Businesses Need to Innovate But How?

Businesses need to innovateAny business that stands still, dies. Why? Because markets change all the time. If a customer buys your product and with repeat purchases your demand soars, then you will need to meet the challenge of scaling production. If it’s a one-off purchase then that’s one fewer potential customer and time for a ‘new’ product. Both innovate.

Crucial is to evolve your market offerings and innovate. But many companies are scared to consider innovation, because they cannot understand what it is. Innovation has two extremes but is usually found somewhere in between. The company that now offers the product in 2 colours; the company that offers something so radically different that others wonder whether it can truly be a business.

Marginal Gains

Consider the successes over the last few years of British Rowing and British Cycling. Both are powered by marginal gains theory and the concept that winning or losing is often defined by the last millisecond of the race. Time management theory has always proposed that greater efficiency is achieved by breaking all processes down into individual parts and optimising. By having a defined process it is possible to manage and control.

Innovation can be a process rather than a blinding brainwave. Conceptually we are able to believe that it is possible to improve most things by 1%. This isn’t innovative. But consider if you improved each part of your product or process by 1%. The overall improvement would be much greater than 1% and could be innovative. In the case of the 2 colour company, it improved overall product performance by more than 10% and reduced production costs by 5% for a premium product commanding a higher price.

Old to New to Innovate

Innovation can come through knowledge transfer. Businesses can gain significant advantage by using ideas and techniques that came from other sectors and applied in their own.

Consider how we view customer service now compared to 20 years ago. Whereas previously it was ad hoc, assumed and left to the individual who either did or did not have customer service; now it is productionised. Customer service is a defined process and individuals trained to respond to customer demands in a set way. It falls down when it becomes the mechanical ‘how is your meal?’

Radical Breakthrough

Radical breakthrough is what many think to be innovation. Here is something so different it’s going to fly or die. Henry Ford innovated mass production in car manufacture; but went bust twice with the idea before his success. Radicalism requires determination.

History is full of radical new ideas that gain no traction, because they are unneeded by the market or an alternative is seen to be better. Fax machines flopped when invented in the 1840’s as many saw telegraph to be better. They thrived in the 1980’s and 90’s when the want was for individuals to communicate quickly, graphically and simply themselves in the office to the rest of the world. They died again as simple mobile communicators took over.

Essential for the radical breakthrough is a true understanding of the market needs and wants to develop the concept into the product that will sell. Not just the blind determination of the mad inventor.

The question for all businesses is not whether to innovate, but which type of innovation is easier for your business to handle now – marginal gains, old to new or radical breakthrough.