Strategy and Innovation
27 June 2026 · Learning
I just finished the first semester of my Master of Commerce at the University of Sydney. The unit was Strategy and Innovation, and it runs through five topics.
Each section below covers the core concepts and where they apply.
Foundations
Strategy is something you do, not a document you write
The unit's central idea: managing, strategizing and innovating are verbs, not nouns. They are things you do, in practice, under uncertainty, with other people and whatever resources you have. There is no lone genius drawing up a master plan that everyone then salutes.
That leads to deliberate versus emergent strategy. Real strategy is never purely planned or purely discovered. You set a direction, the world pushes back, and you adjust. The plan you finish with is rarely the plan you started with.
Innovation has a precise definition. It is the successful application of new ideas. Not the same as invention, and broader than a product. A new service or a new way of organising counts. The word "successful" matters. An idea that goes nowhere is not innovation.
There is also a checklist for where new ideas come from. Drucker's seven sources of innovation are worth keeping close:
- Unexpected events, the wins and failures nobody predicted
- Incongruities, the gap between what is and what should be
- Process needs, a weak link everyone works around
- Shifts in an industry or market structure
- Demographic change
- Changes in how people see things
- New knowledge
Mindsets and Responsibility
How a manager thinks, and who the work answers to
Managing is not one skill. It is a few ways of seeing, switched on at the right moment. Mintzberg's Five Minds of a Manager names them, and each one manages a different thing:
| Mindset | What it manages |
|---|---|
| Reflective | yourself, stop and think |
| Analytic | the organisation, break the problem down |
| Worldly | the context, get to ground level |
| Collaborative | relationships, not people |
| Action | change, and knowing when to leave things alone |
The five work together, and a common failure is leaning on one while ignoring the rest. The action mindset is the subtle one. Acting is the easy instinct. Knowing when no change is the right call is harder. The same split shows up as heroic versus engaging management. The hero swoops in with answers. The engaging manager works through other people.
The second half is responsibility, treated as part of strategy rather than a separate concern. Two ideas connect them. Giving Voice to Values says the point is acting on your values, not just knowing the ethics. And Creating Shared Value says social and environmental goals can be a source of opportunity and advantage, not a cost you pay for goodwill. Anchor it to something concrete, like the UN Sustainable Development Goals, and responsibility moves from the marketing afterthought pile into the actual plan.
Reading the Outside and the Inside
Two honest answers to why one firm beats another
Ask why one company does better than another and there are two answers. The truth is usually a mix of both.
The first looks outward. The I/O model says performance comes mainly from the industry you pick and how you position in it. To read the outside you run a loop of scanning, monitoring, forecasting and assessing, then reach for two tools:
- PESTEL maps the big trends: political, economic, social, technological, environmental and legal. The job is to spot the drivers, not just list them.
- Porter's Five Forces judges how attractive an industry is: rivalry, new entrants, substitutes, buyer power and supplier power. Stronger forces mean a tougher, thinner-margin industry. A smart firm does not just react to the forces. It tries to bend them.
The second answer looks inward. The resource-based model flips the logic. Differences come from unique internal strengths, not industry structure. It shifts the question to what does a firm do that others genuinely cannot. Two tools sharpen that:
| Tool | The test it runs |
|---|---|
| VRIO | Is the strength Valuable, Rare, costly to Imitate, and is the firm Organised to use it? |
| Value chain | Where do primary and support activities create value, and how do the links between them add up? |
Most claimed strengths fail at least one part of VRIO. And the edge often sits in how activities connect, not in any single one.
Choosing and Executing
Pick a way to win, then make it real
Choice happens at two levels. Business-level strategy asks how to win in one product market. Corporate-level strategy asks what businesses you should be in, and whether the whole adds up to more than the parts. That extra is synergy.
At the business level, Porter's generic strategies are the spine:
| Strategy | The move |
|---|---|
| Cost leadership | be the low-cost option and still make money |
| Differentiation | be worth more, so price stops being the point |
| Focus | serve one narrow segment better than anyone bothers to |
The trap is stuck in the middle, half cheap and half special, committed to neither. Many products land there. Making the choice explicit is most of the work.
Then there is the part plans usually skip: making it happen. Implementation is done by everyone in the firm, and it loops back into the plan through trial and error. Strategy is top-down and bottom-up at the same time. Two tools help keep it honest:
- The balanced scorecard forces attention onto four perspectives, not just money: financial, customer, internal processes, and learning and growth.
- A strategy map shows how goals across those four link together, using lead and lag indicators so the strategy is visible.
Innovating
Sort the change, open the doors, mind the context
Innovation covers several different things, so the first step is to sort it. The kind of change decides the response:
| Type | What it is | Why it matters |
|---|---|---|
| Routine | small steady improvements on what you do | safe, but never enough on its own |
| Disruptive | a simpler, cheaper option eats the market from below | your past success is what blinds you |
| Radical | a breakthrough that resets the whole game | links to creative destruction |
Disruptive is the dangerous one. It starts in the segment that looks too small to care about, which is exactly why established players ignore it until it is too late. That is the Innovator's Dilemma: the way big firms allocate resources pushes them to ignore small markets. The answer is the ambidextrous organisation, one that explores new bets and exploits the core at the same time, even when the core is doing fine.
Innovation does not have to happen inside your own walls. Open innovation lets knowledge cross the boundary in both directions: outside-in, where you pull ideas and technology in, and inside-out, where you license or spin work out. And whether a new thing lands often depends on everyone around you. Use a wide lens and watch two ecosystem risks: co-innovation risk, where your success needs others to innovate too, and adoption chain risk, where everyone in the chain has to say yes before the customer benefits.
The last lesson is that context decides whether innovation happens at all. Five places to scan:
- Individual, where intrapreneurship and everyday initiative push ideas up from the bottom
- Organisational, where culture and workspace either open the door or shut it
- Industry and global, where the lifecycle stage and the country shape what is possible
- Social and sustainability, where you aim the firm's assets at real problems
- Crisis, where urgency forces fast, frugal answers, because necessity is the mother of invention
How the pieces fit
Every topic points back to one idea. The frameworks are a shared language for reading a situation, not a formula that produces the answer. They tell you what to look at. The decision still depends on the specific case.
The exam works the same way. Take a framework, apply it to a case, and the marks sit in the application, not the description.