Innovation Strategy: How To Build an Ecommerce Strategy for Growth (2026)

The pressure is on as companies grapple with the new reality of retail. Consumers are pinching their wallets as prices fall for many goods sold online. To make matters worse, the National Retail Federation estimates that customers will return 19.3% of their online purchases in 2025, further squeezing margins. 

So, what’s a business owner to do? 

Develop an innovation strategy to enhance efficiency, expertise, and resilience. This is what separates the leaders from the pack: recent global data from McKinsey shows that innovative businesses are also top performers—even in uncertain markets.

Ahead, learn how to build an innovation plan that can supercharge your overall business strategy and help you become a leader in your industry. 

What is an innovation strategy?

An innovation strategy is a company’s comprehensive approach to developing and implementing innovative ideas. It’s typically a document that outlines your innovation philosophy and processes, aligning your team around a common mission and encouraging employees to pursue new ideas.

Key benefits of a well-defined business innovation strategy include:

• Enhanced competitiveness through innovative products and services
• Improved customer experience by addressing unmet needs
• Increased profits from inventive offerings
• Organizational growth and sustainability

Developing a good innovation strategy creates a framework for operational efficiency, enabling companies to quickly identify, test, and implement new ideas. 

Innovation consulting and software company Stage-Gate International reports that top performers using disciplined idea-to-launch processes achieve market success rates of between 63% and 78%, compared with 24% for poor performers.

What is the purpose of an innovation strategy?

A solid strategy focuses your innovation efforts on profitability. Companies that don’t embrace strategic innovation run the risk of aimlessly chasing trends—like building a virtual clothing line in the metaverse or just doingsomething with generative AI. 

Meanwhile, a strategic team will create an innovation cycle that aligns with business goals and solves a margin problem. For example, if your company has a high return rate, you might develop a virtual try-on and sizing tool to deliver a better shopping experience for customers.

At its core, a strategic innovation process helps to:

• Drive tangible value and return on investment (ROI). An innovation strategy helps you prioritize bets with the highest potential return. A 2025 PwC report cited two areas of innovation driving growth: GenAI and climate-related investments. Of CEOs surveyed, 56% said GenAI drove efficiency improvements in their businesses. The report also asserted that climate-related investments are six times more likely to raise revenue than reduce it.
• Gain a competitive advantage. Over two decades, companies with a sustained commitment to innovation delivered 2.4 percentage points higher annual total shareholder return (TSR) than the market, a recent Boston Consulting Group (BCG) report found. 
• Ensure sustainable growth. Innovation is a matter of survival. Some 42% of CEOs surveyed by PwC say their company won’t be viable in 10 years unless they reinvent themselves. Building a strong innovation engine helps your business evolve to meet future demands and achieve long-term stability. 
• Align the entire organization. A clear strategy also makes innovation a shared mission. Every team, from product to marketing, works together to launch ideas that move the business forward. In 2024, BCG found that strategy-led innovators achieve a 74% higher share of revenue from new products than those with weak alignment.

Core innovation strategy components

Effective innovation strategies include four fundamental components that guide strategic decision-making and execution:

1. Idea generation: find your opportunities 

The first stage of innovation is brainstorming “what if” scenarios. It’s where you actively hunt for new possibilities.

Look for market gaps, watch for market trends, and keep an eye on your competitors. Your mission is to find unmet customer needs or problems that your business could solve in a new way. 

2. Evaluation: pick the best ideas

Next, decide which product ideas are worth pursuing. Consider these innovation evaluation criteria to assess each idea:

• Can you actually build it? Do you have the budget, talent, and technology to support it? An idea is not feasible if it requires a $10 million investment and you only have a $1 million budget.
• Does it align with your business goals? A feasible idea is only worth pursuing if it supports your overall strategy. For example, maybe you want to rapidly expand internationally, but your new product line will take 24 months to pass EU compliance—that’s a poor strategic fit. The better option would be to adapt an existing product line for new markets. 

3. Implementation: build and launch it

Execution gives ideas value. The build stage requires a clear innovation road map for prioritizing projects and giving them the right resources, like money, people, and time. You’ll manage the idea through product development to turn the concept into a real innovation that customers can use.

4. Monitoring: track, learn, and adjust

Innovation is never truly done. Actively monitor your results in the real world and adjust your plans. If the market changes, you must change, too. 

For example, a multibrand retailer might launch an innovation project to partner with 50 new small brands using Shopify Collective, with a goal to increase average order value (AOV) by 15% through cross-selling. At the first quarterly review, the data shows AOV is only up 3%—but a strategic company doesn’t call it a failure, they keep analyzing.

They also see that new customer acquisition is up 40%, driven by the new brand partnerships. Unknown to everyone, the project’s true value wasn’t AOV, but acquisition. So they re-allocate resources and make acquisition their new key metric. 

Types of innovation strategies for ecommerce

Understanding the different types of innovation strategies helps you select the right approach for your situation. Here are the three main categories for ecommerce, plus some real-world innovation strategy examples.

Incremental innovation

Incremental innovation focuses on improving existing products, services, or processes. This approach builds on your current capabilities while reducing risk. Common incremental innovation types include:

• Product innovation. A product innovation strategy is all about bringing new products to market or improving existing products.
• Service innovation. Service innovation improves a company’s services or introduces new service offerings within its existing business strategy.
• Process innovation. A process innovation strategy introduces new business processes or improves existing ones.
• Technological innovation. Technological innovation reshapes the tools you use to do business without necessarily changing your product, service, or business model.

The Apple Watch exemplifies incremental innovation: Apple recombined existing technologies to create and launch a new product type within its established ecosystem.

Disruptive innovation

Disruptive innovation creates new markets or significantly changes existing ones by offering simpler, more accessible, or more affordable options. This strategy targets underserved market segments and gradually moves upmarket. Key characteristics include:

• Business model innovation. A business model innovation strategy introduces new business models that challenge industry norms.
• Value innovation. Value innovation reshapes your value proposition to increase differentiation and improve your company’s competitive advantage.
• Market disruption. Disruptive innovations are significant enough to disrupt competitors’ business models or cause industry-wide change.

Amazon Prime’s two-day shipping commitment exemplifies disruptive innovation in ecommerce. By offering fast, free shipping to members, the company gained market share and pressured competitors to offer comparable services.

Radical innovation

Radical innovation introduces entirely new technologies or creates breakthrough products that didn’t exist before. This approach presents the highest risk but offers the greatest potential rewards:

• Breakthrough technology. Developing new technologies that enable previously impossible solutions.
• New market creation. Creating entirely new product categories or market segments.
• Transformative solutions. Solving problems in fundamentally new ways that make existing solutions obsolete.

Radical innovations are less common but can generate significant competitive advantage for businesses willing to invest in long-term research and product development strategy.

How to develop an innovation strategy

1. Revisit business fundamentals
2. Define strategic challenge
3. Conduct market research
4. Set innovation goals
5. Keep your core values top of mind
6. Build your process
7. Monitor and adjust

An effective innovation strategy will help you address current challenges, unlock new value-creation opportunities, and position your company for future growth. Here’s how to develop one and use it to drive innovation:

1. Revisit business fundamentals

Review your core business goals and unique value proposition, ensuring that both are accurate and up to date. Next, review your business development plan, growth plan, or any other strategies outlining your plan to meet those goals.

You’ll use this information to align your innovation efforts with your other business activities. Conducting a SWOT analysis in which you review your strengths, weaknesses, opportunities, and threats will help you identify promising areas of innovation for your company.

2. Define strategic challenge

Next, define the one core problem your innovation aims to solve. 

An example of a strategic challenge could be: “Our growth from paid acquisition is no longer effective in a saturated market. We are losing new, price-sensitive shoppers to competitors during the discovery phase. Therefore, our innovation should focus on retaining our current customers and increasing their lifetime value.”

Nailing down the challenge immediately rules out projects around top-of-funnel acquisition and focuses them on loyalty, experience, and service. 

Whatever your core problem is, it’s likely born of factors such as:

• Market saturation. With US ecommerce growth slowing, the challenge is winning on differentiation and experience. 
• Competition. Price-based rivalry from new entrants could force you to compete on service or curation. 
• New tech. From AI to blockchain and quantum computing, new technologies demand new strategies to stay efficient. 
• Regulatory challenges. New rules and regulations add costs that impact your operations and ad policies.
• Shifting customer needs. Shoppers today are more price-conscious, privacy-aware, and using AI to discover products. 

3. Conduct market research

Market research will help you understand the role of innovation in your market, identify opportunities, and anticipate what’s next. Here are six key research areas:

Product life cycles

Different industries innovate at different rates. The shorter the product life cycle in an industry, the faster companies need to innovate to keep up.

Short product life cycles are common in fields like software as a service (SaaS) and consumer technologies, requiring providers to introduce new products and services regularly to stay relevant.

Market dynamics

Is your market growing or shrinking? What was the most recent major disruption in your market, and what caused it? What external events or policies drive market change?

Competitors

Conduct a competitive analysis, identifying areas where your competitors outperform you and noting any performance trends. You can also identify major players and determine their collective market share.

Financial viability

Use your research on market dynamics and competitors to build a business case for your innovation. Forecast potential revenue, costs, and ROI. 

Feasibility

Run a feasibility study to determine if your idea is practical before committing resources. The study will help you assess the project from multiple angles, including:

• Technical requirements 
• Financial costs and benefits
• Legal compliance
• Operational capacity

Doing this helps you spot risks early so you can decide whether to proceed, change the plan, or hit pause.

Customers

Study the customers in your market, including those you’re already serving and potential customers you haven’t yet reached. Then identify customer needs, noting which ones you meet and which your competitors meet better.

Pay special attention to unmet customer needs, as they represent opportunities to gain market share. Gyve Safavi and Mark Rushmore, founders of electric toothbrush company SURI, discuss how they used market research to disrupt the electric toothbrush market on the Shopify Masters podcast.

“When we looked at share data, we found that there were two main brands that dominated most of the share in most developed markets,” says Gyve. “The first thing Mark and I did was [run] a lot of surveys.”

The results showed that despite market consolidation, customers weren’t particularly loyal to the brands they were using—a sign that an emerging company could challenge major players. Gyve and Mark used survey insights to develop sustainable electric toothbrushes with plant-based recyclable heads, generating more than $30 million in sales in their first two years.

4. Set innovation goals

Use what you’ve established in your overall business strategy—including goals, core capabilities, and market strengths—to define your strategic arenas. These are areas like customer experience, operational efficiency, or new market entry where you will intentionally focus innovation efforts. Then, set specific goals for each of those arenas.

Here are key questions to ask yourself during the innovation process:

What innovations do we need to make to stay competitive?

Start by identifying the bare minimum. If successful companies in your market introduce new or updated products every few years, you will need to do that, too.

How stable is our market?

Look for signs that your market is vulnerable to disruption, such as low levels of customer satisfaction, high prices, limited product accessibility, and high levels of consolidation among a few major players.

Target disruptive innovation tactics yourself or pursue value creation to insulate your company from potential upheaval.

What opportunities aren’t we pursuing?

Look back at the opportunities from your SWOT analysis, especially the underserved customers and unmet needs you uncovered in your research. 

You likely haven’t gone after these yet because your business isn’t set up to serve them, which is exactly why they’re good innovations to target.

What are my company’s biggest areas for improvement?

You can also use innovation to address weaknesses and reduce risk. Identify your biggest expenses, your most time-consuming processes, and any areas where your competitors outperform you.

What are our internal capabilities and available resources?

Identify the innovations you can realistically pursue. Ask yourself which innovation techniques your infrastructure can support and if you have the financial resources for innovation investments.

Consider your level of risk tolerance. Disruptive or radical innovation strategies can yield big returns, but they can also lead to dead ends.

Use these questions to identify your competitive needs, set goals, and select innovation initiatives to pursue. Then select the corresponding innovation strategy type, keeping in mind you might pursue multiple types of innovation and build more than one strategy.

5. Keep your core values top of mind

Before moving on to the next step, take a beat to revisit your business’s core values. Plans that take you away from those values should be revisited.

For example, when Gyve and Mark struggled to find a supplier, they returned to their sustainability commitment.

“Our brush is one-third the size of most brushes, and we’re using new materials that have never been used in a toothbrush before,” says Gyve.

Many suppliers weren’t up to the challenge. 

“The immediate reaction was, ‘We don’t trust you. We don’t think this is a good idea. This sounds very complex,’” he added.

Mark and Gyve didn’t compromise on their vision and, eventually, the team found a supplier excited about bringing their product to market.

“I don’t think I’ve ever believed in anything as much as I believe in this,” Mark says. “I can look into the eyes of my children and say, ‘Dad is working on something meaningful, which in some little way contributes to making the world a slightly better place.’ That really helps with the rejections.”

6. Build your process

Develop or outline the organizational structures, business processes, and techniques that will support your organization’s innovation activities. Your process will depend on the type of innovation you plan to pursue.

The first step is allocating resources for research and development (R&D). Determine how much financial and human capital to dedicate to innovation. 

Decide what the innovation team looks like, including everyone from research and development teams to product managers. Then, decide how much funding you’ll allot to exploring new ideas, separate from the requirements of day-to-day operations. 

A process for a service innovation strategy will involve regular cycles of reviewing customer feedback and market research. These systems generally fall into two categories:

• Always-on suggestions. A system where employees can submit ideas at any time, through a digital portal, a dedicated Slack channel, or as a regular part of team meetings. 
• Time-bound challenges. These are special events such as hackathons, design sprints, or challenges that ask teams to solve strategic problems. They are effective for developing novel solutions to urgent problems.

A disruptive innovation strategy may have a less definitive process. Here, you might assemble a key team, give them a dedicated budget, reporting schedule, and list of needs, and task them with proposing inventive solutions to your market’s biggest challenges.

7. Monitor and adjust

Track progress and adjust your product strategy for better outcomes. Most innovative businesses commit to regular feedback cycles. They solicit employee and customer input and use it to create positive feedback loops for continuous improvement.

Track the following metrics to measure your innovations’ impact:

• New product vitality (NPVI). The percentage of revenue from products launched in the past few years. There is no universally accepted target, as it depends on your industry. For example, an industry with short product life cycles, like consumer tech, would need a much higher NPVI to stay relevant than a more stable industry.
• Time to market. Measures cycle time from the start of design to when the product is ready for sale. It’s used to determine what’s slowing you down, and helps you set speed targets for different project types. For example, a small update may need only one week, while a breakthrough project may require a 12-month target. 
• Revenue performance. Track your new product’s revenue at 30, 90, and 365 days post-launch. Measuring revenue lets you compare performance against your financial goals. 

Note that a mature innovation strategy rarely involves one project. You’re often managing a portfolio of initiatives at different stages and risk levels. Known as innovation portfolio management, your job is to manage like an investor, reallocating resources based on evidence. 

Ask yourself regularly: Is this strategy producing quantifiable results? If not, set aside time with your team to identify fault lines and adjust course. You may have to prune some low-performing bets and double down on the most validated ones.