Reference:

Innovation: Key to Successful Business

ideas, inventions, patents
Credit: Light bulb idea image via Shutterstock

One of the keys to any successful business is being able to come up with new ideas to keep operations, products and services fresh. The process of bringing those ideas to reality is called innovation. While thinking up new ideas is one step of the process, businesses have a much greater task in trying to turn that into an actual product or service that will benefit customers.

In an article he wrote for BusinessNewsDaily, Fusion92 vice president of innovation Jacob Beckley said while innovation might have slightly different meanings depending on the industry, its core is universal.

"It embodies the improvement of something that has come before," Beckley wrote. "It is the evolution of convenience, efficiencyand effectiveness."

The companies that do this best, according to Beckley, are the ones that will ultimately have sustained success.

"In the vast sea of innovation, companies that take the largest risk, close the biggest gaps and identify the newest opportunities are rewarded with the title of true innovators and leaders by their consumers and peers," he said. "These true innovators are setting themselves apart from any and all competition."

 The majority of business professionals agree that innovation is critical to their success. A recent study by Accenture revealed thatmore than 90 percent of executives believe long-term success of their organization's strategy depends on their ability to develop new ideas.

Despite its importance, research also shows that most employees feel their organization isn't doing enough to foster innovation. The Accenture study found a decline in the satisfaction with innovation performance over the past three years, while a different by study by Deloitte Touche Tohmatsu Limited discovered that just one quarter of millennial employees think business leaders are doing enough to encourage practices that foster the development of new ideas.

The problem is that too many businesses are trying to develop new ideas in ways that aren't productive, according to author Maria Ferrante-Schepis, a veteran in the insurance and financialservices industry who now consults Fortune 100 companies. In an interview with BusinessNewsDaily, the Ferrante-Schepis argues that it can be hard to see a need and invent a way to fill that need when you've been inside one business or industry for a long time.

"You can't innovate from inside the [proverbial] jar, and if you aren't innovating, you're just waiting for the expiration date on your business," Ferrante-Schepis said.

In order to successfully innovate, businesses need to install the strategies that best fit their needs and goals.

Types of innovation

When trying to be innovative, businesses can choose from a variety of different strategies. Each offers advantages and disadvantages. Among the different types of innovation processes business can employ:

Open: Originated by Henry Chesbrough, a professor at University of California at Berkley and executive director for the Center for Open Innovation. Open innovation is when companies use internal and external ideas to help advance their operations. "Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively," Chesbrough wrote in his book "Open Innovation: Researching a New Paradigm" (Oxford University press 2006). "[This paradigm] assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology." Chesbrough believes open innovation is a more profitable way to innovate, because when done correctly it has the potential to reduce costs, accelerate time to market, increase differentiation in the market and create new revenue streams. 

Disruptive: Coined by professor, author and entrepreneur Clay Christensen. Disruptive innovation is when new products or services start out at the bottom of the marketplace but end up eventually moving up and displacing their competitors. According to the Clayton Christensen Institute for Disruptive Innovation, the "theoryexplains the phenomenon by which an innovation transforms an existing market or sector by introducing simplicity, convenience, accessibility, and affordability where complication and high cost are the status quo. Initially, a disruptive innovation is formed in a niche market that may appear unattractive or inconsequential to industry incumbents, but eventually the new product or idea completely redefines the industry." Examples of disruptive technology include the refrigerator being introduced as a replacement for the icebox and mobile phones being developed as a replacement for home phones. Both products were not highly welcomed when they first hit the market, but over time, as they improved on the original designs, the products eventually took hold with consumers.

Reverse: Reverse innovation is when products or services are developed first for use in developing nations. In an article for the Harvard Business Review, Vijay Govindarajan, author of "Reverse Innovation" (HBR Press, 2012) wrote, "at its core, reverse innovation describes solutions adopted first in poorer, emerging nations that subsequently — and disruptively — find a market in richer, developed nations." Examples of reverse innovation include dried noodles that Nestle developed for use in India that eventually became popular in Australia and New Zealand, and smaller format Wal-Mart stores, which originally were developed for use in Mexico, but eventually became popular in the United States as well.

Incremental: Incremental innovation is when companies make small changes to products and services to ensure they keep their spot in the marketplace. Rather than changing the products or services completely, incremental innovation simply builds upon what already exists. Examples of incremental innovation include men's razor blades, which started with one blade and now have three or four, and the automobile, which is consistently being updated with new features and technology.

Breakthrough: Breakthrough innovation, also commonly referred to as radical innovation, is developing completely new ideas and concepts that don't build off any existing products, servicers or operations. Often developed by research and development teams, breakthrough innovations often use new technology as a way to quickly climb to the top of new markets. Examples of the breakthrough innovations include the Internet and transistors.