Innovation

Innovation

Part of being an effective leader of your small business is to be able to make sense of the numbers and to avoid profitability pitfalls!  Understanding innovation is important because your business must be able to understand how to properly utilize innovation in order for your business to remain competitive and grow in an ever-changing business environment.

As an entrepreneur, innovation is what will keep your small business growing and relevant in an ever-changing marketplace.   The drive to innovation begins at the top of the organization. The first thing about understanding innovation is that it is, in essence about seeing, perceiving and solving problems in creative ways! It requires a sense of urgent passionate purpose and visionary dreaming and thinking to play with solving wicked problems so as to improve the quality of people lives and the way we live.

Here are some reasons to innovate to avoid profitability pitfalls:

• Adapting to changing workplace dynamics and trends – As more baby boomers retire and conventional succession planning processes become obsolete, the ageing demographic globally is the new tidal wave incurring financial demands on already exhausted financial systems. Millennials are also swapping jobs at increasing rates as they seek more meaningful work, autonomy and equality. Hiring processes are shifting as more recruiters rely on internet based social processes where ‘reputation’ is fast becoming more important to professionals and companies alike. Freelancing and contracting are becoming a way of life, meaning that more people are working from home, taking responsibility for generating their own income and wealth. They are also operating more from co-working and collaborative work environments. This means they are networking and teaming to share and gain knowledge, skills and experience.
• Responding to increasing customer expectations and choices – There are significant changes required as to how we perceive and sense customer’s needs, wants and expectations as they too, adapt to, are empowered by the increasing speed and proliferation of choices available in our increasingly connected and digitized world. Their focus is on receiving value that demonstrates that companies understand and empathize with them and support their lifestyle choices. Noting that customers have never had more control over who they are, what they do, and importantly, what, how and where they buy! Increasing consumer expectations and choices are impacting organizations to become increasingly customer centric through innovative change. By using human centered design to improve the users (our) experience provides increased value and new ways to create and invent products and services as well as to execute plans in ways that people value and cherish.
• Innovation puts companies on the offensive. Consider how Colgate and P&G, effective serial innovators, have innovated Unilever out of the U.S. oral-care market. The company that builds a culture of innovation is on the path to growth. The company that fails to innovate is on the road to obsolescence. The U.S. domestic automakers and major companies such as Firestone, Sony, and Kodak all used to be industry leaders, even dominators. But they all fell behind as their challengers innovated them into second place (or worse).
• Innovation enables you to see potential acquisitions through a different lens, looking at them not just from a cost perspective, but also as a means of accelerating profitable top-line revenue growth and enhancing capabilities.
• Innovation also provides an edge in being able to enter new markets faster and deeper.
• FIND THE NEXT S-CURVE – Nothing grows forever. The best products, markets, and business models go through a predictable cycle of growth and maturity, often depicted as an S-curve. Diminishing returns set in as the most attractive customers are reached, price competition emerges, the current product loses its luster, customer support challenges emerge, new operating skills are required, and so on.  The time to innovate—the innovation window—is when the first growth curve hits an inflection point. How do you know when you’re hitting the inflection point? You never know. So the best companies are forever paranoid and make innovation a continuous process.
• LEAN ON CUSTOMERS – Successful growth companies have a deep understanding of their customers’ problems. Many are embracing tools such as the customer empathy map to uncover new opportunities to create value. This customer insight is the foundation for their lean approach to product innovation: rapid prototyping, design partnerships with lead users, and pivoting to improve their product and business model.
• THINK LIKE A DESIGNER – Managers are trained to make choices, but they don’t always have good options. Innovation involves creating new options. This is where designers excel. Apple’s exceptional user experiences were largely the creation of Jonathan Ive, a professional designer and Jobs’ righthand man. Design thinking requires a different set of tools. Growth company strategists have abandoned Porter’s Five Forces Analysis because it assumes that markets have well-defined boundaries and competitors must fight for market share. Instead they search for uncontested market space and make competition irrelevant using Blue Ocean Strategy and the Business Model Canvas.
• LEAD THE WAY – Unless the CEO makes innovation a priority, it won’t happen. Innovation requires a level of risk-taking and failure that’s impossible without executive air cover. The best growth companies create a culture of innovation
• Seek add-on sales. When a customer purchases something from you, offer a free sample item that will enhance the value of the original purchase. A free sample may encourage your customer to buy more or refer other customers to you.
• Goods or services – Any good or service or combination of these which is new to a business (or significantly improved).
• Operational processes – New or significantly improved methods of producing or delivering goods or services (including significant change in techniques, equipment and/or software).
• Organizational/managerial processes – New or significantly improved strategies, structures or routines of a business which aim to improve performance.
• Marketing methods – New or significantly improved design, packaging or sales methods aimed to increase the appeal of goods or services of a business or to enter new markets.
• Developing an Innovation Strategy – Strategy is as much about what you do as what you don’t do. This tenet also applies to innovation strategies — as such strategies must be linked and aligned with the overall business strategy.

These factors are forcing organizations to explore innovative strategies for enhancing staff engagement, empowerment and enablement as well as with the acquisition and retention of the best talent.