Product innovation is a term loosely used in business but do we really understand what that term means? Lets start by defining the key words: product and innovation. A product is a bundle of attributes (features, functions, benefits, and uses) that a person receives in an exchange. In essence, the term “product” refers to anything offered by a firm to provide customer satisfaction—tangible or intangible. Thus, a product may be an idea (recycling) , a physical good (a pair of jeans), a service (banking), or any combination of the three. Innovation is defined as the introduction to new things or methods.
Having an extensive product portfolio used to be an old-school concept. Now it is mostly reserved for large companies such as Amazon, Costco and WalMart. For SMEs, the idea should be more towards uniqueness of products and not a large product portfolio. The question that needs to be answered is why would a customer choose your product over other similar products offered by your competitors?
This is where the importance of your USP or Unique Selling Proposition becomes evident. This is what your business stands for, what sets you apart from similar products competing for the consumer's dollar.
When you attempt to be known for everything, you don’t become known for anything.
Most ideas are not new; it is just how you perceive them.
So, perceive uniquely!
Innovation, rather than novelty, can be credited for seemingly new product ideas such as a heated butter knife or the Sky Wifi Smartpen.
The successful implementation of ideas is crucial to every business. Improving your business processes, bringing new products and services to market and increasing efficiency should result in profitability and growth.
Ever-increasing competition of local, regional, national, and global marketplaces give rise to the revolutionary aspect of innovation. Moreover, it is this very competition that results in broader access to new technologies and increased knowledge-sharing opportunities.
The following points should help give you a route to plan and create the right business environment to develop and implement creativity and ideas.
What is Business INNOVATION?
For many businesses, “innovation” is about providing new ideas out of the blue that lead to significant achievements and discoveries. However, it is more than that.
First, we need to clear up a myth - innovation isn’t ONLY represented by new ideas, devices, or methods, but also incorporates new ways; any change that modifies business models and offers better products and services comes under the umbrella of innovation.
Innovation is about introducing something new or different, coupled with creativity. It’s like harnessing your creative ability while replacing or improving business processes to boost growth and productivity.
Innovation could be a single breakthrough - a new product or service - but is more commonly a series of small incremental changes that add value to existing products or services that differentiate your business from the competition and improve the perceived value to the customers.
Models of Business Innovation
There are many ways to be innovative and organizations of different sizes have various reasons for embarking on a process of innovation, often depending on where they are in their life cycle.
For an established SME, it may be re-assessing the ways a business generates revenue, moving into a different industry altogether or even creating a new brand. Whereas, newly founded companies experience great innovation and increasing customer value by eliminating waste in production or the sales cycle and streamlining processes to improve the customer experience.
Before embarking on your business innovation cycle, get to know the various models that are available to you.
Incremental innovation (Revenue-based)- is a series of small improvements or upgrades made to a company's existing products, services, processes or methods. The changes implemented through incremental innovation are usually focused on improving an existing product's development efficiency, productivity and competitive differentiation.
Disruptive (Stealth Innovation) - creates a new market and value network and eventually disrupts an existing market and value network, displacing established market-leading firms, products, and alliances.
Architectural - creates an improvement in how components, at least some of which may not in themselves be innovative, are put together.
Radical (Industry-based)- blows up the existing system or process and replaces it with something entirely new.
Reasons to be INNOVATIVE
“Innovation distinguishes between a leader and a follower.”
Steve Jobs.
Being innovative means:
Having an edge to penetrate markets faster
Improved productivity
Cost reduction
Being more competitive
Brand value-building
New partnerships and relationships
Having a compelling USP
Attracting the best talent
With the most important reason being growth, these are also sufficient reasons to start your innovative journey sooner than later.
What if your business lacks innovation?
This could result in:
Lost market share to competitors
Gradual fall in productivity and efficiency
Loss of key staff
Experience reducing margins and profit
Possible insolvency
Every competitive advantage has a shelf life and can be emulated by competitors. Furthermore, in the world of ever-changing consumer behavior, the status quo lasts only as long as the tastes of your consumer. When consumers stop choosing your brand, they may be seeking new creative options.
Being innovative means taking risks, but can result in unexpected rewards if planned and implemented well.
Planning Innovation
First things first - to plan innovation, you should:
Enable value-adding change as part of your company's culture
Have a strategic vision of how you want to develop your business.
Dedicate your time to monitor trends so that you can focus your innovative efforts more closely.
Have mechanisms to gather feedback from customers and frontline personnel that drive innovation.
Start with a meaningful assessment of your business' financial performance versus over time. Ensure that the performance metrics you track are going in the right direction. If things are improving, you need to ascertain whether this is the result of favorable market conditions, or due to the implementation of your business plan. In order to glean insight into this, begin looking at the competitors and their respective operations. If competitors appear to be outpacing your growth, you may have to accept that your own growth is more a factor of the market than your efforts. Use the tools you have available; perform market research via the Internet to peruse price, product, trends, and culture. Also, ask around; you might be surprised what intel you can acquire by simply asking others in the know. This will open up avenues for you to exploit. Many online tools, such as Google Analytics, can assist you in discovering the strategies of your competitors. For operational, administrative, and supply chain related strategies, an SME can always hire a General Management Firm to better navigate the market.
2. Study Market Trends
Awareness of the climate of your business is a key to your plan. Get to know as many insights as you can about your industry. Use the Internet or try to scan through business and trade resources for useful content.
Create a customer profile that focuses on who is an ideal consumer for your business. Use data that is mined from open sources, such as Facebook. Then, go straight to the source. Online or phone surveys with current and potential customers will allow you to better predict consumer wants and needs.
Any effort to innovate in the absence of feedback from those that will be affected by the proposed changes will be fleeting, ineffective, or destined for failure. You need buy-in from those who will implement the innovation, as well as those customers you intend to impress. Brainstorming and pooling resources with stakeholders, including suppliers, business partners, and employees will be of great help in developing and implementing creative ideas.
Having established the reasons "why?" innovation is critical, ask the following questions:
What impact will the innovation have on business processes and practices?
What additional training would be required?
What extra resources may be needed?
What about the financial aspect?
Who needs to be consulted?
Who needs to be informed?
Who is responsible for each task associated with implementation of the innovation?
Who is accountable for the results?
When will we start?
When will we launch?
Now, it’s time to incorporate your vision in your business innovation plan:
Document your goals (long and short term) with details of how you will achieve them.
Link these goals to financial targets.
Review your plan regularly and modify as is necessary.
Encourage Business Innovation
There are many sources that you can use to generate new ideas for your existing company. As previously stated, your stakeholders, including frontline personnel, management, customers, suppliers, business partners, network contacts, and the community, can be valuable contributors to your creative process, complemented with support and encouragement.
It can't be overstated; don’t overlook your own employees as one of your most vital assets in driving valuable innovation. Far too many business owners and managers generate the ideas and merely dictate or mandate change to the team. This is a critical mistake and will invariably backfire. Get the most from your people by offering a creative environment and encouragement for out-of-the-box thinking. You have to make it easy for your people to share ideas and criticize inefficiencies. Be sure to reward and commend those efforts at improvement made on behalf of your team.
To promote innovation:
Develop a supportive atmosphere so that your people can freely express their ideas without the fear of rejection, criticism, or ridicule.
Ensure you have processes and events in place to gather creative ideas. Suggestion boxes (or the digital equivalent) in the workplace, regular workshops, or time spent away from the office to brainstorm ideas.
Promote openness - allow the ideas and knowledge to flow. How about having newsletters and intranets to help people share and encourage innovative ideas?
Encourage your employees to take risks and experiment without undue fear of their ideas failing.
The fewer layers of management impeding progress there are, the more likely you are to gain traction.
The more frequently you implement suggestions made by the team, the more people will feel their ideas are appreciated and will be likely to continually contribute.
Practice rewards, give positive feedback and celebrate success. Incentives play a vital role in encouraging staff to be creative. Yet, even more important, people want to contribute and want to know that they are appreciated.
Seek creativity when recruiting new employees. During screening, ask questions regarding the contributions applicants have made to innovation with past employers.
Want some traditional ways to be innovative?
Keep reading!
10 Cost-Efficient Ways to Innovate
1. Model an existing idea that worked somewhere else and applies in your venture.
2. Ask and observe customers.
3. Mine complaints and negative feedback for improvement ideas.
4. Brainstorm "what-ifs" - Challenge as many boundaries and assumptions as you can in your field.
5. Utilize your social networks.
6. Follow competitors intelligently.
7. Minimize or maximize - reexamine your four Ps (Product, Pricing, Promotion, and Placement).
8. Collaborate and do cross-promotions with other ventures to exploit opportunities.
9. Go back in time. Assess whether something that worked well in the past has been abandoned or neglected and should be reestablished, perhaps with a modern spin.
Get inspiration when you are the customer of other businesses. Note those things that your favorite establishments do well or fail to meet expectations. Then, figure out how you can apply the observations to improve your business.
Who’s Going to Fund My Business Innovation?
A better question may be, "Can I afford to operate without increasing value through innovation?" The goal of innovation is increased sales and profit. And, it is this profit that eventually funds necessary investments in innovation. However, you should often find that innovation reduces expenses through the elimination of waste. If capital is scarce and you can't afford to invest in equipment or people that will result in supercharged, albeit delayed, sales and associated profit increases, begin with innovation that increases operation efficiency and reduces costs. Then, reinvest those savings in those improvement initiatives that require capital.
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