Business innovation is a hot topic these days, especially in the age of disruptive forces like the COVID-19 virus. This latest disruption has impacted small and medium sized manufacturers, startups, and entrepreneurs. And many are looking for new products, services, partnerships, and business models to hang on to for survival, or to take advantage of new opportunities to grow or to replace revenue lost to COVID.
As a result, business innovation is more critical than ever in driving new ideas and products into a highly competitive market. But exactly what is business innovation? And how can small manufacturers, startups and entrepreneurs benefit from it?
Business innovation is the process of adding new products, introducing new ideas or changing methodologies and processes to add value to the organization. It is an investment like R&D but is a more holistic approach that covers R&D as well as market analysis, financial health, system performance, product performance and new opportunities.
Types of Business Innovation
How companies can take advantage of business innovation to add new value depends on the strategy and model adopted. There are three basic types of business innovation that companies can pursue:
Product Innovation – Companies use product innovation to add, enhance or discontinue products within their portfolio that are part of their core business offering. It may mean adding new versions or variations of existing products, rolling out new iterations of older popular products, or creating entirely new offerings within those spaces. The product innovation model may also include things like tightening supply chain performance, discontinuing underperforming products or seeking new sales channels.
Business Model – Also called process innovation, in business model innovation companies review their market position and processes to find new ways to sell their products. An excellent COVID-related example would be companies who started selling direct to consumers online to replace losses or grow product categories impacted by lower retailer sales. Companies may also automate with new software or enter partnerships with other companies to co-offer or co-brand their products.
Industry Model – This type of innovation is industry focused. Again, using the recent and massive disruptions brought on by COVID-19, companies using this model may look for new industries to enter that may allow them to use their equipment and resources for new products, such as breweries and distilleries who converted production to hand sanitizer and 3D printing companies who shifted resources to PPE for face shields and masks.
Small and medium sized manufacturers can benefit from business innovation by analyzing their core products, understanding their market, and adopting a model that best suits their core competencies.
The Importance of Making Time for Business Innovation
There are many reasons to make time for business innovation. These include:
Planning for Disruption – Data has shown that 88% of Fortune 500 companies in 1955 have disappeared, meaning that disruption often leads to extinction for companies that don’t – or can’t – innovate. And while devastating in scope and impact, COVID-19 wasn’t the only disruption to occur over the last 20 years. Others, with more positive connotations, include the impact of additive manufacturing (3D printing) on production and product prototyping, and the introduction of initiatives such as the Industrial Internet of Things (IIoT) and industry 4.0. Because of this, small and medium sized manufacturers now have access to the same type of automation and data tools as do large companies with on par cost and ROI. Making time for business innovation allows companies to take advantage of the available tools and help plan for and succeed through coming disruption.
Meeting Higher Customer Expectations – As technology has made mass customization and fast-to-market product development a reality in many industries, customer expectations have risen. Today, customers expect innovation and factor it into their purchasing decisions, with 84% stating that innovation is important in their purchasing decisions. One example is in the electronics industry where 83% of consumers are willing to pay more for innovative products, and 15% are willing to pay as high as 40% more. This dynamic has also repeated itself in the food and beverage industry where innovation in “organic” products have given rise to higher expectations.
Building Innovation into Your Culture – Small and medium sized manufacturers have an advantage over larger companies in that the layers of bureaucracy and redundancy present. Because they are more agile and flexible small companies can use this to build a stronger culture for innovation. One study by McKenzie found that 94% of surveyed senior executives consider teams and corporate culture to be big drivers of innovation. Small manufacturers who take advantage of their lean and agile structure to build innovation into their culture have a better chance to replicate that innovation as they scale.
Today, 84% of business leaders believe innovation is an important factor in their company’s growth. At the same time, almost as many consider innovation to be a risk to their current business model. With that level of awareness, and with future disruptions considered a given, making time for business innovation will open paths to new revenue streams, positively impact company culture, and provide agility and flexibility when disruption hits.
If your company is looking for mentoring, assistance in growing R&D efforts or fostering your business innovation efforts, The Henry Bernick Entrepreneurship Centre (HBEC) at Georgian can help businesses and entrepreneurs discover their potential and grow to build that innovation into their culture.