Business Guide to Innovation

Innovation in business is about new ideas, products, services, marketing and distribution methods, but it’s also about the culture of an organisation. Success isn’t just about satisfying a desire in the market but also creating growth for that desire. So, what are the necessary characteristics of a business that will encourage innovation?

The Panel:

Sonja Bernhardt, CEO of Thoughtware, an IT company specialising in human resources services, and software development

Robert Dew, founder of consulting firm Coriolis and innovation lecturer at the Queensland University of Technology

Rowan Gilmore, CEO of the Australian Institute for Commercialisation (AIC)

Roger La Salle, creator of the La Salle Matrix Thinking method and author of several books on innovation, including Think Again: Innovate Your Processes and Harvest the Untouched Wealth

Lyndal Thorburn, managing director of Innovation Dynamics, a technology advisory firm

Drive innovation

Robert Dew: There needs to be recognition to innovate, a recognition that it’s worth it and almost a business’ only option.

Roger La Salle: All companies need to be a moving target. They need to constantly innovate their products, processes and services to give their customers a better offering to move them to a better place.

Lead on innovation

Sonja Bernhardt: The CEO of a business sets the tone. Leaders and managers should display both innovation and an appreciation of innovation in others.

Rowan Gilmore: Ensure the buy-in of company leadership. The AIC works with a number of companies wishing to innovate, but it takes committed leadership not to fall by the wayside! The board needs to have innovation firmly on its agenda.

Roger La Salle: It has to come from the top. A senior manager has to have key performance indicators so that innovation progresses, otherwise it won’t happen.

Create a culture of innovation

Rowan Gilmore: [Businesses require] a culture where it is acceptable for staff to try things in new ways, and where employees feel safe in pursuing innovation.

Roger La Salle: The process needs to be systematic and able to be embraced by people at all levels of the organisation. It it’s too airy-fairy or complex, they’re going to think it’s a joke.

Provide resources

Robert Dew: Make sure there is an environment where innovation is properly resourced–the time to innovate, a budget that can be invested in innovation, expert availability, help with implementation and someone who will help with getting innovation accepted within the organisation.

Rowan Gilmore: Assign the most viable ideas a budget and resources for further investigation and development. Actively project-manage the development process to ensure this ‘commercialisation’ phase is successful.

Capture ideas

Sonja Bernhardt: [Businesses should employ] genuine brainstorming activities where thoughts are not rejected as soon as they appear but captured, explored, expanded on, and valued for later analysis.

Rowan Gilmore: Formally capture ideas from staff, customers and suppliers, and external collaborators such as research organisations. Continuously review those ideas along axes of technical, financial, and market risk.

Lyndal Thorburn: I’d recommend regular whole-company meetings that address progress and provide input to development of new product/service concepts. There need to be internal systems so that ideas can be proposed by staff and considered within company strategy.

Install a selection process

Robert Dew: Innovation is not just coming up with new ideas but choosing the right one. Effectively it means you need to find out where you can get approval inside an organisation—in a normal chain of command, if I go to my boss and he doesn’t like it I don’t have any chance of moving it forward. Reinventing the Corporation (by John Naisbitt and Patricia Aburdene) recommends decentralised decision-making where there may be three or four internal investors who are actively looking for innovation in the company and have a reason to say yes.

Manage risk

Sonja Bernhardt: Risk-averse people have difficulty being innovative as the risk aversion blocks thoughts and rejects ideas before they have been explored. To borrow something from a PR campaign—and be non-innovative!—just do it.

Roger La Salle: You need a way to evaluate the effectiveness of the innovation. The biggest risk in business is market risk. If you want to lower the risk of bringing out new products and services you need to find what’s doing well and go back to the market with something better than what people are buying.

Recognise and reward innovation

Sonja Bernhardt: Recognise and reward people’s great ideas—any idea that thinks differently, considers different angles, views—not just the ‘winners’ [of the selection process].

Roger La Salle: To encourage innovation there have to be rewards. The rewards only need to be a six-monthly competition and a night out to dinner for the team.

Manage innovation as an asset

Robert Dew: Implementation has to be based on an idea of open innovation where even if you can’t use the innovation internally, you will work out how to license it outside.

Rowan Gilmore: A business environment needs processes where ideas become transformed into intellectual property (IP) and where IP is considered and managed as an asset.

Roger La Salle: Protect innovation with patents. If we can protect innovation, Australian companies can survive in a market with challengers like Chinese and Indian manufacturers, if we have IP.

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Attain external help

Robert Dew: Find an expert and get their help for a short period of time, with measurable outcomes at a fixed price arrangement. Not necessarily an innovation consultant—they could be a marketer, or someone to rearrange your finance, or someone who can help you with production methods—someone who will help you do something different.

Lyndal Thorburn: Innovation can be something known to others but new to a company. [Organisations need] a capacity to scan the environment external to the business so that emerging trends can be identified and incorporated. It is a matter of looking around to see what others are doing and then thinking about how it can be adapted to your circumstances.

Do things differently

Robert Dew: Compete on value. Real comparison is not a price comparison but a value one: the time it takes me, the emotion that’s involved, the risk I perceive, how the price is presented as an investment, and my past and future situation. Find your unique selling proposition and exploit it.

Sonja Bernhardt: Hold meeting in different ways, in different places, and at different times. Some may be formal face-to-face, some virtual, some at restaurants, coffee shops, the beach etc.

Fast Fact

Australian businesses spent 37 percent more on innovation in 2007 than they did in 2006.

—Survey conducted by ACA Research on behalf of Fujitsu Australia and New Zealand

Event

Innovation Festival (April 26–May 30)

AusInnovation will officially launch this year’s Innovation Festival on April 22, to commence over a month of events running in all states and territories. The theme for 2008 is ‘Innovation Clusters’ accompanied by events on innovation’s 4Cs—Creativity, Connections, Collaboration & Commercialisation.

To register an event, find out more information, or search for an event near you, visit www.ausinnovation.org

Case study: Tracking Purchases

Like the rest of us, Julie Ringrow hates bank fees. But the Adelaide mother-of-three wanted to stop complaining about fees and start controlling them. “I wanted to be able to track my spending at the point of purchase. I found it quite frustrating because my Visa statement would come in and I would already be into the next spending cycle,” explains Ringrow. “There wasn’t anything out there so we just said ‘let’s just do it’.”

She knew what she wanted the device to do and how it would look, so she commissioned an electrical engineer to build it for her. The result was Spendtracker, an easy-to-use device the size of a credit card that could help users track their budget according to different categories.

The innovation was simplifying budget control and making it portable and affordable, leaving behind the pen and notebook system and eschewing nights in front of a computer adding receipt amounts to spreadsheets. The Spendtracker literally takes seconds to use and can be pulled out at the point of purchase, so users don’t have to worry if they lose a receipt.

Ringrow then developed the second version of the device, Spendtracker Advanced, in response to the first version. “I had a lot of feedback and inquiries,” she says. “People were telling me what they wanted and that was really helpful.” This allowed her to compile a wishlist of features, some of which made it onto a design brief for the development of Advanced.

A patent and a registered trademark currently cover the device. There are plans to release a unit with a USB interface, to link up with software for a complete budget solution, and a mobile phone application, which will both complement the product.

Ringrow has also been savvy about marketing and distribution. Media outlets, from local and metropolitan newspapers to TV shows and magazines, have relished the story of how she came to invent the device, and even more so since Ringrow underwent two mastectomies after being diagnosed with breast cancer. In addition to selling directly through her website via the publicity generated, Ringrow also has Mortgage Choice-branded products distributed through the lender.

Case study: Potent Potions

Retailer Perfect Potion was using the word ‘natural’ in its truest sense long before green marketing became popular. The business took well-being to a new level when, in 1991, founders Sal Battaglia and Carolyn Stubbin opened a store that sold natural therapeutic products because they couldn’t find anyone doing it well. The difference between their store and others was apparent immediately.

“Our vision is that we make Perfect Potion the most sought-after experience in the world,” says Battaglia. “Our customers know what it is as soon as they walk into the shop from the mood– design of the shop, the music playing, and the aromas that create this experience.”

Added to the enticing multi-sensory environment is the education process provided by therapists and sales assistants creating repeat business. “People were coming into our shop saying ‘how am I supposed to use the essential oils?’ So we ran workshops and discovery nights for our customers,” Battaglia explains. “By doing that we created customers who were very passionate and loyal to Perfect Potion. That was innovative in retail because no one had offered in-store workshops after hours for their customers.”

The business placed as a finalist under the Innovation in Retail category at the 2005 National Retail Association Awards, but Battaglia says innovation had long been embedded in the business. “Innovation is about constantly changing, not just changing at the whim of consumer trends but actually setting the trends,” he says.

True innovation also involves a bit of risk. Their decision to discontinue some products and introduce certified organic ingredients at a 25 percent price increase was a little risky but because it stayed true to their core values and because no one else had done it, the risk paid off. Now Perfect Potion complies with a European standard, stricter than any criteria in Australia, to keep ahead of the certification game.

Education has also become a more important part of their business with their workshops expanding to corporations looking to use aromatherapy for the well-being of their teams. With programs like this, you could say Perfect Potion has the right recipe for innovation.

Case study: Urban Intuition

A showroom full of office furniture may not strike you as particularly innovative, but what if it could fit out any sized office space you have in mind? This is the premise behind Urban Office, a business that began in 1986 as the Office Furniture Centre. Now the business is less of a retail outlet and more of a service provider.

Alan Monahan, director of Urban Office, says the business has evolved since the early days. “We started with a commercial furniture showroom open to the public. With the first recession [in the late 1980s], we realised government contracts were still there. They were still buying and the greater public weren’t, so we secured a manufacturer for government contract work and we built the business further with government.”

In the 1990s, the store started securing exclusive products for more discerning customers. This allowed them to expand their customer base and sell upmarket, which meant their catalogues began to appear in architects’ offices. Then, in response to consumer demand, Urban Office created a service that enhanced the furniture sales.

“People started asking us for more than furniture so we started doing space plans and designs,” says Monahan. “But these were people who wouldn’t ordinarily engage in architectural services.”

The added service involved conducting focus groups with clients and then recommending furniture and fit-outs in line with their needs. The service aspect of the business grew until Urban Office needed to subcontract builders, which then became an in-house operation.

“Bringing in a licensed builder gave us more control. We’ve since brought in a second licensed builder to build our skills, and we employ a number of subcontractors on the sites where we’re operating,” says Monahan. “The furniture is now actually secondary.”

Urban Office’s unique selling proposition is that they have retained the full showroom from their time as a furniture store, “so people can touch and feel and sit on what they’ll have in their office”, notes Monahan. This means they go beyond other design and construct companies that may only work from an office. Another innovation is the way they’ve acquired new clients—by approaching leasing agents. “We went knocking on their doors because they’re at the coalface as far as new business is concerned. We all know there are a lot of people out there who need our service but how do we get to them? They’re in touch with the leasing agents when looking for a new space or an extension or refurbishment. So it’s an opportunity to get our name out there at the time they need us.

“These poor clients have been taken around by an agent to look at 500 square metres of space and they look at bare floor and they think ‘where the hell do I start?’ We do the space planning and the 3-D modelling so that people can actually view a fit-out. If they want a walkthrough, we can do that. To bring clarity to the situation is one of the things we do best and that’s what the customer is buying.”

Monahan says the evolution of Urban Office has come about because innovation is a mindset ingrained in the business. “Innovation is about anticipating future needs and then catering to them. We have a long-term view of the market and we’re always future-pacing to see what we can do in our business to stay ahead of the crowd. It’s being a leader in the market rather than a follower.”

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