Business innovation benefits not only consumers but also business owners. Innovative ideas and strategies have proven, time and again, to be both socially inspiring and financially lucrative. Just look at two of America’s tech giants, Facebook and Apple, which have grown by leaps and bounds through innovation. While the benefits are there for everyone to see, there are many companies that have difficulty innovating. This is because business innovation has some challenges. Knowing these challenges can help businesses to develop innovative strategies and ideas that will not only boost their financial standing but also give them an edge over the competition.
To learn more, check out the infographic below created by Ohio University’s Online MBA program:
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An Introduction to Business Innovation
According to The Oslo Manual, which is the premier international source on how to collect and use data on innovation, there are basically four types of innovation. Product innovation is the introduction of a good or service that is either new or a significant improvement of an earlier version, particularly in terms of technical or software components, or usability. A great example is the introduction of iPhone 5 vs the earlier iPhone generations. Process Innovation entails establishment of a new, or improved, production or delivery method. A good example of process innovation is Amazon Prime Shipping.
Marketing innovation entails implementation of a new marketing strategy involving significant changes in product design, packaging, product placement, promotion or pricing. A good example of marketing innovation is Coca-Cola’s strategy of putting people’s names on bottles, so that consumers can buy a bottle that has their name printed on the label.
Organizational innovation is the fourth type of business innovation. This entails incorporating a new organizational method or altering the work culture of a company in a bid to improve workplace dynamics. Google is a great example of a business that has shown organizational innovation. Google’s workplace culture is vastly different from the traditional organizational culture.
From these examples, you can probably see that business innovation is one of the main factors that contribute to the success of a business. Besides, business innovation has been linked to overall growth and technical advancements in a variety of industries. This is partly due to the fact that innovation alters how a company operates internally as well as how it interacts externally with customers and other businesses.
Business Growth, Innovation and Tech
A recent study conducted by PwC found that 80% of CEOs believe that innovation ignites efficiency and creates a competitive advantage. The study also found that 70% of CEOs were investing in IT to reduce costs and become more efficient. On the other hand, 54% of CEOs allocate funds for growth initiatives that leverage emerging technologies, such as Apps, Bots and social media.
Examples of Innovative Companies
- Google: In 2015, Google reported an annual income of $74.54 billion. The company has many innovative products, but the following three stand out; Google Glass, Google Self-Driving Car and Google Search. The tech giant has a policy of giving engineers 20% free time to work on independent projects. Google’s workplace has training facilities, cafes, private rooms for nursing mothers and resting lounges among other things.
- Apple: In 2015, Apple’s total annual income was reported to be $53.4 billion. The iPhone maker has a number of other innovative products, including the; MacBook, iTunes Store, and Apple Watch among others. The company offers fertility and adoption services as well as a paid family leave policy that provides female employees with up to four weeks of paid time off before delivery and 14 weeks off after delivery. Apple has a secretive workplace culture where employees enjoy keeping their in-work discussions, innovations, and discoveries private, even sometimes among family members. According to Justin Maxwell, the principle behind the culture is that each employee is part of something that is bigger than them.
- Facebook: In 2015, the social media giant’s annual income was $17.93 billion. Facebook’s innovative products/services include; Messenger, Facebook platform and Instagram. The company has an innovative workplace culture where even C-suite executives are actively involved in the building and design process. The firm’s physical work environment reflects its culture. Facebook’s director of design, Kate Aronowitz, once said that if you want to build openness and collaboration, then the workplace must reflect that. While all these firms may be tech giants today, they were once startups operating in garages and dorm rooms.
Startups Lead the Way for Innovation
Startups tend to lead the way for innovation. The following are three startups that have led the way in terms of innovation.
- Uber: In just a few years, Uber has completely revolutionized the traditional taxi industry. The company leveraged technology to create a business approach that allows almost anyone to become a taxi driver while making more profit than a traditional taxi driver. Uber’s gross booking for the first half of 2015 was $3.63 billion. As of 2016, the company has a market valuation of $62.5 billion.
- Airbnb: The company revolutionized the hotel and rental housing market and influenced how people travel. Airbnb made it possible for the average person to rent out their home, rooms, and apartments. In the year 2013, the company earned a total of $250 million. In mid-2015, the company’s total earnings for the year were projected to be $900 million and projected to rise to $10 billion by 2020. Airbnb currently has a market valuation of $24 billion.
- Slack: Slack developed an innovative platform that edged out Apple’s iMessage, Facebook’s Messenger and traditional email to become the prime digital communication tool for companies and organizations across the world. As of May 2016, Slack had a total of 3 million active daily users, up from 750,000 in April 2015. At the same time, Slack is generating over $25 million in annual recurrent revenue.
The main reason why startups lead the way for innovation is that they usually take an ‘outsider’s approach’ to business. They have a raw outlook and a desire to infiltrate the current system. All the companies mentioned above analyzed their respective markets, identified gaps and sought to create a product that could fill those gaps and improve on the current infrastructure. On the other hand, well-established firms have difficulty innovating because they are too scared to take risks.
How to Overcome Difficulties to Become More Innovative
Think Holistically by Focusing on the Group: To help encourage group-focused thinking, businesses should offer individual incentives whenever a group succeeds.
Make Sure Team Members Understand the Importance of Roles: Individuals and teams often work better if they are assigned special tasks or roles. Managers can leverage these roles by making each team member understand that they will provide a unique outlook on a given topic or problem.
Overcome Fear of Failure: Well-established firms often feel like they have more to lose, in terms of reputation, brand, and finances, so they fail to innovate for fear of failure. To overcome this challenge, businesses should set aside a portion of their income for testing innovative ideas.
Know When You Start Losing Traction or Stalling: To prevent this from happening, there should be powerful motivational quotes around the workplace. Furthermore, employees should exercise and take breaks on a regular basis.
Infographic created by Ohio University’s Online MBA program