Using Innovation to Create Strategic Optionality

Innovation is about finding ideas to consider as new horizons for a business. They are often far from current core offerings, but can unlock a higher purpose for an organization. It's a journey of self discovery that can be extremely rewarding, and it's one of the things I thoroughly enjoy taking clients through. Organizations are often blinded by their incumbent ways and perspectives, a point most evident through the internally focused statements around pushing a product into a market. But if one looks at innovation as a process of search and discovery for strategic options, you can shift the mindset of the organization, creating more meaningful connections with the markets you serve.

Re-inventing a company is tough, it also isn't always necessary. Exploring the possibility of new options is something that keeps companies like Silicon Valley's most promising startups ahead of the game, as they continually self reflects on their purpose.

Take for example: Netflix. Originally, they were a company who did DVD by mail through online orders, a service people thought of as consumer-friendly, convenient and cheap that allows big selection of videos with no late fees. But when video streaming came along, their customers’ behaviors also changed since watching through laptops, smartphones, and tablets are more convenient. People now prefer to just watch online.



Netflix tried to catch up by offering video streaming services too. They struggled to survive by imposing a price hike on their monthly subscription of DVD rental plus online streaming. With this move, they received a huge backlash from their consumers. In addition to this, Netflix also experienced painful negotiations with the owners of the digital videos, not receiving any incentives because of their DVD rental business.

Because of these, by the end of June 2011, Netflix’s accounts payable had climbed 218% from $137 million at the end of 2010 to $435 million.


This was where Netflix thought of reinventing itself: instead of giving up on online streaming, they started creating their own great content which succeeded tremendously. Their popular TV series House of Cards kicked off February 2013 and was well received, with an estimate of as much as 5 million subscribers who watched it in its opening weekend. In February 2013, Ted Sarandos, Netflix’s Chief Content Officer, told GQ “the goal is to become HBO faster than HBO can become us.” And he may be right, considering Netflix’s Buzz score has actually surpassed HBO sometime in 2014.



Another example is National Geographic Society (NGS). Like Netflix, NGS had to find a way to survive with its original business model.

NSG was established in 1888 and was originally known for its familiar yellow binding and stunning photographs, offering colored photographs to the mass since 1914 and has become a staple magazine on everyone’s desks.

However, the appeal of the colored photographs eventually declined, and young consumers considered the magazine something only their parents would read. Subscription revenue fell from $284 million in 1999 to $211 million in 2009.

In addition to this, print magazines had started to come and go, and NGS was on the brink of disappearing along with them. So, CEO John Fahey decided to reinvent the brand by going into TV and creating the National Geographic Channel in 2001.

NGS channel 1

But that wasn’t enough for Fahey. Instead of just being stuck in documentaries, they started to revise their programming into “factual entertainment,” which meant producing and airing reality TV shows. In 2012, Fahey also emphasized the importance of using other media, especially online. The brand expanded to multiple platforms, which include launching a website, and experimenting in video games market.

your shot 2

He emphasized that the re-invention should still be focused on NGS’ oldest asset: stories and pictures, now, with the use of different digital platforms including iPad, Kindle, and Nook. NGS utilized different social media networks to engage younger audience, including the youth's contributions for their #YourShot campaign.

Learning from those two, I’ve listed the top 3 tips for creating strategic optionality:

Find your purpose: Organizations often find themselves limited by the past, blinding them from the truth. My favorite example from the banking industry is "Nobody buys a mortgage. They buy a home."

Constantly explore: Inspiration for a strategic option could come from anywhere, at any time. The best way to prepare for the possibility is to equip the workforce with tools to observe the natural world with a sense of curiosity.

Measure options: There are some really simple methods for measuring a potential option using frameworks borrowed from the world of startups called 'Growth Hacking'. These measures allow an organization to understand the potential value of an idea, prior to revenue.