Innovation – Everything you need to know

If you’re an ambitious business looking to scale up, enter new markets, or bring a new product to market, then innovation could be for you. But with so much noise around innovation, it can be intimidating. Is it for you? What is and isn’t innovation? How can it help your business? 

What is innovation?

Innovation is hard to define as it means a lot of different things to a lot of different people. It also goes beyond what some may think of as traditional innovation: new technology, new gadgets, engineering solutions, widgets that you can patent. Lady Barbara Judge, chair of the UK Pension Protection Fund, sums it up nicely: “Using something new, or something known, but in a different way, different time or a different place.”

Crucially though, innovation is about creating value for customers by doing something different or in a different way. Both are important for businesses as they need to be doing something that isn't "business as usual" or that someone else is already doing ("me too" products), but it also needs to be valuable for the customer as this is what creates sales!

What isn't innovation?

This can be quite a controversial topic, particularly when considering that innovation has many definitions. Applying the principle that innovation creates value for customers by doing something different or doing something in a different way creates two questions:

1. Are you really doing something that no-one else is doing?
2. Are you creating value for a client in a way that they currently can't access?

Unfortunately, this isn't as simple as recreating a business in a different location. There must be something novel and new. Difficulties arise when looking at business model innovation - is offering the same range of products and services as competitors but offshoring the work to reduce cost an innovative approach? This all depends on the business and its offering.

It's important here to remember that ideation (the creative process of coming up with new ideas) is not innovation if the eventual commercialisation of the product is not borne in mind. Does your idea have commercial potential? Have you thought about the eventual business model that will support it? Have you fully explored customer needs to make sure that you are fulfilling an unmet need? History is littered with the remains of products that never quite made it – remember the likes of Google Glass, HD DVD, or the Facebook phone? 

How do you innovate?

Much has been written on innovation and the process of innovation. While too much to reproduce here, there are a number of key points:

1. Generate ideas but make sure that you have a rigorous process for selection of which ones to take forward for further exploration. Understand your business strategy and how potential new products or services fit within this.
2. Have a culture of innovation in your business - everyone who works for you should be empowered to come up with ideas. This could be from customer interaction, spotting problems or enhancements on current products or just that lightbulb moment. 
3. At the outset of any innovation projects, or as part of the selection process, consider what the eventual business model for the product will be and how this fits into your current business. Also consider the value proposition to the customer - both the person who will be buying from you and the eventual end user! The Business Model Canvas and Value Proposition Canvas are invaluable for helping innovators work through this.
4. Consider the customer and test. Developed in tech communities, the minimal viable product approach uses the concept of developing the minimum product that will satisfy early adopters, gathering real world customer feedback and using this to improve and build your feature set. Whilst this may not be possible for all products, the idea of building something, testing it and seeking customer feedback is a good one.
5. It's OK to fail. Part of the innovation process is that some projects don’t result in a new product. This shouldn't be seen as a failure, it's part of the learning process, particularly when you are involved in R&D. It is however important to fail early and spot when projects just aren't going anywhere, or giving the required result, so that you can then move on to the next project and not burn money unnecessarily.

What does innovation achieve?

Innovation for the sake of innovation is not often a successful business model. At the start of your innovation process be clear as to what you want as the end result of your innovation strategy. Is it business growth? Turnover or profit? It could also be increasing your market share, reducing your operational expenditure, or simply remaining ahead of the competition. It could be that you see that your current market or sector is becoming stagnant, or has a number of new entrants and you wish to change your business model, revenue streams or enter another sector (to "pivot" in current terminology).

Whatever the reason for innovation, it's important to ensure that you have a clear business strategy and an innovation strategy that defines where your business is going and how innovation fits in. It then becomes clearer which projects to back, and which to drop.

What are the barriers to innovation?

There are many barriers to innovation and the eventual commercialisation of new products or services. A major one is often funding (either from grants or external investment) for staff costs and/or equipment, as innovation often isn’t cheap. Too often innovation is hampered by having to do the day job and generate revenue. Funding can give the breathing space required for both the early stage idea generation and investigation of feasibility and the, possibly more costly, product development and launch.

Having a sound understanding of your new product, service value proposition or the market need is key for successful innovation projects. If entering a new market, do you fully understand the market drivers and how you enter and sell there? If it’s a market that you already service, have you got a good understanding of where your new product or service will sit and how to achieve adoption? In both cases, a good understanding of the customer and how you will create value for them is key. In this case, consider the Minimum Viable Product approach, launch early without a full feature set and seek real-life customer feedback.

Intellectual Property is also a consideration for innovation, not only patents but other forms of protection (that may be less costly) such as trademarks and design rights. With IP, there will always be deliberation as to whether you actually need formal protection or whether first-mover advantage or keeping trade secrets will suffice. As with all IP, you need to consider competitors, what their barrier to market entry is and the potential cost of defending your IP.

Innovation should be thought of as a key component of any business growth strategy, especially if you are aiming to scale up, internationalise or transition into new markets. While potentially daunting at first, with the right help, your company can go from strength to strength.