When an entrepreneur starts a new business, innovation is usually at the forefront of their mind—after all, it’s a key determiner of whether the business is going to be successful or not. Once a business is established, though, it’s human nature to become complacent or content with the status quo, a “if it’s not broken, why fix it?” mentality.
Since at least the 1990s, Harvard Business Review and other publications have discussed this cognitive bias and how it can endanger business success by undermining the importance of innovation and creativity.
In this article, we’ll be discussing how business innovation provides the antidote to the status quo. In it, we’ll:
- Define innovation, its different types, and its importance in business.
- Outline the advantages and disadvantages of innovation in business.
- Define what an innovation strategy is, and share some resources for developing your own innovation strategy.
- Introduce NextStudios’s business innovation consulting services.
What Is Innovation and Why Is It Important?
“Innovation” is a bit of a loaded word, and it can be applied to virtually any industry or endeavor. It’s about developing new ways of seeing things, new approaches to persistent problems, and the application of outside-of-the-box thinking to the types of problems individuals and businesses routinely struggle with (e.g., business growth, competitive standing, and so on.).
So, what is the best definition of innovation? For the purposes of this article, innovation in business simply refers to new ideas or strategies that help achieve one or more business goals or objectives. To be a little more specific, we can define three main types of innovation in business depending on their scope and focus.
What Are the Types of Innovation?
The names and definitions for the types of innovation in business are quite straightforward:
Product innovation involves developing a new product or service, or improving an existing product or service. A company may develop product innovations in response to customer behavior or preferences, to make use of new technology, to create a competitive advantage or niche market, and so on.
When a company makes innovative improvements to their product and service offerings, this benefits both the business and its customers. This is because customers who are happy with your offerings are likely to remain customers (and maybe even refer some new customers!).
Process innovation involves making improvements to how the business creates, delivers, and supports their product or service offerings. These innovations are rarely flashy, as they occur primarily behind the scenes. For process innovation, companies might look to upgrade the technologies they use or update their workflows and processes to streamline operations to an extent.
When their process innovations succeed, companies typically see benefits in the form of lowered costs and increased profits—largely due to addressing redundancies or convoluted processes.
Business Model Innovation
Business model innovation involves a foundational shift in how a business provides value to its customers and a strategic view of how that added value can generate increased revenue. One of the best examples of innovation applied to a business model is a retailer’s shift from operating (only) a brick-and-mortar store to providing eCommerce options for its customers.
Business model innovation tends to be much more difficult than the other types of innovation, as it involves rethinking how the business operates on a foundational level. According to an analysis from MIT Sloan Management Review, though, when done right, business model innovation “has the ability to make companies resilient in the face of change and to create growth unbounded by the limits of existing businesses.”
What Are the Advantages of Innovation in Business?
A few of the most compelling reasons why innovation is important in business include the following:
Uncovering Brand New Solutions to Longstanding Problems
Whether they apply to the products/services themselves, internal workflows and business processes and tools, or the business model as a whole, virtually any problem can be addressed with thoughtful innovation.
Creating an Innovative Culture
When business innovation is established as a priority and strategies are actively being developed, it begins to create an innovative culture that, if maintained, will provide long-term dividends in protecting against being complacent with the status quo. Innovation shouldn’t be a chore—rather, it should be one of the most exciting parts of running a business.
Through business process innovation, organizations can streamline how employees and teams work and collaborate, saving time and increasing efficiency. Now, not all streamlining is going to be advantageous, as going overboard on “increasing productivity” can lead to a team of exhausted, burned-out employees. The idea of this type of innovation is to make lives easier, to empower employees to perform (and feel) better.
Increasing Revenue and Profits
When a business makes substantial improvements to their product/service offerings, processes, or business model, the top priority is usually growing revenue to increase profits. The happier customers are with what a company provides, the more likely they are to continue (if not increase) their spending and even refer the company to colleagues.
Creating a Competitive Advantage
With thoroughly-strategized and well-executed innovation comes the competitive advantage of being a thought leader, a player at the forefront of their field or industry. This is a great way to grow the brand, expand into new markets, and more. Identifying these opportunities is one of the benefits of working with innovation consultants like NextStudios.
Are There Any Disadvantages of Innovation in Business?
One of the most-cited disadvantages to innovation includes the potential for it to be costly and time-consuming without a guaranteed return. Further, investing too much in certain innovations without doing enough due diligence research to foretell their impact is a risky game that can cost the organization a lot.
If one or more product, process, or business model innovations fail, it can really be costly. Not just financially, either—if a new product or service is rolled out too soon or without enough testing and research, for example, and it has significant issues, it can result in lost customers. Not only that, but the brand’s credibility can take a hit, which can be a substantial competitive disadvantage.
Neither of these potential drawbacks should turn you off from the idea of innovation. The truth is, with a little forethought and planning, innovation’s going to be a good thing.
What Is an Innovation Strategy?
Basically, an “innovation” is an idea—in this context, an idea for either a product, process, or business model innovation—and an “innovation strategy” is the logistics of how to develop, implement, and support the idea.
Greg Satell, best-selling author of Mapping Innovation: A Playbook for Navigating a Disruptive Age, defines four distinct types of innovation strategy that have become a common foundation for identifying opportunities to develop successful innovations.
These categories are primarily based on two items:
- How well the problem is defined and understood.
- How well the related skill domain (the competencies required to develop innovation) is defined and understood.
The thinking here is relatively simple—when you can define a problem well, and possess the capabilities and resources to deliver a solution, you’re going to approach innovation differently than if you have little understanding of where innovation opportunities lie or how you’d possibly impact them.
Next, we’ll define the four types of innovation he lays out in his oft-cited work.
This is the starting point for many organizations looking to innovate. In Satell’s matrix of innovation types, basic research is suited for companies who have neither a well-defined problem nor idea of how to address it—hence the need for basic research. Early in the process, this might involve soliciting feedback from employees and customers, studying industry-leading competitors to see what the best in the business are doing, or both. Companies in the basic research phase should also be keeping an eye on industry publications to better-understand what the future holds (and how they might better-position themselves with future customers).
Some problems or challenges, even if easy to identify and empathize with, can prove to be extremely challenging to solve. The concept of “breakthrough” innovation applies when a problem or challenge has been well-defined, but the business either isn’t sure how to solve it through innovation or lacks the resources or skill set to implement a solution.
As its name suggests, sustaining innovation applies to organizations that are focused on activities like roadmapping, R&D labs, and design thinking. In simple terms, they’re companies with a “continuous improvement” type mindset for the products and services they offer, as well as the business processes that support their development, delivery, and support. The ultimate goal of sustaining innovation is to continue refining and improving their offerings, workflows, support, and other processes.
In many industries, by the time an organization realizes their customers’ preferences or expectations—or a particular industry or business model itself—have changed, they may have already fallen behind the competition. Disruptive innovation attempts to proactively innovate by anticipating how an industry is poised to change and then developing and implementing thoughtful innovations in response. While there is inherent risk in making changes based on an inevitably uncertain future, when done well, disruptive innovation provides companies with a huge opportunity to become a leader in their industry.
How Can I Develop Innovative Ideas and Strategies?
We know we’ve introduced some complicated concepts here, but hopefully you’re feeling more energized (by the potential) than overwhelmed. So, where do innovation ideas and strategies come from? We’ll finish this article with a few tips and examples of steps you can take today for a more innovative tomorrow.
Do Some Industry and Market Research
To deepen your understanding of what your customers want and expect, how well your product/service satisfies them, and how well your competitors might satisfy them. The goal here is to understand your competitive advantages and disadvantages in order to generate innovative strategies for better-serving current and potential customers.
Consider researching current and anticipated trends in your industry, market or customer demographic shifts, the competitive landscape, and so on.
Read Articles about Innovation in Business
Get inspired by these articles that discuss some solid examples of innovation in business:
- Business Insider’s “25 Greatest Business Innovations of All Time” starts with the introduction of money (in 3000 B.C.) to products like customer relationship management (CRM) software in 1993 and the iPad in 2010.
- This in-depth article by author Greg Satell defines “The Four Types of Innovation and the Problems They Solve”.
- Fast Company’s “World’s Most Innovative Companies “ and “10 Most Innovative Small and Mighty Companies of 2021” articles dissect some of the best innovation strategy examples of the past year.
How do you know if you’re truly innovative? And how do you develop a culture of innovation? Perhaps these pieces will inspire you:
- For a more specific look at small business innovation examples, the U.S. Chamber of Commerce suggests “4 Ways to Make Your Small Business More Innovative”.
- Read Harvard Business Review’s “5 Requirements of a Truly Innovative Company”, Forbes’s “6 Requirements of a Truly Innovative Company”, or Huffington Post’s “13 Ways to Tell if a Company Is Truly Innovative” to assess your capability for innovation.
- This article published by WeWork, “How to Encourage Innovation in the Workplace”, outlines a process for empowering employees to generate and execute innovative ideas.
- Read McKinsey & Company research’s overview of “Creating an Innovation Culture” or Forbes’s “Seven Steps to Creating a Culture of Innovation”.
Consider Partnering with an Innovation Consultant
Finally, it’s a good idea to consider partnering with a business innovation consultant—like NextStudios and Next Consulting. Our services can help with a number of key activities that go into the development of successful and productive innovation, including:
- Ideation and creation: We offer tools, techniques, and expertise for developing accelerated plans for strategic innovation.
- Budgets and resources: We can help secure funding for innovation initiatives.
- Coaching and mentoring: We leverage our expertise to provide coaching and mentoring opportunities in areas including human resources, design and branding, leadership and management, funding and financing, and business operations.
Whether you’re interested in making small, incremental innovations or have your sights set on disruption, our approach will help plot the course to get you where you want to be.
Learn more about the NextStudios team, and reach out via the contact form on our website to take the first step toward a more innovative future.