What is Business Innovation?
You may have heard the term "Business Innovation" being thrown around or maybe you've heard about an "Innovative new business" but what does business innovation actually mean?
Business Innovation is how you are different from your competitors, not just a USP, but how you work, how you are efficient in the business and how you exploit new ideas. Business innovation is the ideas that you have and use successfully that none of your competitors have thought of. For example, imagine a world where all the cars were blue, every car showroom had blue cars and the street were full of blue cars. You could then start a car showroom selling some blue cars but also red cars. This is a new and exciting idea in world filled with blue cars, this is what makes you innovative. But at the end of the day this is just a USP, the innovation could be that the red cars are a trial to see how the consumers react, if you find you're starting to sell more red than blue then you could look at introducing more colours. Yes your competitors can then imitate you if it goes well, but you'll still be the first one to try it. Remember - if the design is significantly different, you may be able to apply for a patent or design right.
Using the example above you could then start to charge a bit more of a premium price for the "New" colours. This could then increase your profitability as well as increase the value to the existing products. These are also signs of business innovation.
In short, imagine what your competitors are doing, what could you do better, how can you add value to your services in a way that your competitors have not? Once you have the answer to this then you can adapt your business in order to maximise this idea and bring about innovation in your business.
The different Models of Innovation
Now you know the basics of what business innovation is, let's look at the three models of innovation.
1. Industry model innovation - this is where you create a new industry, move into a new industry or redefine the Value Chain. Examples of this can include; Google leading the way with self-driving cars, Virgin moving from airlines to fibre broadband and Dell moving from selling only mass produced PC's to customisable ones.
2. Revenue model innovation - this is where you re-configure the services being offered and your pricing strategy for these services. There are different pricing models that you can use in order to achieve this. There are several different models which are separated into different categories; we won't cover these here (otherwise you'll be reading for a while), but you can find the basics on Wikipedia. This means there are many different models that could be used by your business and you should think carefully about which strategy you should be using for your business.
3. Enterprise model innovation - this focuses on changing the internal and external processes and connections of the business. This could include changing where the business is in the Value Chain, leveraging a network of partners or even outsourcing non-core activities. A value chain is rather complex to learn about, but you can find information about it here.
These sound a little complex, but so long as you know how to move the business forward then you can start to implement these and thus become an innovative business.
I want to innovate, but I need some support
There are several sources of support you can use in order to move the business forward. These can be internal or external, and what you use is a personal choice.
Internal support can come from market research, customer focus groups, workshops, senior management teams, boards of directors and internal stakeholders.
External support can come from local enterprise partnerships, Business Networking groups (BNI, Chambers of Commerce, etc.), websites, industry, government (policy, guidance, funding), trade bodies, Intellectual Property Office, trade events, external stakeholders and others.
I have an idea of how my business can adapt, how do I implement it?
There are 8 main stages for implementing an adaptation to the business. These are:
- Idea generation: This is where you:
- complete a SWOT analysis,
- complete market research,
- gain customer feedback,
- complete analysis of competitor offer,
- and come up with new product ideas
- eliminate unsound concepts,
- analyse the target market (along with the size and growth),
- look at competitive pressures,
- look at market trends and the product/service profitability
- intellectual property issues,
- the product/service features,
- the product/service benefits,
- any consumer reaction to product/service concept,
- the production cost-effectiveness,
- any production costs,
- the product/service feasibility
- and any prospective client liaison
- estimate likely selling price,
- estimate sales volume,
- estimate profitability and break-even point,
- and look at the potential return on investment
- complete production of physical prototype or mock-up,
- test the product,
- test the packaging design,
- conduct customer focus groups,
- introduce the product/service at trade shows,
- complete pilot study,
- and look at distribution channels
- estimate resources required,
- finalise a quality management system,
- implement an operational management plan,
- publish technical communications (data sheets and specifications),
- finalise supplier agreements,
- finalise logistics plan,
- publicise the resource plan,
- work out contingency plans
- organise product/service launch activities,
- create and publish promotional material,
- organise advertising activities,
- work out the distribution pipeline,
- work out the critical path analysis
- gauge the customer reaction,
- gauge the impact of the product on existing portfolio,
- analyse the internal and external value of the product/service
- complete competition response analysis,
- complete analysis of value segments (including demand),
- review the production costs,
- forecast unit volumes,
- review revenue and profit,
- review of after-sales service
I want to innovate, but it sounds risky
As with everything business, there are pros and risks to innovation. First of all let's look at the pros.
- You can improve your products and what you are offering your clients.
- You can improve the internal processes of the business meaning you can give your clients greater satisfaction due to being more efficient while handling their orders etc. But also you can improve, well, almost every aspect of your business.
- Innovation can lead on to organisational growth and being able to better compete within your market, you could even go on to enter a new market as described in another of our posts "What are business markets?".
- You can offer your clients a unique product range and have unique selling points, which could lead on to greater customer retention.
- It could open up the opportunity for you to enter into a niche market, meaning you could have more loyal clients as there will be fewer suppliers (if any) of the products you are supplying.
- By being one of the few businesses operating the way you are, you could have improved brand recognition in the market you are operating in.
- You could fail to meet operational requirements regarding the quality, cost, scheduling, service and required resource.
- You could fail to meet commercial requirements which could be due to insufficient sales and decline in customer base.
- You could fail to achieve a return on investment.
- There could be a shift in organisational culture where there is a resistance to change, staff being unsupportive of new systems and processes.
- You could receive insufficient support from leadership and management.
There are ups and downs to business innovation and there can be no "one glove fits all" approach. However by completely knowing what business innovation is and by being able to plan it step-by-step, your business should head in the right direction.
- 13 Aug 2018 - What is a Company Trademark?
- 25 Jul 2018 - 4 Key Things to Consider Before Turning a Hobby Into a Business
- 16 Jul 2018 - Tips to Choose the Right Structure for Business
- 04 Jul 2018 - Is your Business Cost Effective?
- 29 Jun 2018 - Is an Umbrella Company Right for Me?