Does Strategic Planning Impede Innovation?

27 May 2011 Sandeep Mehta

Executives are increasingly focusing on innovation in response to the great recession.  Executives also depend on strategic planning to navigate through tumultuous times. In fact, there has been very influential research showing that planning can actually help organizations learn and improve.  So what is the impact of strategic planning on innovation?  The article Does Strategic Planning Enhance or Impede Innovation and Firm Performance? from the Journal of Product Innovation Management has some timely insights:

Does strategic planning enhance or impede innovation and firm performance? The current literature provides contradictory views. This study extends the resource-advantage theory to examine the conditions in which strategic planning increases or decreases the number of new product development projects and firm performance. The authors test the theoretical model by collecting data from 227 firms.

The paper has empirical evidence suggesting that both strategic planning and innovation are good for organization.  We should keep in mind, however, that the paper appears to use new product development (NPD) as innovation.  That is probably not the accepted definition of innovation, but we can use it as an approximate stand-in…
The other interesting information is that the firms with organizational redundancy (larger firms), gain more from strategic planning than smaller one. However, strategic planning actually reduces NPD (or innovation).  The evidence seems to support that improvisational organizations (as opposed to planned) are more innovative.  Also, lack of strategic planning seems to encourage more outside-the-box thinking.  May be Wall Street is right in thinking that larger firms can not be innovative… However, the article also shows that larger firms with large R&D budgets are able to overcome the impact of planning and still succeed.
So what are the lessons for R&D managers:

  1. Make strategic planning flexible so that innovation and improvisations is allowed. 
  2. Develop resource allocation processes that clearly communicate to employees that innovation is important.
  3. Encourage employees to access innovation from the outside (in form of technology or user experience). 

Here is the overall message:

Finally, managers must understand that managing strategic planning and generating NPD project ideas are beneficial to the ultimate outcome of firm performance despite the adverse relationship between strategic planning and the number of NPD projects.

Article first published as Does Strategic Planning Impede Innovation? on Technorati

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