

According to Moeller, Stolla and Doujak, strategic innovation is an important tool for achieving sustainable growth, but it is not only for the established companies to implement such tools, rather it is equally important for the new business in the industry to implement such tools. It has been observed that the new companies implement strategic innovation in a more effective way in comparison with the well established companies (Moeller, Stolla & Doujak, 2008).

According to Govindarajan and Trimble, strategic innovation plays a very crucial role in the overall growth of the organization. In order to survive in the long run, the organization needs to implement strategic innovation and it has been recognized as one of the biggest challenge for the management of the organization. The companies, which initiate strategic innovation, have the capability to compete with the competitors in more effective way and also in delighting investors by means of increased profit (Govindarajan, & Trimble, 2005).

According to Robert M. Grant, by the use of strategic innovation, an organization can achieve the competitive advantages over others in those industries where the potential for competitive advantage is limited. The importance of strategic innovation further increases when the relevance of the product and the process innovation starts shrinking (Grant, 2002). According to the article named, Strategic innovation for success, it becomes a prerequisite for the businesses to pursue continuous strategic innovation in order to maintain a competitive edge over others. It is essential to identify the changes in the demands of the customers and needs to adjust as per the trends in the market demands (Chen, 2008).

According to Burgelman, an organization can achieve the competitive advantage over a long period of time by implementing the strategic innovation. The performance of Intel in the field of IT has been an important example, which implies that through the strategic innovation, the market leadership can be acquired and it is also quite possible to sustain such advantage over a long period of time. With the strategic innovation, Intel has achieved such a position in the market as the manufacturers of computers have to still depend upon Intel for most of their resources. Thus, it became difficult for new businesses to pursue strategic innovation as it requires a huge capital coupled with talented human resources. This makes it difficult for the new businesses to earn huge profit as they have to depend on the market leader for their survival (Burgelman).

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According to Kurt Verweire and Lutgart Van Der Berghe, strategic innovation has been a major threat for that organization, which are planning to start their operation as a new business and this particular threat is from the existing market leaders who are successfully operating in the market. There are four major challenges of strategic innovation, which acts as major threat for the new businesses to pursue such innovation. These challenges include motivation to innovate, generation of breakthrough ideas, innovation project management skills and business management skills (Verweire & Berghe).

There should be a need to have enough motivation among the management of the organization, so that the innovation will be pursued in a better way. But it has been found lacking in most of the organizations. Further, strategic innovation requires generation of breakthrough ideas, which is a very difficult task as it requires appropriate individuals with good talent in them to think strategically. Innovation management skills and business management skills are other important prerequisites of a successful strategic innovation, which is also difficult to locate among the management of the newly established companies (Verweire & Berghe).

The strategic innovation pursued by the well settled organization in the market has considerable advantage, which acts as a major barrier for the newcomers to earn profit from the operation. This implies that the strategic innovation is a challenging job, which should be handle carefully in order to enjoy its advantages and as it is a highly critical task; it should be the responsibility of the skilled person who is fully aware of the threats and the opportunities from such innovation. So it does not guarantee as it will lead to the success to all the organizations that implement such strategic innovation in their operation (Verweire & Berghe).

Key ideas

A brief discussion of the review about the importance of strategic management implies that it has a pivotal role to play in the effective performance of both the new as well as established organization. It could lead the organization in getting success by generating more profit for the organization. However, the important prerequisite for the success of strategic innovation acts as a major barrier for the new businesses to implement such innovation strategy in a most effective way.


Strategic innovation has an important role to play in the maximization of profitability of an organization. It has been effectively used by many of the organizations to pursue the competitive advantage over others. Some of the organizations are Nestle, Apple, Procter & Gamble, Stamford University, etc. However, it has been a difficult task for the new businesses to successfully pursue such strategy because it requires good management skills and also the desire to innovate on the part of the management. These requirements are hard to find in the management of the new companies. As a result, they find it difficult to implement strategic innovation and the motive of profit creation remains a big question for them.