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What Does Innovation Mean in Business?
Business innovation is the act of introducing something new to a company—whether it’s a new product, a new market strategy, a new method, and so on—in order to reinvigorate the company and promote new value and growth. Innovation is all about business leaders coming up with (or listening to) creative ideas, and then using strategic planning and decision-making to implement the new business ideas successfully. When a business innovates, it can either improve its existing products, processes, or methodologies, or it can create new ones from scratch.
3 Models of Business Innovation
There isn’t just one way to innovate—in fact, there are three distinct approaches that big and small businesses use to introducing something new. Each model involves innovating a different aspect of the organization:
- Revenue-model innovation: This involves business owners looking at their revenue model for places to innovate the products and services that they offer, the prices of their products and services, and the customers they target. When organizations choose revenue-model innovation, they may choose, for example, to create innovative products, stop selling certain products, make changes to their supply chain, sell to new customers, or change the prices of their offerings.
- Business-model innovation: This involves business owners looking at their overarching business model for places to implement innovative solutions: their business processes, their business strategy, their mission statement, the technologies they use, and the businesses that they partner with. When organizations choose business-model innovation, they may choose, for example, to create a strategic alliance with another business, to update the software that they use, to accept venture capital financing, or to go from selling at a physical storefront to selling online.
- Industry-model innovation: This involves business owners looking at their industry model for places to innovate: the industry they currently work within and what potential industries they could transition to. When organizations choose industry-model innovation, they may choose, for example, to market their product to an entirely different industry or even to create a new industry to align with their mission and products.
3 Reasons Innovation Is Important for Businesses
Innovation is a key part of owning a successful business. It can help you:
- Innovation grows your business. Business growth means, ultimately, increasing your profits. Successful innovation allows you to add value to your business so that you can increase your profits—if you don’t innovate well, your business will plateau.
- Innovation helps you stay ahead of the competition. With globalization and a rapidly changing market, there are more competing businesses than ever before. Innovative thinking can help you predict the market and keep up with customer needs. If your business doesn’t innovate, you’ll watch innovative companies bring new ideas to the marketplace, and you’ll have to scramble to keep up.
- Innovation helps you take advantage of new technologies. Technology (and especially artificial intelligence) is evolving faster than ever before, which means that there may be new, more efficient technologies to make better products, to offer your services, to market your business, or to track your performance with analytics. By taking advantage of these new technologies for process innovation, you’ll be able to optimize your business and gain a competitive advantage over your competitors.
3 Risks of Innovation
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Innovation isn’t a guaranteed success. There are several factors that may prevent innovation from being successful, and you have to keep them in mind before taking the leap:
- Expense: New technology, specialized employees, huge shifts in your business’s identity—innovation can be an extremely expensive undertaking, and because increased profits aren’t guaranteed, it can be risky. During the innovation process, you have to think about the costs weighed against the potential profits and make the best decision. Ask yourself the question: Will this create value?
- Scheduling: Innovation takes time, and the time that you spend innovating is time that you’re not using to focus on your current products, marketing, and sales. If you can’t implement your innovations quickly and efficiently, you can risk failing to meet your quotas and falling behind on your schedule—losing profits and the trust of your customers and investors.
- Instability: Innovative idea generation can be exciting, but if businesses are constantly making huge innovations, they may never find a stable identity or market—and it will be hard for customers, investors, and employees to keep up with their changes. It’s all about innovation management; a stable business identity is important for generating profits, so it’s vital that you choose your new innovations carefully and deliberately, rather than saying yes to every new thing that comes your way.
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