Innovations are often used to mark milestones in a company’s history.
For start-ups, it is commonly referred to as the ‘Pivot’ point. For SMBs, it often refers to the introduction of a new product or service. After the bluster of a product launch and marketing push, many companies have difficulty sustaining the initial spark and momentum responsible for the breakthrough. Where will the next big thing come from? Who is responsible for seeing it through? How do we get the idea from point A to point B?
Encouraging innovation is one thing, but managing it, is an entirely different beast altogether.
Innovation and the bottom line
Booz & Co’s Global Innovation 1000 report shows even the top companies have trouble keeping innovation on track. Only 25 percent of 1000 companies surveyed, feel confident their processes for idea generation and for converting those ideas into product development projects were highly effective.
The most important insight from the report however, is proof that the old adage of ‘1 percent inspiration and 99 percent perspiration’ is true. Overall financial success seems to depend more on companies being effective at idea conversion than at idea generation. Companies good at conversion consistently outperform their industry peers in terms of revenue, growth and earnings.
What’s the best innovation strategy?
What then are highly effective innovators doing differently? Unfortunately, there is no panacea or one size fits all approach. Depending on the innovation strategy adopted, companies typically relied on a range of tools and networks.
‘Technology Drivers’ adopt a philosophy that customers do not always know what they want and base their innovations on the latest advances in technology. While such an approach can potentially produce major breakthroughs, it also inevitably increases the risk of new products not always meeting market demands.
‘Market Readers’ focus on getting to the market as quickly and efficiently as possible, typically innovating from an existing core competency. They rely heavily on traditional market research and internal networks to determine which ideas to convert. Innovations thus tend to be of an incremental nature, as an improvement on existing products or as a fast follower in the market place.
Finally, ‘Need Seeker’ strategies rely heavily on direct customer observations and relationships, with a strong focus on collaborative testing of new ideas with customers, partners and suppliers. Ensuring relevance is a priority.
Companies using this strategy also often rely on internal ‘innovation champions’ to coordinate initiatives. Most importantly, the results suggest companies using this strategy consistently outperform both Technology Drivers and Market Readers financially.
Some practical tips for SMBs
- Innovation as a business function – innovation should be treated like any other business function and as such, measured against Return On Investment (ROI). This is especially true for SMBs who have limited resources to spare.
- Innovation as a team sport – a single pair of hands is often not enough to convert great ideas into new products or services. It requires collaboration, and SMBs who are serious about innovation should consider appointing an internal champion or at least a point of co-ordination.
- Source your strengths – look to leverage the natural competencies of your team. The sales team are natural Need Seekers, the marketing team are Market Readers and the IT team already base many decisions on technology developments.
- One direction – most importantly however, know first where you want to head. You can then align your innovation efforts, decisions and resources to that overall strategy, and not the other way around.