How established companies can innovate strategically

In an environment marked by frequent disruption and growing competitiveness, the ability to reinvent the business model has become an urgent necessity for many companies. However, as Joaquín Cava, Lecturer in the Department of General Management and Strategy at Esade, warns, most established organizations struggle to carry out real strategic innovation. 

Although many companies know how to gradually improve their products or processes, very few succeed in deeply redesigning the way they create and capture value. What kind of obstacles do they face when trying to innovate? And what options do they have to structure the organization in a way that encourages innovation? Professor Cava addressed these questions during the Esade Live Experience, an open house event where partners, prospective students, and alumni were invited to explore Esade’s new campus in Madrid. 

Strategic innovation: concept and difference from incremental improvement

To address the concept of strategic innovation precisely, it must be distinguished from incremental innovation. While the latter consists of optimizing what already exists—new features, cost reductions, and process improvements—strategic innovation involves rethinking the very foundations on which the business model is built. It is, in the words of Professor Cava, "imagining entirely different models."

A useful strategic innovation framework views every business model as three building blocks. Every business model is built around three main components. The first is the value proposition, which answers what customer needs are being met, with what product, and at what price. The second is the delivery architecture, which includes the human, operational, technological, and commercial resources needed to realize that value proposition. The third is the profitability equation, which determines how revenues, costs, and investments are managed to ensure the business’s viability. 

Strategic innovation is not about doing “more of the same,” but about imagining completely different models

Strategically reinventing a company implies substantially modifying at least one of these three components to satisfy the same needs, but in a different way. This framework makes it possible to clearly distinguish between true strategic innovation and mere incremental improvements.

This simple framework helps distinguish true innovation from mere incremental improvements. Professor Cava uses two illustrative examples: while launching a razor with one, two, or even fifteen additional blades is not an example of strategic innovation, the development of the Segway—despite its disastrous commercial failure—was, as it attempted to radically rethink personal mobility. Strategic innovation is not about doing “more of the same,” but about imagining completely different models. 

The problem for large companies is that they are very good at improving what they already do, but they struggle to find innovative solutions that break from their own logic. Keeping the core business running while exploring new avenues often generates internal tensions that are hard to manage. And that is precisely where strategic management and innovation take on critical importance.

Why is strategic innovation so hard? Identified obstacles

In a survey he conducted himself, Professor Cava asked innovation managers at 65 medium and large companies what kinds of challenges and limitations they faced. The first notable finding was that nearly 80% admitted to having serious difficulties with strategic innovation. 

• Punitive corporate culture around failure: many organizations are programmed to penalize failure, which stamps out the internal entrepreneurial spirit.
• Lack of qualified talent: the will to innovate may be there, but without real technical and managerial capability, innovation becomes empty rhetoric.
• Pressure for short-term results: the demand for quarterly accountability to shareholders leaves little room to invest in projects with medium-to-long-term returns.
• Misalignment in capital allocation: without a clear business case backed by numbers, many committees reject strategic initiatives whose returns they cannot anticipate precisely.
• Absence of a formalized strategic innovation plan: many companies lack a roadmap that integrates innovation into their long-term corporate planning, which prevents resources from being allocated coherently and consistently.

Underlying several of these is a deeper fear: that speculating about the uncertain gains of strategic innovation will end up damaging the business that already works. Understandable as it is, this fear is often the single greatest barrier that keeps organizations from tackling the strategic innovation agenda with the depth it deserves.

How to organize strategic innovation inside the company

In response to this challenge, Joaquín Cava proposes a conceptual framework to understand how companies organize themselves when they decide to take strategic innovation management seriously. His approach is based on two axes: where innovation is located (inside or outside the organization) and the level of control exercised over it by the core business. The result is four structures among the most practical strategic innovation tools for diagnosing your own setup.

Internal models of innovation

Some companies choose high-control internal solutions, such as creating dedicated innovation departments or cross-functional teams tasked with exploring new ideas. Others prefer low-control internal approaches, in which the entire organization shares responsibility for innovation in an ambidextrous way. This can take the form of independent units reporting directly to the executive committee or structures in which all employees are encouraged to devote part of their time to generating new proposals.

This last model is associated in particular with what the academic literature calls "ambidextrous organizations": those capable of exploiting their current capabilities while simultaneously exploring new models. In the context of strategic innovation management, this organizational ambidexterity is one of the most well-documented success factors. To explore how to manage this tension in greater depth, it is worth reviewing the analyses on how to manage the transition to a dual business model.

External models of innovation

On the opposite end are external strategies. When combined with high control, these include joint ventures, acquisitions, or close collaborations with specialized consultancies. In such cases, the company maintains tight oversight of the innovation process, even though it unfolds outside its own boundaries. Finally, there are external models with low control, in which companies invest in startups or independent projects with full autonomy—essentially a kind of innovation conglomerate. 

According to Cava’s findings, in practice, most companies opt for internal or hybrid models, and very few rely exclusively on external initiatives.

This trend is explained, in part, by the difficulty of integrating external knowledge into internal strategic processes: strategic innovation management requires not only capturing ideas from outside, but also incorporating them coherently into the organization's strategic innovation plan. For those who wish to explore a more radical approach, the literature on regenerative business models offers complementary perspectives on the deep transformation of business architecture.

The key to success in strategic innovation

What separates the companies that innovate strategically from those that try and fail?

A sharp perception of risk. Successful firms are acutely aware that their sector can be disrupted. They don't pretend everything is fine; they see the threats and act. "A spur to get your act together is to really see yourself in trouble," Cava summarizes.

Structures that don't block innovation. They attract the right talent, set the right incentives, and—above all—position innovation as a genuine priority on the executive agenda. Senior leadership has to be deeply committed for any project to stand a chance.

A formalized roadmap. The best performers articulate their objectives explicitly: they set clear goals, allocate specific resources, and establish tracking metrics that go beyond short-term financials. A well-built strategic innovation roadmap turns intent into something structural rather than cosmetic—a living innovation strategic plan that ties innovation directly to corporate strategy.

The right organizational shape. Models that combine an external orientation with high control tend to stand out, as do internal approaches with low control that let employees freely question the foundations of the business. Rigid structures with innovation locked inside functional silos are associated with weaker results.

In short, innovation is not the exclusive domain of startups. Established organizations are less agile, and the path is not easy, but there are viable formulas for moving from constant incremental improvement to genuine strategic business innovation and for keeping new entrants from taking their place in the market. It takes courage, vision, and disciplined management of the internal factors that block change.