If It's Not Just A Buzzword, What Is Business Innovation?

Published 07/04/2020
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We hear the word all the time. Innovation. It's like we can't move forward without it. But hearing the word and repeating it doesn't mean a great deal. If people are throwing the word around all the time, then we feel like we are missing out. And FOMO is a powerful thing. So, what is business innovation?
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And why does it make a difference to what we do? Let’s take a look in some detail at what is business innovation exactly.

For a business, innovation can bring some pretty exciting benefits, such as higher profitability, lower staff turnover and potentially awards. But we need to make some important distinctions as we define the phrase business innovation.

Innovation Versus Invention

The traditional view of innovation is easily confused with invention. We think of someone coming up with a new object. Inventors are seen as odd people who sit and think up weird and wonderful ideas and bring them to life. Innovation in business can look a little like this, but without the instant idea conception. Innovation often comes from research, from trying things out and from getting it wrong a few times first.

Business innovation is where a company introduces a new product, a new service or a new process that is designed to bring about a positive change in their business. This includes both starting a new idea from scratch and improving something they already do. The end goal of business innovation is to create new value in the company and then boost productivity and growth. As a business we always want to get better at what we do. Scraping along doing the same thing can cause a business to stall and even fail.

Business innovation matters because it adds value to a business. That’s the bottom line. If a business constantly improves and innovates then they thrive. Innovation opens the doors to new opportunities all the time. This could be with new products, new markets or just selling more to existing clients. An innovative company will find that they get the most out of their existing channels as well as finding new revenue opportunities. All of this leads to higher profits, which is ultimately what we are all in this for. Innovation when carried out successfully will also lead to competitive advantage over the rest of the market. People buy the latest products and consume the latest services. An innovative company is the one to provide these.

Theory is one thing. We could spend all of this article letting you know what the textbooks say. And you would be slightly convinced but probably not enough to make innovation an integral part of your business. Therefore, when we look at the question ‘what is business innovation?’ we need to look to the real world. There are many examples of successes and failures in the business world that we can view that will show you what difference business innovation can make.

LEGO And The Collaborators

This toy is now globally successful and can be seen in shopping centres across the planet. But it wasn’t always that way. The Danish brick toy was devised back in the late 1940’s and experienced success in the decades following that. Of course, it was started with wooden blocks and the transition to plastic didn’t come until the 1960’s. A warehouse fire was the catalyst for the company to look at their production techniques and decide that plastics were the future.

Lesson to be learned from this – it can take a catastrophic event for a business to take stock and look at the way they operate. We suggest you don’t leave it until something this drastic happens to consider innovation in your business.

The business grew from the 1960’s until the 1990’s where it faced a slump in sales. One of the main issues was that their target market was always growing out of the product and they had to replenish this market every few years. It may have been that parents turned to LEGO with their children. But there was a large gap in time between people playing with LEGO as a kid and then becoming a parent themselves and passing the passion down to the next generation. LEGO needed to work hard in terms of marketing to find the customers to replace the ones that had got a little older and moved on to play on their BMX or with a Rubik’s Cube.

The toy maker made innovation one of the core principles of the company. The top tier decided that they were going to innovate their way out of the malaise. They adopted open innovation whereby people who didn’t work for the company could put forward design ideas. Invariably, these people submitting the ideas were older, more mature. So, they submitted ideas that would appeal to a wider market than the one LEGO had been aiming for.

Commercial tie-ins also boosted the LEGO brand and made it more appealing to a market that didn’t grow out of the brand. You can now buy LEGO sets that run into the hundreds of pounds. The target market is collectors and there is a vibrant online scene of people who collect and modify LEGO sets.

When you think of the question, ‘what is business innovation?’ you’re forgiven for thinking immediately that it involves a new product. In the case of LEGO, it was a new way of working. It’s probably harder to measure directly, but changes in culture make a huge difference to the fortunes of a business.

Headspace Looks To Connect

The smartphone has brought massive changes to our lives. We can now connect with people globally in an instant. Many commentators attribute the huge success of smartphones to the idea behind the app. And many apps have made their inventors incredibly rich. Coming up with an app that sells in the millions can generate stacks of cash – just ask the developers behind Angry Birds or Tinder (not that we would now much about that app ;) )

Headspace is another app that has captured the hearts and minds (literally) of people across the globe. It was devised as an app to manage events, but quickly transformed into something that helped people with guided meditation. It gives you the opportunity to turn your attention inwards. But the company was always turning its own attention outwards. Having a successful app can mean a lot of headaches with constant upgrades, dealing with bugs and customer support. When the app itself is making money then you can get drawn into servicing that client base and making that the sole focus of a company. After all, there is a great deal of innovation there, looking to the future and developing the app. The demand for Headspace has morphed into something that is now downloaded in more than 190 countries across the planet. This means translation, meeting legislative requirements in different jurisdictions.

But the founders of Headspace were looking to spread the word in other ways. Taking your device with you wherever you go means you can take Headspace in your pocket to the most remote parts of the world. Their large and growing subscriber base was a profitable way to run a business. They looked to diversify their market. Headspace have partnered airlines and airports to bring some of that meditative calm to a busy and sometimes hectic part of modern life. The airport is filled with people moving in opposite directions, with queues and a little dose of chaos. There are many people who find the whole experience stressful, and that’s before they even set foot on an aeroplane. Fear of flying affects up to 25% of the population. This means that there is a great deal of people up in the air that need a little calm in that moment of their lives. The idea that Headspace had is that when their app delivers some calm at a time when it is really needed, then the one-time airport users will become subscribers and add to their customer base.

This innovation was linked to marketing and providing connections to other businesses. While other apps were more than happy with their millions of subscribers, Headspace looked to innovate in terms of how they could help people. That is one of the founding principles of the company. According to their website, their goal is to “teach meditation and mindfulness to as many people as possible.” A pretty lofty goal but one that is furthered by their recent tie-ups with the travel industry.

Xerox And Their Inventions

Xerox have been a successful company for decades. Let me rephrase that. They were a successful company for decades. For people of a certain generation, simply utter the word Xerox and it brings back memories of photocopiers that whirred into life and were an everyday part of business. The company made huge amounts of money from selling photocopiers. They sold photocopiers to millions of companies across the globe. Business seemed to work off the back of a Xerox. And the company knew it. They made so much money from their copiers that they didn’t much bother with anything else they invented.

That’s right. The company still had a research and development function. They out money into innovating new ways of doing their own business. Within this time, they came up with

  • The computer mouse as a way of controlling the icon on the screen
  • A windows/icon based interface for using with a PC
  • The laser printer

And they gave all of these away. Rather than patent them and make money from these marvellous inventions that still abound the world to this very day, they gave them away. Making stacks of cash from copiers meant that they didn’t feel the need to monetise these other ideas. They were just part of the process of selling copiers as far as Xerox were concerned.

In essence, Xerox’s generosity (or lack of business acumen) fuelled the success of Microsoft, HP and Apple. While they were working, they never imagined a future world where faxes and photocopiers would be outdated.

This highlights one of the most important distinctions of innovation. It is to grow a company. Making up new things and giving them away is philanthropic invention rather than innovation. If you spend your company’s cash on making something and then you give it away, then this can be seen as giving to the world. But if at the same time, your core business is being eroded then this is commercial suicide.

Xerox didn’t future-proof their business. They thought that people would buy their copiers forever. There are two main flaws in this approach –

  1. They assumed that they would never have any direct competitors
  2. They also assumed that their technology wouldn’t be superseded

Both of these can be summed up with the word complacency. If we ever get complacent in our business, then we are headed for trouble. That’s when the competition bites; it’s when the disruptors disrupt.

Seeing what you do as without competition is a dangerous view of the world. It’s not that you need to always be looking over your shoulder, but you should be aware of what could be just around the corner.

Polaroid And The Instant Image

Anyone of a certain age will remember their first contact with a Polaroid camera. Rather than taking an image and waiting a week or so to collect the photographs from the local chemist, you could see the photograph immediately. The world changed. We thought that we would never wait for our images again.

And this was the same in the business world. There were professions where an instant image was highly important to drive efficiency. Insurance loss adjusters were one such profession. Their reports relied on images to support their findings. Waiting the best part of a week for these images to be processed slowed the whole procedure down. And they didn’t get paid until the report was administered.

The Polaroid camera was their saviour. It allowed instant images, turning the processing of the necessary paperwork from a week to a few hours at most. It was a godsend for professionals like these. It was an essential element of their job role.

And the average person on the street loved the immediacy of the Polaroid experience. Having a photo on your hand straight away (with the unnecessary Polaroid shake included) meant being able to check whether it was right. Those dreaded stickers on the front of an image to tell you there had been overexposure or some other issue were now null and void. You would know within a minute or so whether the photograph was right or not.

Polaroid could see no future where they were anything other than an indispensable tool for people across the planet. In the 1970’s it accounted for around 15% of the US market for cameras and 20% for films. They employed over 21,000 people.

It wasn’t for the lack of research and development that Polaroid failed. They invested heavily in digital photography, seeing some kind of future for it. But, even when they were developing a digital camera, the leaders of Polaroid believed that everyone would want a hard copy of each and every image they took. The rest of the tech world hadn’t quite caught up with digital cameras at the time, so the storage capabilities that we have even on a smartphone now were not achievable on the highest end computers of the day.

Polaroid executives were taken aback when they learned people didn’t want or need to print their images. CEO Gary DiCamillo said, “"It's amazing, but kids today don't want hard copy anymore. This was the major mistake we all made: Mac Booth, Gary DiCamillo, people after me. That was a major hypothesis that I believed in my marrow that was wrong."

They innovated in some ways but didn’t get it right, following through their research in digital to a wholesale acceptance that it was the future. They still had a fairly lucrative business selling their traditional camera and the films that went with it. It felt like they were sounding their own death knell if they abandoned that and went lock stock and barrel into digital photography.

But it was going half-heartedly into the arena that eventually saw the end of Polaroid. They filed for bankruptcy in 2001, signalling the end of decades of successful trading.

What Is Business Innovation And You?

We’ve looked at the definition of innovation and what this means in theory. For any business, their aim is to add value, to be a viable proposition going forward and to make money. And we break down the financials of our operation into two things – income and expenditure. Reading about business there is a great deal of emphasis on controlling expenditure. Cut out unnecessary items. Strike the best deal you can. Lower overheads. And we see all forms of expenditure as items that are robbing us from our rightful profit.

But if we don’t speculate, we don’t accumulate. Look at Xerox. They performed research and development but only to make their life easier. They didn’t protect any of the work they put in and left it for the likes of Microsoft, Apple and Hewlett Packard to turn it into profits. Vast profits.

What is business innovation? It is the kind of things that LEGO and Headspace did and are still doing. They have looked ahead and seen gaps in the market. They have changed their way of working to ensure that they remain viable in the current marketplace. And they have future proofed their business too.

But if these real-life examples don’t sharpen your mind, maybe some cold hard cash could. When we ask the question what is business innovation, we think of spending money on something that might or might not work. But the UK government has seen the risk involved here. And they have decided to reward companies that take a commercial risk with all of this. If you are involved in research and development, then R&D tax credits could be sat waiting for you.

They are designed to reward companies that take some kind of risk with research and development, with business innovation. You can apply for R&D tax credits if you have spent cash in improving processes or products over the last couple of years. And also, if you have brought out a new product, embedded a new piece of kit or developed software.

What is business innovation? There is a fair chance that you are already doing it.

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