The need of innovation- Why do startups and corporate firms need to innovate?

In this fast moving generation of technology, there is a very high priority involved with companies consistently innovating. Corporate firms have started taking the more agile approach as startups, setting up new ventures, research teams or acquiring startups to foster the power of innovation. McKinsey mentions that 84% of interviewed executives believed innovation to be important to business strategy and growth. A majority of 80% believed that business models are at risk.

According to Deloitte (2017), by 2019, innovation expenditure of German economy will reach 175 Billion Euros. Some companies have taken the initiative to define their innovation strategy to help them stay innovative, and creative.

The first step in being innovative is to understand what innovation is. According to Baregheh, Rowley & Sambrook (2009), “Innovation is the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace.”

GE Global Innovation Barometer (2018) shared that Germany and UK have seen an increase in larger corporate companies driving innovation. Technically majority of the businesses are trying to be creative and innovative in order to maximize their business & market share.

Before understanding how can corporate entities or startups innovate, it is important to understand why a need exists to innovate. Companies can innovate for multiple reasons including

Solve Business Problems
Business Growth
Have the Competitive Advantage
Customer needs and wants
Business survival

1 > Solve Business Problems:

The first reason to innovate is to solve additional or complex problems that the business is having. Innovative methods and techniques can help your business tackle problems using traditional or creative ways to find solutions to your business. This effects all stakeholders involving employees, company boards, customers, and the service/product.

A very simple example could include; a software company that delivers high quality end-to-end solutions, they want to optimize their development process such that it helps them internally. One recommendation the team comes up is using a hybrid model of SCRUM and KANBAN instead of using a single agile method to improve their project delivery. They start seeing an increase in productivity as well as helps them accelerate the business.

2 > Business Growth:

Business growth is critical, and innovation can help increase growth. Innovation can increase revenue, the services offered, decrease overheads costs meaning the companies can be more profitable. Business growth can also be in the form of improving the existing product/service line or introducing a new product/service line to bring an additional revenue stream.

Startups are a good example of innovation. They tend to innovate, and build scalable business models from a simple problem. Transferwise, started from the founders wanting to send money across borders. The idea was getting the money instantaneously without paying hidden fees, no waiting, or stress and currently Transferwise is a billion-dollar business and growing massively.

3 > Have the Competitive Advantage:

By utilizing innovation, your business can become much more competitive. Regardless of the industry, you can always find ways of innovating and standing out from your competition. For example, if you have a SaaS (Software as a Service) platform for financial services, you can offer a new feature that your competition does not have to make your product unique.

This can eventually increase your market share and profits. In the example of the SaaS application, the company offers an additional feature X that will help customers get rid of a problem they are struggling to solve. The customers would be glad they are getting feature X, and they would become a marketing channel as well. The customers start sharing the word with other people, and eventually leads to an increase number of customers and higher revenues.

4 > Customer needs and wants:

With passing time, customer wants convert into needs. If a particular solution does not consistently give customers with newer features, the customers might look for other solutions. The most important point is thinking why the customer uses your product/service. The answer is simple, it helps them solve a problem, and their problems are consistently changing. There is a consistent change in technology and the way businesses are operating, which leads to business requirements of products/services consistently changing. This implies understanding that what are the wants and needs of your customers, and delivering what the customers would like.

5 > Business survival:

One of the most important reasons, a business needs to innovate is to survive. If a business stops innovating, the product/service become obsolete due to technological advancements or market shift. The business will eventually close. Therefore, a very strong reason for businesses to innovate continuously.

Being innovative is a process, and requires a lot of continuous improvement in terms of business processes, product/service improvement. However, the return of being innovative can be massive as seen from the reasons above. Innovation is a tool that your business can use to improve customer experience, have the competitive edge, and a unique value proposition.

Does your company say if there is a need to be innovative? If yes, what innovative techniques is your business utilizing or how are you differentiating?

References:

Baregheh, A., Rowley, J., & Sambrook, S. (2009). Management Decision. Towards a multidisciplinary definition of innovation, 47(8), 1323–1339.

Deloitte. (2017). The Renaissance of Innovation | The Deloitte Innovation Survey. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/de/Documents/Innovation/Datenland-Deutschland-Studie-Renaissance-Innovation-Executive-Summary-English-Deloitte-2017.pdf

GE and Edelman Intelligence. (2018). GE Global Innovation Barometer 2018. Retrieved from https://s3.amazonaws.com/dsg.files.app.content.prod/gereports/wp-content/uploads/2018/02/12141110/GE_Global_Innovation_Barometer_2018-Full_Report.pdf

McKinsey & Company. (n.d.). Growth & Innovation. Retrieved from McKinsey & Company: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/how-we-help-clients/growth-and-innovation