In our six-part series on Systemic Innovation, we look at each of the elements required to deliver systemic innovation. We’ll draw on insights from the IS056000-series, and our work from across Europe, providing actionable strategies for driving innovation across the organisation. In this second post, we look at the importance of Context.
Innovation happens gradually, and then suddenly. Innovation doesn’t occur in isolation; it’s influenced by a number of external and internal factors that shape the way organisations develop and implement new ideas. Each and every senior leadership team need to master the art of sensing, evaluating and understanding these factors to be able to manage their organisations innovation portfolio. The pace of change tends to be faster in the external world than at large organisations, meaning awareness of what’s going on is crucial for creating an environment where innovation can flourish. The context of innovation includes everything from market trends and competitive dynamics to organisational culture and internal capabilities. By understanding these elements businesses can navigate the complexities of innovation more effectively. This leads to sustainable growth and increases their resilience.
External Factors
The market environment is one of the most powerful drivers of innovation. By understanding market trends, organisations can gain valuable insights into customer needs, emerging technologies, and competitive pressures. But staying ahead means more than just observing current conditions, organisations must continuously monitor these trends, anticipating future shifts, and recognising opportunities for innovation.
Take Tesla as an example: 15 years ago, established car manufacturers failed to predict the massive demand for Electric Vehicles (EVs) that would later transform the industry. This caused established companies to quickly fall behind when car buyers became interested in electric vehicles. This serves as a reminder that organisations should always look beyond their immediate industry to identify cross-industry trends and technologies that could be adapted to their context. This broader perspective can unlock opportunities for growth and differentiation and long-term competitive advantage.
To stay head, organisations must use tools like market research, trend analysis, and scenario planning. Partnering with tech startups or exploring innovation ecosystems can offer a glimpse into the future. Strategic foresights help map these insights to a business's own challenges and unmet needs. By translating market trends into actionable innovation strategies, business can position themselves to lead, not follow, in a rapidly evolving landscape.
The achieve this alignment, set clear innovation objectives that support strategic priorities and business goals. By doing this, organisations can turn their innovation portfolio from a collection of ideas into a powerful engine for growth, transformation and long-term success.
For example, the Defence Innovation Accelerator for the North Atlantic (DIANA) aims to accelerate the development of emerging and disruptive technologies across the NATO Alliance. DIANA has developed a set of focus areas derived from its 2024-2025 strategic direction. These dual-use priorities address NATO’s security and defence needs, scientific and technical feasibility, and market potential, providing a structural framework developed with guidance from the Allies. The focus areas form the basis for challenge statements, which are designed to be technically neutral. This allows innovators the greatest flexibility for creativity in proposing novel technology solutions free from preconceived constraints or methods. These will be addressed through the planned 2025 DIANA accelerator programme.
Internal Factors
While external factors may spark the need for innovation, it’s the internal factors that determine how well it’s executed. Leadership, culture and other aspects play a pivotal role, which we explore in other posts.
Fundamentally, it’s important to recognise that building a successful innovation strategy starts with assessing your organisation’s internal readiness.
Companies that foster a culture of experimentation and encourage calculated risk-taking are more likely to generate groundbreaking ideas. In contrast, a culture that punishes failure or resists change can stifle creativity.
Resource allocation is equally critical. Innovation requires more than financial investment- it requires access to skilled talent, time, and the right technology. Companies need to ensure they have the right mix of skills and expertise to support their innovation initiatives. The most forward-thinking organisations continuously evaluate their internal strengths and weaknesses. This allows them to strategically decide whether to build capabilities in-house, collaborate with external partners, or acquire new solutions.
Many established companies fall into the ‘not invented here’ mentality, overestimating their internal capabilities and clinging to outdated mindsets. This overconfidence can severely limit value creation, leaving businesses stuck while competitors surge ahead.
Conclusion
Context is the foundation upon which successful innovation is built. By sensing and understanding both the external and internal factors that shape their business environment, organisations can make informed decisions about where and how to innovate. This holistic approach ensures that innovation efforts are not only relevant but also aligned with the organisation’s long-term goals and backed up by capabilities that enables transformation and value creation.
Read our previous piece on leading the way to empowering leadership in innovation management.
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