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Follow these six steps towards sustained innovation.

You have probably heard of the phrase, ‘Every company is a software company’. It might give you the illusion that starting a software company is easy, but that is far from the truth. An estimated 90% of new startups fail in the first three years. If you want to be relevant in the market and stay ahead of the curve as a software company, you need to be continuously innovating. And to be continuously innovating, you need an innovation strategy.

Steps to develop a product-led innovation strategy

One mistake that software companies often make when it comes to innovation is that they jump straight to tactics without having a solid understanding of the actions. A product-led innovation strategy aims to solve this problem by taking a holistic view of the space a company operates in, establishing targets to determine the effectiveness of actions identified.

There are six steps to developing such a strategy. Let’s dive in.

Step 1: Perform an audit of your current status

More often than not, a software company already has initiatives around fostering innovation. It could be sporadic effort, such as hackathons once in a while, or it could be more regular, such as 20% time for engineers to tinker and learn new technology. As an engineering leader developing a product-led innovation strategy, you need to perform an audit of the current state of affairs in order to understand what’s working well and what requires improvement.

Ask yourself three questions:

Question 1: What should the company start doing? (Identify opportunities)

For example, during your audit, you might realize that your company currently does not have dedicated time for tinkering or learning. While tinkering and learning should be part of a day-to-day job, it helps to have dedicated time set aside for it to show that the company is fully supportive of these activities. It also acts as a reminder and empowers employees to be more creative and innovative. You may find that such strategic initiative is something that your company should start doing. You can then define the details such as how often and how much, when you're in the last step – Step 6: Invest in strategic initiatives.

Another example that you might find with software companies and startups is that their software engineers lack product knowledge and understanding of customers. They have excellent technical skills but when it comes to building an innovative product that customers love, they have room for improvement. Their outlook of innovation strictly focuses on what technologies they are using. In this case, as an engineering leader, you will want to strengthen your engineers’ customer empathy so that they embody the following characteristics that are necessary to build innovative products:

1. They start with why. They understand what customers want, and analyze problems before jumping into coding or solutions.

2. They have a balanced view. They strike a balance between technology, time/effort, and customer value every time, with every feature.

3. They never fall in love with their code. They don’t optimize prematurely; they are pragmatic and they are willing to start all over again if they realize what they are building isn’t what customers want or need.

4. They know what to measure. To know what customers really want or need, they know what to measure and they measure what matters. For example, engagement metrics, performance metrics, business metrics, and they validate what they have shipped.

Question 2: What should the company keep doing? (Leverage current strengths)

A lot of software companies already have a few initiatives around innovation, and some may be working very well. For example, your company may already have a yearly hackathon with a healthy level of participation from engineers, that produces ideas the company takes forward. Therefore, this is an initiative that can add value to the business.

You may also want to leverage this strength further by setting up a structure around it, for example, keeping track of ideas that weren’t successful and making sure they are either revisited or failures and learnings get shared openly across the company.

Question 3: What should the company stop doing? (Eliminate time-wasters) 

Likewise, there may be activities that your company is doing in an effort to foster innovation but they simply do not work. The best way to identify what these activities are is to send an anonymous survey to the entire engineering department and ask them to provide a rating and feedback on all the activities and processes that you currently have. There is nothing engineers despise more than being unproductive and having to jump through hoops to get things done. By asking for their feedback anonymously, they will be far more forthcoming.

Step 2: Look at what others are doing

The beauty of the ever-changing technology landscape is this :  there is no shortage of learning to be had. This learning may come from competitors who have got proven strength in building and maintaining innovative solutions within the industry or outside the industry. In fact, I strongly recommend looking beyond your own industry so that you can extend your current capabilities and knowledge base, and get ahead of others within your own industry. For example, if you’re in the education space, look at what others are doing in the telecommunication space. Likewise, if you’re in the legal space, look at the fitness and recreation space. It might seem like they are at the opposite ends of each other, but you will get more creative and unconventional ideas from doing so.

We know that there are many well-known technology companies that are nailing innovation: Google, Microsoft, Amazon, Apple, Samsung, Adobe, just to name a few. Let's take Adobe as an example –  a well-known software company that has been around for a number of decades, forty years to be precise.

Adobe was recently named as one of the World’s Most Innovative Companies for 2021 by Fast Company. Adobe is a great example of continuous reinvention and innovation. It successfully transformed its entire business model – from local software to software-as-a-service provider, and started offering new digital solutions for enterprise customers via Intelligent Services. Adobe has not moved away from its flagship product, but it has managed to expand its portfolio and reinvent offerings. All the while staying true to its goal: making software that helps anyone with an idea or story to bring their vision to life.

As an engineering leader, you might like to follow Adobe’s footsteps by investing in the core offering of your company, and focusing on an incremental innovation of a particular software in the early days of your journey before diversifying your portfolio.

Step 3: Imagine the ideal future state

Now that you’ve become intimately aware of the current state of innovation within the company, as well as the ways in which other companies are addressing innovation, it’s time to set the vision. It’s time to reimagine what’s possible so that you can fast-track your company’s future when it comes to product-led innovation.

When setting the vision, I encourage leaders to be bold. There should be no limit or constraints. I can hear you asking, ‘What if it’s not actually possible or feasible to implement the vision?’ Well, that’s why we have Step 5: Create a strategy. But for now, just dream and envision without barriers and let your imagination go wild.

There are three elements that engineering leaders should take into consideration when envisioning the future:

  • Customers. How might you solve problems that customers may not even know that they had? How might your product make their lives better? Think about the famous quote by Henry Ford, ‘If I had asked people what they wanted, they would have said a faster horse.’
  • Employees. What are employees saying about the company and its products? Often, people on the ground have a better idea about what is possible if you take the time to really listen to them.
  • Landscape. What does the outlook of the industry look like in one to three years?

Once you have thought through them, write down your vision in the following format:

By [timeframe], [company name] will enable [key capabilities] to provide [tangible outcomes in terms of benefits for customers or the business].

After all, as Wikipedia rightly describes it, innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services.

Step 4: Define measures of success

I truly believe that what doesn’t get measured doesn’t get done well. Once you’ve set the vision, it’s important to know how you’re going towards that mission. Your vision needs to be supported by measures of success. Recommended measures of success for a product-led innovation strategy are:

  • Engagement
  • Alignment
  • Customer value
  • Consistency

Examples of measurements that engineering leaders might want to use are:



Number of ideas that were pitched at a hackathon


Percentage of engineers that used innovation time


OKR/KPI score for innovation


Number of experiments shipped over a year

Customer value

User engagement (e.g. click-through rate) of features that originated from innovation time

Customer value

Number of innovation time taken per team


Number of hackathons per year


Step 5: Create the strategy

This step is where the vast majority of planning and alignment will happen. The goal of this step is to produce an effective innovation strategy that is aligned to the vision, corporate strategy, industry best practices, and company needs. You will identify the time horizon for your strategy and bring focus to what matters most. This is very important because while your vision can be aspirational, your strategy needs to be laser-focus and realistic to be successfully executed.

Here, I recommend engineering leaders identify key pillars for the strategy. Depending on your current and future state, your key pillars may be different. Here are some of the key pillars that I recommend for your product-led innovation strategy:

  • Structure. Easy-to-follow guidelines and infrastructure.
  • Culture . Psychologically safe environment.
  • Expertise .  Continuous learning and improvement.
  • Talent . Driven with the desire to make an impact.
  • Collaboration . Teamwork is dream work.

Step 6: Invest in strategic initiatives

The number one reason why innovation strategies fail is that there are no strategic initiatives that support the strategy. The last step, therefore, aims to solve the problem. A software company needs to invest in strategic initiatives in order to keep them ahead of the curve and enable execution. At this stage, engineering leaders need to come up with initiatives that have been chosen and, if delivered successfully, will deliver on the overall strategy and success measures.

The list of initiatives should be ordered by priority and work together to achieve the future state described in the strategy. The initiatives should clearly state the timeline and investment required as well as how they contribute to the overall success measures. To ensure the initiatives are laser-focused, it is important to highlight which pillar they belong to in order to avoid coming up with an initiative that does not have a strong alignment to the overall strategy.

Innovation is within reach

Innovation is within reach if you know what you’re reaching for. As an engineering leader at a software company, whether you’re a CTO, VP of Engineering or Director of Engineering, you’re responsible for developing an effective innovation strategy that your team can execute well and stay focused on. I’ve seen too many software companies try to be innovative without having a clear strategy, and the end result is wasted effort and a disengaged team – this is extremely costly.

To summarize, the six steps to developing an innovation strategy are as follows:

  • Step 1: Perform an audit of your current status
  • Step 2: Look at what others are doing
  • Step 3: Imagine the ideal future state
  • Step 4: Define measures of success
  • Step 5: Create the strategy
  • Step 6: Invest in strategic initiatives

By following the above steps, you’ll be able to create an innovation strategy that is informed by current challenges, vision, and principles, and lastly, the future state that you wish to be in.