The word innovation seems to be everywhere these days. Seemingly every article we read about business includes comments about the importance of innovation, usually alongside a reference to growth. Growth of the economy. Growth of turnover. Growth of profitability. It is not a coincidence, innovation and growth are inextricably linked.
What do we even mean by innovation? There are hundreds of competing definitions of innovation and the following versions hint at the differences between authors in terms of focus and perspective:
- ‘Turning an idea into a solution that adds value from a customer’s perspective’
- ‘A feasible relevant offering such as a product, service, process, or experience with a viable business model that is perceived as new and is adopted by customers’
- ‘A great idea, executed brilliantly, and communicated in a way that is both intuitive and fully celebrates the magic of the initial concept’
- ‘The introduction of new products and services that add value to the organisation’
Since every business or organization is different, innovation will inevitably mean different things to different people, so the broader the definition, the better from our perspective.
At RTC North we generally view innovation as involving a new product, service, system, process, or business model. It is a simple definition which assumes that the innovation is based on new ideas or fresh thinking and that it adds value, or in other words, we are not pursuing innovation for the sake of it or tinkering with no strategic purpose.
It is perhaps easiest to understand what innovation involves by reviewing well known examples of successful innovation. The internet is full of articles from authorities like Forbes magazine listing famous companies such as Amazon, Rolls Royce, or Apple alongside lesser-known examples such as Procter and Gamble, L’Oréal and Pernod Ricard.
Innovative companies are constantly evolving as they investigate fresh ideas and pursue new services and products to present to the market. They are committed to innovation and associated research and development. They are adept at spotting trends and learning how best to meet emerging market requirements, but they also understand that not every project or product will be a success.
What innovation looks like in practice varies greatly. Historically, some sectors have embraced innovation far better than others, but the textbooks tell us that there are broadly four types of innovation.
Disruptive innovation gets investors excited since it involves an innovation that disrupts the market by displacing long-standing, established competitors. The disruption can either involve using a low-cost business model to enter the bottom of an existing market or new-market disruption where a business seizes a new market segment. Amazon, launched as an online bookstore in the mid-1990s, is an example of disruptive innovation.
Incremental innovation is something we come across in our everyday lives as it focuses on marginal improvements to what already exists rather than creating entirely new products or services. Examples might be a drinks manufacturer adding a new flavour to their range or a low sugar version of an existing drink. Incremental innovation involves gradual, often continuous, improvement, and can be viewed as a series of small steps rather than giant leaps forward.
Sustaining innovation involves a company creating better-performing products to sell for higher prices to existing customers. It is typically a strategy used by successful companies to pursue higher profit margins and examples might be computer manufacturers creating laptops that sell at a premium to desktop computers or phone manufacturers offering ever larger and more sophisticated mobile phones to an audience willing to pay for the increased flexibility that the enhanced product provides.
Radical innovation involves a transformative business model that changes the relationship between customers and suppliers by destroying an existing industry or creating a whole new one. In the process of creating a new market for their product, radical innovators may change parts of the system, the processes of the system, or both, and the innovation is often underpinned by technology.
So which type of innovation should your company aim for if you are starting from scratch? That will depend on the markets a company operates in and the overall business strategy along with the skills and resources available. What is more important is that management and staff share the appreciation that standing still in a fast-moving market / economy is not an option, and that embracing innovation at all levels of the organisation is the best recipe for future success. The commonly held belief is that baking innovation into the DNA of the business should eventually result in competitive advantage
The good news is that most organisations don’t need to be told to innovate because they are doing it already. Just think about the new products or services that your business has recently introduced, or the changes to the systems and processes by which you are delivering them to the market. However, existing innovation often needs further support, resources, or recognition to reach its full potential so periodically stepping back and assessing where you are, where you are going, and what you still need to do is no bad thing.
If the thought of cost and time associated with innovation frightens you, just think about the alternatives. Take a good look around you and think about the many stagnant and uninspiring businesses that have failed over the years. Remind yourself that one of those could be your business if you do not value, support, encourage, and nourish innovation. Build innovation into your strategy and budgets, include it in meeting agendas, reward successful ideas and initiatives at all levels, and take pride in doing things differently.
Innovation is not always easy, but it is always vital, and if you need assistance, we recommend seeking support from local experts.
RTC North are experts in growth and innovation, for further information about services why not visit our website – www.rtcnorth.co.uk.
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