In the innovation strategy, the company needs to decide the means for achieving the innovation: grow own technology, acquisitions, mergers or licensing. These are all methods of bringing the innovation to fruition and the choice depends on resources in the company, time available, costs, risks involved and the probability of success.

If the decision is to develop the innovation within the company, there has to be the decision on whether the change has to be incremental or discontinuous. This means that the management decides if the innovation is to grow from the present base or if this is to be a completely new direction - maybe a new plant or a new market or a new product platform. In the industry, is it strengthening its position, changing position or moving out? Is the company organisation staying the same, gradually changing or completely changing? There also needs to be a specification of risk - high, moderate or low risk.

This is really setting the company philosophy for innovation. A large company may say that it has different types of innovation in different parts of the company - some strategic business units may be high risk, discontinuous change, growing their own technology; other strategic business units can be low risk, incremental changes, acquisitions. But usually the company has one philosophy; there may be venture parts of the company that have a different philosophy. The degree of risk in an innovation strategy varies with the company; two different companies may decide to develop the same product for the same market - for one it is high risk and for the other it is low risk (Souder, 1987).

Two companies developing frozen bread dough and two developing low-fat beef are compared in Table 2.5.


Table 2.5 Innovation strategies and their risks in different companies

Frozen bread doughs The innovation is frozen bread dough as a consumer product in supermarkets · A small baker marketing bread in its local area is looking at an innovation strategy for marketing frozen bread doughs to supermarkets nationally. This is a high-risk venture as both the technology and the market are new to the company. · A large baking company which is marketing cakes, biscuits and frozen pastry to supermarkets is considering marketing bread doughs to supermarkets. This is a low- risk venture because it has the technology and the market already and it is a new product to expand the range. Low-fat beef The innovation is a production method for growing beef cattle to produce low-fat beef · A group of farmers is setting up a new processing and marketing cooperative to market the beef in the local market as gourmet products for high-class restaurants. This is an innovation with a high capital cost for plant, but a low risk as the farmers are already selling beef in this market, and know it well. The risk is that the market may be too small to carry the capital cost. · A meat company, with processing facilities and marketing system selling beef to hamburger processors in an overseas market, is seeking to set up a marketing system in the overseas country through meat importers and restaurant distributors. This is a high-risk venture as the company does not know the marketing system for beef to restaurants, and also the consumers' requirements for low-fat beef which is grass-fed. There is no capital cost for equipment, but costs in setting up the marketing system.

Think Break 1. How does your company regard risk in innovation? 2. What type of innovation strategy does your company use most often:     company change, organisational change, technology change, marketing     change, market change or consumer needs and wants change? 3. What are the company's methods for making each of these changes -     internal development, licensing, acquisition, merging or outside     contracts?