Updated May 22, 2023
What is Innovation in Business?
Many major businesses and yesteryear brands are now reduced to non-entities. Hindustan Motors (HM) had a monopoly in passenger cars till the 1980s, with its classic Ambassador reigning supreme on Indian roads. With the Maruti car’s arrival and, later on, several new generation cars, HM lost out miserably. Likewise, Hindustan Lever dominated the washing powder market with its premium brand. Still, Nirma came with a more affordable product capturing the mass market, and Hindustan Lever had to follow suit with a few lower-priced offerings.
Nokia dethroned Motorola and other mobile phone manufacturers to the number one position in 1998. Still, it lost out miserably to iPhone, Samsung, Sony Xperia, and Motorola a decade later as it failed to update its Operating System Symbian while the whole world was moving to Apple Os or Google’s Android platform.
In today’s fast-changing market, where new entrants come with innovative technologies, market dominance is not for any company’s eternity. They need to innovate to retain their existing position constantly.
Top 10 Techniques of Innovation in Business
Innovation is the key to success whether you are a start-up or an established firm. Here are some techniques to keep your organization’s innovative spirit alive and your market share intact.
Be curious and gather more information.
Market leaders can’t remain leaders unless they are curious to learn, gather more information, identify market trends, and try to spot new opportunities by looking at the competition. There must be a systematic way to gather, analyze, and apply information to the business.
Having a good library, interaction with peers in workshops and conferences, trade meetings and seminars, and interaction with thought leaders will help the company keep abreast of what’s happening in their industry. An air conditioner (A/C) manufacturer Godrej entered the invertor A/c market a bit late compared to its MNC counterparts but innovated with a 5-star rated A/C developed in-house. It claims to have an Indian Seasonal Energy Efficiency Ratio (ISEER) of 5.2, the highest in the industry. With a market share of 6% in A/Cs, Godrej hopes to raise it to 9% with the innovative product.
According to David Dewolf, a contributor to Entrepreneur.com, organizations focus more on developing products, technological expertise, and big data but don’t spend energy on getting more information, identifying trends, and forming conclusions. Therefore, the organization needs to collect and analyze a vast amount of information and data, and there should be a systematic procedure for this.
Recognize innovation opportunities
Understand the pain points of existing customers with your products or with that of the competitors. If the industry is unsatisfied with existing offerings, an innovation opportunity lies dormant. Therefore, every product’s problem or crisis is an opportunity to innovate and succeed. A stapler is a useful product to help hold your papers together, but what if you have more than 12 papers to organize? Conventional stapler pins can’t hold more than a dozen papers. That’s when Accentra Inc, a Pennsylvania-based office products company, developed the PaperPro that helps to pin 60 papers together. The founder of the company, Todd Moses, observed no fundamental change in the product for the past 100 years, which prompted them to develop the new product, which is now selling millions of units per in more than 100 countries. PaperPro’s example proves that consumers look for function and fashion in their products.
Uber is another success story that leveraged the pain points faced by commuters and travelers in cities. Most often, taxi cab users were charged more, service was poor, and there was no reliability regarding the cab’s arrival and pricing. Uber revolutionized car rental or hired by hooking several thousand taxi owners to be part of the Uber network and charging only for the kilometers covered and not for the return trip. As they completed one assignment, the taxi cab drivers soon got another inquiry thanks to the GPS app installed on their mobile. It also made tracking the trip and payments easier for Uber.
Look broader, beyond the industry, for ideas.
Most often, the best ideas for innovation need not come from your own industry but from other industries. Henry Ford got the idea of a moving assembly line from the meat processing industry, which changed the automobile industry’s whole dynamics through volumes and labor deployment.
PepsiCo was looking for a way to reduce sodium in its snack foods and get the medical industry’s solution. A group of researchers on osteoporosis (a condition that leads to deterioration of the bones) had created a low-sodium substance by breaking calcium into small particles and enabling its re-growth. This technology gave the idea for Pepsi to implement them in their snack foods.
Likewise, Proctor & Gamble found an anti-wrinkle solution from a polymer developed by a computer chip expert based at a European University.
Companies have often succeeded in innovating with the in-house team, and they are biased against looking outward for solutions known by the term ‘functional fixedness’. The solution is to have an in-house innovation group that constantly scouts for ideas from other industries to be incorporated into their own domain.
Foster an innovative environment
Does your business want to do business the way it has always done? Or is it open to change? For example, a company that has always done the ‘brick-and-mortar’ business may lose out if the trend changes to a mix of online business with in-store trading. If the top management is not open to change, it will percolate down the hierarchy. And innovative ideas won’t come up.
The innovation group must meet frequently, gather ideas and suggestions and have brainstorming sessions. If possible, involving the entire team of workers as limiting it to a few people will limit the company’s ability to get support and new ideas from the entire talent pool. Each individual has his own talent, ideas, and experiences.
It is very important to assign ownership to innovative ideas and their execution. Often, great ideas don’t go beyond brainstorming sessions as the organization has no proper follow-up or ownership.
If you don’t encourage innovation, the result could be losing out on people who go on to innovate on their own and succeed. Brian Acton, who had worked for Apple and Yahoo, was denied jobs by Twitter and Facebook. He teamed up with Jan Koum, an engineer who had worked with him at Yahoo. They created Whatsapp, a huge success that FB bought over for $19 bn. Acton’s stake was just $3 bn at that time.
Innovation need not be about products but the workplace also.
Most people think of innovation with respect to developing a new product but fail to recognize that better processes and practices within the organization can raise productivity and profits for the firm. A bad workplace atmosphere can lead to lower employee motivation and output for the firm. Google realized the workplace should not be filled with dull cubicles and walls.
Google offices have play areas, coffee bars, open kitchens, crèches, themed conference rooms, libraries, and several other innovations to provide a happy environment to boost productivity. Pitney Bowes Credit Corporation redesigned its interiors to appear like a village that was calm and serene. This helped them break down barriers between people and hierarchies and foster open communication. The company grew from strength to strength based on innovative products developed due to better communication between employees.
Run a contest, scout for ideas from colleges
The technology and management schools have incubators that help students develop project ideas from solar energy to waste management to new products using robotic technology. Some companies run contests for the public or in professional colleges and offer monetary rewards. The best ideas can become licensed and commercialized.
Good ideas can come from customers.
By openly communicating with the customers, you can understand their pain points or dissatisfaction, which could help you develop a better service or process. To begin with, there should be an understanding of whether they want a change in the product or service. Don’t innovate for the sake of innovation. Customer surveys, social media, and market research would help reveal what changes the customer requires.
Be futuristic and have a visionary attitude.
Innovation thrives only in organizations with a futuristic view, and leaders should have a vision. In the late 1970s, Ken Olsen of Digital Equipment Corporation (DEC) doubted whether households would buy personal computers. Now it is commonplace, and DEC is no more. Compaq acquired it, and subsequently, Compaq was acquired by HP. DEC promoter found home PC an impossibility. Sometimes, it requires courage to pursue ideas that look impossible or risky.
Know how to deal with an innovator’s dilemma.
Many organizations face the prospect of launching a new product radically different from their existing offering but can’t abandon it. IBM’s mainstay was mainframe computers, and even when it launched personal computers, it retained its strength in mainframes. Hindustan Lever, which witnessed the emergence of popular economy washing powders, had to sustain its premium brand Surf even as it came up with lower-priced offerings such as Wheel and Rin washing powders. Netflix changed its business model from sending DVDs by post to streaming video to its subscribers without exiting the business.
Disruptive technologies and changing trends
When Google and other search engines implemented algorithm changes and focused away from keywords that destroyed several websites that thrived on copying or rewriting content based on popular keywords, new technologies or processes can be disruptive. Still, ultimately, it helps the mass consumer. Google aimed to ensure the best search results for internet users, while some disruptive technologies led to better consumer convenience. Skype-enabled long-distance calls easier, iTunes gave a better choice over record stores, and Craigslist offered a better alternative to classified ads.
There is a belief that innovation is for start-ups and not for market leaders. However, it is far from true. Innovation can happen in any organization; the cultural mindset is tuned to finding solutions to problems creatively. One way to learn how to innovate is by learning lessons from leaders in the field. The Forbes list of innovative companies is drawn from technology, e-commerce, pharmaceuticals, automobile, food and beverages, consumer products, credit cards, the IT industry, etc. They include small and big brands worldwide.
According to the IBM Global CEO Study, unsupportive leadership and work culture are barriers to innovation. Disruptive innovators have the qualities of associating, experimenting, questioning, and networking on their new ideas. Innovation cannot occur in a fearful atmosphere, as leaders are unwilling to take risks.
It has been proven that the best performers in the S&P 500 list have been consistently innovating since 2000. Technological disruptions and financial crises that spelled doom for the average performers have not harmed them.
When the top leadership shows passion and the courage to implement new ideas, they percolate down the organization.
There is no substitute for hard work and no magic in innovation- it comes through sustained efforts, thinking, and conceptualization. Organizations that focus on the short term and feel pressure to show topline growth often lose sight of the long term.
Rewarding managers for innovation and celebrating creativity yields better results than maintaining the status quo.
Innovation is win-win for both the consumer and the industry.
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