Innovation is the Heart of Growth

The rate of change in markets and technology is accelerating the speed at which companies must adapt. There are really only three responses to serving evolving markets—ignore the change or react to the change or be proactive and lead the change. You might be surprised how often companies think they are operating at a greater level of response than they are. Common comments from companies that don’t change are “We are in a slow-moving industry so that it won’t impact us any time soon” or “You don’t understand the complexities required to change.”  Reactive companies are often trying to stay up with competitors who have forced their hand, adding a new product or cutting price. The challenge is that often when reacting, the business doesn’t change the underlying model such as who they serve or the operational model that produces profitability, so those changes may very well be investments with no payouts.  Those who lead change understand that external forces are changing whether we want them to or not. Our only real opportunity to significantly benefit from change is to play offense and be able to direct the change in a manner that makes sense given the capabilities of the organization. That includes making changes to the underlying business model, carefully vetting alternative solutions, identifying needed capabilities, and reallocating resources. In other words, going forward, innovation is going to be key to growth—especially the kind of growth that outstrips the market average.


Where does innovation come from?

By definition, innovation is something new or a change to something you are currently doing. It inherently implies it is a better solution. If you want to up your innovation game, you might be wondering where does innovation comes from? Many times people ask the customer what they want. While on the right track, most people can’t imagine something they haven’t experienced. They can tell you what they do and don’t like about what they use now. But they are unlikely to invent your next product. Henry Ford said, “If I had asked people what they wanted, they would have said faster horses.” But that doesn’t mean the head of sales or the head of product development knows the answer either. Understanding customer issues, such as knowing what they don’t like needs to be understood from a psychographic perspective, not just a tactical one. That provides the key to understanding high-potential innovations. For example, Calloway invented the Big Bertha by asking why don’t people play golf instead of asking how to get more people to play golf. People were afraid of being embarrassed and “whiffing” hence the solution—bigger club heads. Technological capabilities fuel many of our current innovations so understanding capabilities is key. It is changing how customers buy, how companies work, and the skill sets needed.

According to Wonderslist’s Top 10 Recent Innovations That Have Bright Futures some of the top ten items are about automating our lives to add convenience (driverless cars), changing how we immerse ourselves in experiences (bezel-less cell phones which increase the screen to body ratio, virtual reality), and replace or enhance the human function—physically or cognitively—through artificial means (robots, artificial intelligence, neuromorphic chips). Many of these are science or technology-led. But sometimes we see companies created from an idea of a disgruntled customer that says, “I can’t find ‘xyz’” like the Honest Company which makes natural baby and beauty products, or “why do I have to live with that limitation?” such as natural toothpaste that is tasteless, until Hello Toothpaste came along.

Every year your organization should be asking, what most frustrates our customers about our product category? What if we led the charge to fix it? What would we do if we were trying to solve the problem instead of selling the products we make? It requires us to put aside our historical perspective and hard-earned experience to listen to the market as it is now.

What does innovation include?

According to Viima, in an article titled, The Importance of Innovation—What Does it Mean for Businesses and our Society? innovation is defined as “an idea that has been transformed into practical reality”. For a business, this is a product, process, or business concept, or combinations that have been activated in the marketplace and produce new profits and growth for the organization. Further, the article states that according to McKinsey 84% of executives say that their future success is dependent on innovation.

It is important to realize that transformative innovation doesn’t have to be customer-facing but often, even if it is not, there is an impact on the company’s ability to satisfy customers by increasing the speed, quality, or accuracy, or reducing the price. These might be innovations in operations, processes, or people (the kind of people we employ or the culture we cultivate). Innovation applies to every facet of the business. The bottom line is that for innovation to add value it must impact the company’s ability to provide a stronger value proposition to the customer and/or a financial benefit to the company.

How do you embed innovation in your culture?

Innovation should be a value of every culture. I have heard from some “we aren’t known for innovation” but that doesn’t mean you don’t need it. In many cases that may mean they think of innovation as something different than described here—a narrower or more significant change. We are advocating that changes that are driven by the market and enhance the value proposition are innovations.

It is difficult to change the culture overnight to get everyone to believe that it is now an innovative culture. The first “no, that is not how we do things” in response to suggestions will shut things down quickly. Three things are necessary:

  1. Develop a process to evaluate innovations on a regular basis. Encourage ALL employees to submit ideas. Have categories for ideas—process, operations, products, etc.
  2. Establish an objective source of market data to help select ideas. Ideas need to be well received in the market—both relevant and something customers are willing to pay for that solves problems they have today. Don’t assume that your current customers have the answers. Cast a broad net.
  3. Set goals for innovation that start moderately and build over time. In the first months, set a goal for the number or value of adopted innovations. Over time, increase them in scope and scale. Hold people accountable for at least making suggestions in the early years and teach them how to vet their idea so it is more of a business case than a wish list. Reward the try as much as the success.

Are you an innovative company? What would it take for you to change that perception internally so you can deliver more effectively externally?

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