What is Innovation in Business?

Business Innovation

May 7, 2022 / Chris Cottle / Innovation Insights

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Business innovation can be elusive. Firms large and small try to have innovation be a part of their planning and delivery, but it can be a difficult concept to define, track and reward. Depending on a business’s industry—such as technology, software, hardware, gaming, manufacturing, energy, and others—it may be more inclined to innovate than other industries.

The process of innovation is creating something entirely new, or substantially improving an existing product, service, or item. Some firms are good at incremental innovation and innovative companies have business model innovation that drives their output. This article will explore popular ways that innovation is supported, driven, and reported in business, and its impact on businesses.

Prioritizing business growth through new ideas and innovative business models

According to Forrester, businesses that are innovation leaders grow 260 percent faster than average businesses (Forrester, 2020 report on innovation and R&D).

We know that of all of the priorities facing companies, business leaders value and prioritize innovation highly. According to Boast research, 85% of business leaders rank innovation investment as extremely or very important.

Innovation. Source: https://learn.boast.ai/hubfs/Boast%202022/Boast%20Innovation%20Report_NEW_K.pdf

Many organizations spend up to 30% of their time deciding and prioritizing innovation—which is a massive burden on the company and takes development, research, and execution cycles away from teams. Companies rely on product usage data, engineering development data, and task management data to help decide and track the innovation process.

The CEO and finance group primarily calculate the ROI of innovation investments, but there is a major gap in linking engineering and product data to financial data, and in seeing the overall innovation picture.

Respondents to Boast research share that to improve the process of innovation management, companies need to foster an organizational culture that enables innovation and resource allocation, streamline decision making, empower more employees to innovate, and create stronger linkage between spending and the outcome of that spending.

These same business leaders rank ‘collecting historical data and records’ as the least efficient part of the innovation management process. Encouragingly, over half of respondents ranked their company as ‘above average’ for fostering a culture of innovation.

Defining the innovation process

Innovation is a process of discovery. It involves research and development (R&D), and that means that you are trying to advance the state of your technology, product, or service through a systematic approach while overcoming technical challenges. You often must take into account information readily available in the public domain (search engines, white papers, software patterns, etc.) as well as the context of your company’s current products or services.

If you can’t find a solution to your technical problem within the public domain, then this is where your work may qualify as innovative. Overcoming technical or systemic challenges in a systematic way could be the basis for an innovation process. Turning this into business innovation or process innovation can be a way to create the right culture to create new things.

Employee research shows that workers want to do more than just tasks, they want to create, improve and do new things. And they want to be recognized for their contributions. Companies that create processes to do this—with new processes to encourage these behaviors—will retain more employees and have higher employee satisfaction ratings.

Traditional methods of innovation

Business processes that support innovation can yield a competitive advantage. Traditionally, companies focus on product innovation for business success, but to truly foster innovation, companies should also expand beyond traditional methods of innovation to include other things.

These could include marketing innovation, revenue model innovation, and challenging the status quo with new processes at an organizational level. Economic growth is spurred by creative ideas and technological change. This may be easier for new businesses, but innovation means that even existing products should be rethought.

Companies like Apple rethought about delivering music, Internet and a phone to consumers. Rather than just copying existing MP3 players, phones or web browser technologies and devices of the day, Apple reinvented what it means to deliver all three together in a way that few companies could. They called it iPhone. This radical reinvention-type thinking was a key element that challenged the basic research other category leaders were touting at the time. But not every companies needs to be so radical.

Creating new value through innovation

Creating new value for customers through offering product or service improvement is an important part of innovation work. Products that offer incremental innovations can dramatically improve a company’s performance both financially and culturally. Business innovation helps employees feel excited, as well as customers being happier. But what is ‘new value’? It is when a customer experiences more than what they received before, or more than what competitors offer, and can be simple in execution, cost or delivery.

For example, a company that offers phone support to other businesses had budget limitations, but was able to increase its market share and long term success using artificial intelligence improvements which customers valued. The new innovations, using AI, made a meaningful impact and offered new solutions and new technology that helped the company create differentiation and growth acceleration.

Supporting workplace innovation or organizational innovation

Creating a culture of innovation in business can start with business model innovation. It may tap a company’s innovation resources, but if it is a sustained effort offered through ongoing training, bonus, company visibility or rewards, the chance of success is much higher.

According to Boast research on this topic, business leaders suggest that workplaces that drive innovation have a number of possible support areas, including promoting and highlighting innovation, rewarding teams, promoting the innovation process, highlighting customer uses of innovation, and understanding the return on investment (ROI) of innovation.

Source: https://learn.boast.ai/hubfs/Boast%202022/Boast%20Innovation%20Report_NEW_K.pdf

Disruptive innovations

Any innovation that challenges how things are delivered, sold, offered or done is disruptive innovation. These could include:

  • New supply chain offerings, analytics, processes
  • New transportation systems, delivery, visibility of routes
  • New process innovations or organizational innovations that impact the core business
  • New technologies
  • New internal processes
  • New product innovation
  • New tools (Top SaaS or software tools that are already invented may not be innovative of themselves but may help your teams become more creative in their thinking along with more productive with their time)
  • New industry model innovation

Innovative thinking

Data scientists, engineers, and creative teams all are natural innovators. Some in the business world even track the global innovation index to compare their company and against others in their industry.

  • A formal company innovation program can support innovative thinking and can reward with money, time off of work, or celebrations for individuals or teams. These programs allocate resources to support more innovative solutions in the market.
  • Types of innovation and creating more innovation can also be driven by customer advisory boards or customer research conducted using simple survey tools or your marketing department.

Funding Innovation

Most organizations or small businesses have a market that they serve that is well understood through research and years of selling to target customers. To fund a culture of creation, many leaders will line-item R&D expenses and hire staff specifically for that. They also utilize R&D tax credits offered through government programs. Companies such as Boast help business to maximize their R&D tax credits. Grants could also be an option. Small business loans, funding or venture funding are usually predicated on some kind of improvement to a product or service that will spur growth and advance a company’s place in their market. The types of new things that are funded depends on a solid business plan or current financials and execution against those goals or measures.

Driving faster innovation in business

Tom Freston, Co-founder of MTV, said, “Innovation is taking two things that exist and putting them together in a new way.” For any business to drive this type of thinking, it needs to be measuring innovation and reporting back to employees on its success. Innovation helps companies be sustainable in a market, and the better a business innovates, the stronger chance it has to survive.

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