In shrinking markets, more than ever, finding a competitive advantage is imperative to your SME’s continued growth. And rather than blindly chasing more customers, your competitors are realising business innovation is where the gains are to be made.
Keep reading to discover more about what business innovation is, and how you can use creative ideas to help your business keep its competitive edge!
What is business innovation?
Business innovation is defined as when a company introduces new or improves existing business model(s), processes, services or product offerings, towards increased revenue, profits, or market share.
Put another way, the goal of innovation in business is to add value to your company’s bottom line through identifying and implementing business processes that reduce costs, improve efficiencies or better meet your customers’ needs, across one or more of the following areas:
- What you produce: your products and services
- How you produce it: your operational and organisational systems
- How you market it: your go-to-market strategy
Why business innovation matters
Business leaders must continually seek to grow and scale. To achieve this, your company’s overall business growth strategy must be driven by innovation and new idea generation.
And innovative ideas lead to greater earnings. A recent survey by the Commonwealth Bank showed:
- Innovating one focus area resulted in an average improvement of $386,000
- Innovating two areas resulted in an average improvement of $392,000
- Innovating across three areas resulted in an average improvement of $763,000
(Source: Unlocking Everyday Innovation, CommBank Business Insights Report, Commonwealth Bank of Australia)
Furthermore, studies of high growth companies (businesses that show 20% or more annualised growth for 3 consecutive years or more) have shown that these firms consistently strive to innovate across at least 2 areas – so enabling them to generate higher revenues.
What happens when you don’t innovate?
Blockbuster Video. Need we say more?
4 Models of business innovation
Innovation in business goes beyond developing products and new technologies though. Here are just four examples of business innovation models that could create significant growth in your business.
Revenue model innovation
In revenue model innovation, businesses will redefine how, and from where, their sources of income are generated. Common examples of this can be found in digital technology industries where recurring or subscription pricing models are increasingly adopted in favour of the more traditional singular transaction of old.
Microsoft Office, is a great example of this, a product historically upgraded by businesses every few years, and is now a (rebranded) software-as-a-subscription service, Microsoft 365.
Indeed, many innovative SaaS businesses are around today simply due to this model and the flexibility it allows them to create, develop and iterate new ideas quickly to stay ahead of their competitors.
Business model innovation
Innovation of a business model is perhaps the most all-encompassing strategy within a company, and will likely include major process innovation, possibly alongside a reinvention of the whole company’s core business.
An example of this may be energy companies that have traditionally focused on fossil fuels, who are now abandoning them in favour of more climate-friendly positions.
Industry model innovation
Disruptive innovation of an entire industry takes some serious innovation and even risk-taking.
Industry-level business innovation examples include businesses such as Uber & Lyft, disrupting the taxi cab industry, or the electric car manufacturer Tesla, with its direct-to-customer sales model.
Both of these examples caused significant disruption to the point the incumbent industries resorted to political lobbying to try and regain their market share.
Product model innovation
Creating and introducing new products and services, or refreshing and relaunching an existing product line is perhaps the “low-hanging fruit” entry point for introducing innovation.
Examples of product innovation include lightbulbs, computers, or the iPhone you are perhaps reading this article on! Each of these innovations addressed a pain point, whether it was one its users were aware of at the time or not.
Lightbulbs replaced oil lamps, greatly reducing the risk of fires, and computers are now ubiquitous in offices, enabling business across the globe, while Apple’s iPhone was the perfect marriage of communication and portability.
So which model of innovation model is right for you?
Whichever of these business models (or combination of) your SME chooses to implement, your strategy must be approached with a holistic view.
Like the so-called Butterfly Effect, change in one area will impact another, so be mindful (and listen to the feedback) of your internal stakeholders – your sales, marketing, supply chain, and manufacturing departments – when it comes to deciding which areas your business focuses on.
As innovation expert Mohan Sawhney points out, viewing innovation too narrowly “blinds companies to opportunities and leaves them vulnerable to competitors with broader perspectives.” (Source: “The 12 Different Ways for Companies to Innovate,” MIT Sloan Management Review)
The often overlooked factor of an innovative business strategy
Of course, while feedback and the ideas of your internal stakeholders are crucial, so those of your buyers are critical, and any steps towards introducing new ideas must be buyer-driven.
This is especially true in B2B markets when targeting mid-size and corporates, as buyers and users are not the same, where there will often be a “buying group” of decision-makers – who may not even see or use your product or service.
In these instances, your key to success, and growing and scaling your business, is to continually identify ways to deliver value to these decision-makers: look for ways to tap into their needs, their challenges and their strategic priorities.
By adopting this buyer-driven approach you stand to become a trusted advisor to your business partners, potentially leading to longer-term relationships and better revenue opportunities, further driving the growth of your business.
Identifying innovation opportunities for your business
So now that you know more about what business innovation is and why it is important to the growth of your SME, let’s take a look at how you can start identifying and analysing innovative opportunities and strategies. Here are 5 approaches to innovation for you to start creating new ideas:-
1) Copying analogous companies
Examine other innovative companies to identify what they are doing to move their businesses forward. Consider companies that are:
- In your industry, but operating in other geographic markets
- Outside of your industry, but are recognised for their innovation.
As you observe these other businesses, look for
- What kinds of innovation drove them to success?
- Whether those innovations applicable to your industry?
- If you could replicate them to create a market opportunity?
2) Observing economic and industry trends
Following the latest trends may sound like something from the realm of a social media influencer, but trends are trends for a reason. A keen eye from an innovative company could identify a surging trend that leads to new revenue opportunities new partnerships and higher profits. Make sure it’s not one of your competitors!
Observing economic trends, for example, may lead to new business models that help companies reduce overheads: In the current economic climate, rising energy prices are a hot topic. Perhaps you have the capability and resources to develop an innovative product or technology that helps reduce power bills for SMEs.
Do be prepared to step outside your bubble though – the best ideas for innovating a new technology or problem-solving business model may not be from your own industry! Read, watch and listen to people, perspectives and publications from beyond your own market.
3) Reach out to “extreme” customers
Gather feedback from your existing channels and customer base who:
- Love or hate your company
- Have stopped doing business with you
- Have never bought from you
By listening to these customers, you could potentially discover:
- New and improved products or service offerings
- New support or ‘value-add’ options
- New processes to enable better customer service
Key questions to ask during your discussions include:
- What key opportunities, problems or threats are they currently facing?
- What will you need to be doing differently to overcome the challenges in your market?
- What desired change would you like to see in the future?
4) Identify and address buyer frustrations, concerns and complaints
At some point, your business customers will likely have some issues or frustrations with your products, services or processes. For instance, the capabilities you promised aren’t being delivered at the speed, quality or service levels they require. Or perhaps decision-makers are seeking additional advice or reporting that you are not providing.
Being easy to deal with is a key requirement in B2B. When a customer expresses frustration with the provision of your services, ensure their ideas and feedback are captured and handled as an opportunity to improve.
Business innovation as customer solutions
If you’re still stuck for ideas to innovate your business, contemplate creating these “customer solutions”:
- Assess if you can offer any of your existing services digitally (to reach a wider audience).
- Could you create new services based on your company’s existing resources and strengths? (And create more value for your customers.)
- Consider creating product or service packages to become a “one-stop shop” across multiple areas of provision. (Again, more value for your customers.)
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While many SMEs’ first thoughts on business innovation will focus solely on creating new products or leveraging new technology, it’s clear there are many more layers – and opportunities available when you start digging deeper.
Whether a new idea to disrupt industries, or simply a process enabling your B2B customers to save time and money, creating value through business innovation should absolutely be core to the continued growth of your business.
Now you have a better understanding of what an innovation business looks like, what will you innovate first?