Innovation is about creating new value people are willing to use and pay for, whereas strategy is the plan for harnessing for example marketing, operations, finance and R&D to support achieving the competitive goal.
To clarify, innovation strategy isn’t about innovation tactics, such as setting up an idea challenge, but more about mapping organization’s mission, vision and value proposition for defined customer markets. It sets boundaries to your innovation performance expectations by simplifying and structuring your innovation work to achieve the best possible outcome.
Building innovation into your strategy development process starts with making a deliberate choice of focusing on the best possible way to win as well as justifying the reasons behind that choice.
Often, the best approach to this is to make a set of choices you’re more capable of putting into practice compared to other players in your field.
One relatively solid framework for making those strategic choices is The Strategy Choice Cascade.