Innovate, or become extinct. That is what most business leaders have in mind if they want to stay relevant in this dog-eat-dog world. Only those businesses that regularly provide innovative products, services, or processes can maintain long-term success.
Cost-cutting and efficiency help drive the success and growth of any institution. However, innovation remains the leading element that stimulates sustainability and profitability. Businesses have to be innovative both at the front-end and the back-end to stay ahead. The front-end is concept development, while the back-end includes the implementation of these concepts.
Managers do find this idea problematic. It goes against the rational and analytical processes that they have learned in business schools. Innovation means analyzing available information and converting raw data into practical concepts. It is also about making non-linear jumps.
Business innovation: What is it?
Business innovation is the method of creating something new or improving on what is available to serve a business. In short, it is thinking of new ways to do things. It can be about producing a new product or service, improving the workflow, or other things that will help the business earn more money in a new way.
Most people confuse innovation with research and development, or R&D. While they serve the same purpose, R&D is limited to developing new products. Business innovation includes the application of new ideas in every aspect of the business.
The manifestation of business innovation
Where does business innovation manifest itself? The Organization for Economic Cooperation and Development presents four ways: product, process, marketing, and organizational innovation.
- Product innovation
It touches on freshly new or vastly improved products.
- Process innovation
Process innovation is about new ways to deliver goods or services to customers. It might include altering equipment, techniques, or software.
- Marketing innovation
Marketing innovation refers to how the company presents its products to consumers. It may include changing the packaging, logo, company colors, or ad campaigns. It may also include price change strategies or niche modifications.
- Organizational innovation
It refers to changes in the bigger picture to improve overall performance. The company may decide to change business relations with third-parties, change business practices in areas like accounting or even compensation.
Where does innovation come from?
Where does one find inspiration for innovation? It can come from many sources. The great Paul Mccartney, former Beatle, said he came up with the idea of the song “Yesterday” in his dreams. It ended up being the best song of the 20th century.
So, inspiration obviously can come from anywhere. Here are the seven sources of innovation according to Peter Drucker, author of the book Innovation and Entrepreneurship.
- The unexpected
This is the “I found it” moment. It is both the easiest and the hardest way because you are not looking for it, but when it comes it is often a great idea.
Incongruity is that feeling when you are uncomfortable about your current situation, and this is an opportunity to innovate. It is when you feel that there is a difference between what should be and what is. The earliest Apple iPod had buttons that Steve Jobs felt should not have been there. They got rid of the on/off button.
- Process needs
You may spot a weak link in your business’ way of doing things. A significant improvement to this process can lead to innovation.
- Industry and market structure
These two structures are always changing. There are regular changes in regulations, and product lines either expand or shrink. If you monitor these changes, you may be able to spot opportunities for new products or services.
Do not underestimate the power of ever-changing demographics. They are a great source of new ideas for new products.
- Changes in perception
People change. Their beliefs, views, and feelings change over time. Businesses who know how to innovate leverage these changes.
Businesses know that changes in perception matter, but they have generally thought that it changes slowly. However, in the digital age, this is not so. The internet bombards us with new information every hour, and sometimes this helps change perceptions in an instant.
- New knowledge
New knowledge, discoveries, and technologies can change a whole industry. When people talk about innovation, this is what they have in mind. However, this type of innovation typically takes the longest time to develop.
- New talent
Hiring new top talent is a key to keeping innovation flowing in any organization. Brining on players from competitors, and even from varied industries helps to keep the team engaged and brings fresh ideas to the table. Diversity in hiring ensures that people with different backgrounds are coming at problems from different perspectives.
Design thinking for innovation
Companies also adopt design thinking to learn and test new ideas quickly. It helps improve the traditional product development lifecycle and save time for product creators by reducing the risk of failure.
Benefits of business innovation
- Better growth
A company that stops innovating is doomed to fail. If you are not flexible enough, you are stifling your growth. Large companies who cannot think of new ways to provide products and services purchase other companies to acquire new ideas. Microsoft bought LinkedIn, while Facebook bought Instagram. For smaller companies, it is how they innovate that allows them to succeed.
- Differentiate your business
Innovation differentiates you from your competitor. It means you are doing something different. The more you innovate, the more you stand out.
- More relevance
New ideas inspire innovation, which, if carried out, stimulates business growth. Globalization has increased competition. Businesses that fail to innovate can quickly be left behind in the battle for supremacy.
Without fresh ideas and modern products, consumers could soon tire of the product or service you are providing and will move on to your rivals. With no new reason to be loyal to your product, the consumer will either search for a different product offering or a better price.
At the same time, if you have nothing else to offer, you will be compelled to reduce your price, thus diminishing your profit margins. If this approach still does not lure customers, you may be put under pressure to reduce the price further. This will lead to a negative cycle that could be extremely harmful to your business.
The only way for you to break out of this cycle is to constantly innovate and add value to your products or services.