Highly successful businesses are always forward-looking. Their leaders brainstorm products and services that would allow them to acquire new customers, stay relevant, and uncover new revenue opportunities.
Smaller companies can also embrace innovative solutions to keep their businesses growing and their customers satisfied. Here’s how business innovation can lead to increased market share and higher profits.
Table of contents:
What is business innovation?
Business innovation refers to the process of introducing new ideas, products, services, or operational methods to create value and drive growth. Sustaining innovation involves constant small changes that keep a business relevant, while disruptive innovation aims to introduce entirely new products or business models with the power to revolutionize an industry.
Depending on a company’s industry and business model, the goals of business innovation may include:
- Improving products. Business leaders use innovation to create new products or improve existing ones.
- Revamping business models. In business-model innovation, a company creates new business models or refines the one it already has.
- Boosting revenue. Most companies welcome new ideas that produce increased revenue, whether that’s expanding into new markets or finding more revenue opportunities from an existing customer base.
- Introducing new technology. Many businesses can gain a competitive advantage by embracing technological innovation, even if their core business and revenue model remain otherwise unchanged.
Why is business innovation important?
For most successful companies, innovation is the key to survival. Business innovation does the following:
- Rewards people for their best ideas. In a culture of innovation, companies ask employees to bring their most innovative ideas to the table. When team members see their ideas implemented, morale goes up, inspiring a new round of innovation.
- Unlocks new processes. By thinking outside the box, a company can upend the conventional thinking that sometimes grinds legacy businesses to a halt. With employees constantly generating ideas for improvement, companies can unearth innovations that help them stay ahead of the competition.
- Keeps companies ahead of the competition. Very few businesses survive by doing the exact same thing over many decades. Video game giant Nintendo began as a playing card company in the 1880s. Delta Air Lines began as a crop-dusting company. Athletic apparel company Gymshark started with supplements. Businesses large and small remain relevant by updating their operational models to meet market demand.
Types of business innovation
- Product innovation
- Process innovation
- Marketing innovation
- Organizational innovation
- Business-model innovation
- Industry-model innovation
- Service innovation
- Revenue-model innovation
There are many real-world examples of business innovation. Some focus on improving products, while others help workers save time or improve productivity. Here are eight types of business innovation used by many successful businesses:
Product innovation
This type of innovation involves developing new or improved products or services to meet changing customer needs or market demands. It can range from entirely new inventions to enhancements of an existing product. Innovative product development often leverages new technologies, such as those that make batteries last longer or fabrics more stain-resistant.
Process innovation
Process innovation focuses on improving internal operations and workflows. It seeks to enhance efficiency, reduce costs, and streamline processes. This can involve adopting new technologies, such as artificial intelligence (AI). It could also mean reengineering existing business processes, such as changing an inventory management strategy or a customer retention strategy.
Marketing innovation
Marketing innovation involves finding new and creative ways to promote and position products or services in the market. It may include innovative advertising strategies, social media campaigns, and influencer marketing. Some of these innovations require embracing brand-new marketing channels, while others involve creating updated content for existing channels.
Organizational innovation
Organizational innovation relates to changes in a company’s structure, culture, or management practices. It often aims to foster a more innovative and adaptive environment, encouraging employees to think creatively, collaborate, and take risks. Successful innovation in this sphere may include reorganizing teams, introducing new leadership styles, or creating innovation-focused departments.
Business-model innovation
This type of innovation involves rethinking the fundamental way a company creates, delivers, and captures value. It can lead to entirely new revenue streams, pricing strategies, or distribution methods. Examples of business-model innovation include a software company shifting to a subscription model or a jewelry seller starting a referral program.
Industry-model innovation
Sometimes, in the course of idea generation, businesses find themselves exploring entirely new industries. A discussion of new revenue streams can lead to a retailer investing in commercial real estate, or a phone manufacturer delving into software development. This can be a source of growth and diversification, which hedges against upheaval in a company’s core business.
Service innovation
Service innovation specifically focuses on improving the way businesses provide services to customers. Examples include introducing digital self-service options, ecommerce chatbots, or product-return drop boxes.
Revenue-model innovation
Revenue-model innovation overlaps with business model innovation, but it specifically focuses on revenue growth. For example, a company could adjust its revenue model by allowing sponsored ads on its website or by creating membership tiers that provide different levels of service. Revenue-model innovations usually follow a period of market research so key stakeholders can better understand customer behavior and budgets.
How to innovate in business
- Cultivate a creative environment
- Assume a customer perspective
- Research emergent technologies and trends
- Combine multiple innovation strategies
Developing innovative ideas can play a crucial role in helping your business rise above the competition. The innovation cycle can be broken down into six key phases: ideation, development, testing, implementation, evaluation, and adoption. Here are four tips to help you generate and develop innovative ideas to develop and test:
1. Cultivate a creative environment
Foster a workplace culture that values and encourages creativity and out-of-the-box thinking. Make employees feel comfortable sharing their ideas and taking calculated risks. It may help to assemble diverse teams with varied backgrounds, skills, and perspectives. Different viewpoints can lead to more innovative solutions.
2. Assume a customer perspective
Understand your customers’ needs and pain points via tools like buyer personas, surveys, interviews, and feedback loops. If you’re in ecommerce, pay attention to your user interface (UI) and user experience (UX), viewing them like a new customer experiencing your site for the first time. You can also practice social listening on your company’s social media channels. This can help you innovate with respect to the customer experience.
3. Research emergent technologies and trends
Keep a finger on the pulse of emerging technologies and industry trends. Attend conferences, read industry publications, and engage with thought leaders to understand the potential for innovation.
4. Combine multiple innovation strategies
The various forms of innovation are not mutually exclusive, and businesses often employ multiple innovation models to remain competitive and meet evolving customer expectations. With the right team, you can tackle multiple projects, such as concurrently changing your revenue model and overhauling office workflows.
Business innovation FAQ
What is the business innovation cycle?
The business innovation cycle breaks down the typical steps a business takes in order to innovate: ideation, development, testing, implementation, evaluation, and adoption. Depending on your business model and philosophy, the steps may be slightly different.
What are the keys to innovation in business?
The keys to innovation in business are fostering a culture of creativity, staying customer-centric, embracing emerging technologies, and promoting continuous learning and adaptation.
Is invention the same as innovation in business?
No, invention and innovation in business are not the same. Invention is the creation of new ideas or products, while innovation involves the successful implementation and commercialization of those ideas to create value and drive growth in the marketplace.
What is sustaining vs. disruptive innovation?
Sustaining innovation refers to incremental improvements made to existing products or processes to maintain a company’s competitive position. Disruptive innovation involves the introduction of entirely new products, services, or business models that can disrupt or reshape an industry by addressing unmet needs or creating new markets.
