Importance of Innovation
Just as Steve Jobs stated, “innovation distinguishes between a leader and a follower.” Innovation can be defined as new ideas and creative thoughts in the form of a device or a new method. In this increasingly competitive climate, it is important that enterprises adopt innovative methods to create value in the businesses.
Some may wonder what spells the need for innovation, when the status quo is working perfectly fine. While it cannot be denied that innovation comes with incurring additional costs and the risk of failure, business history has also demonstrated, with plenty of examples, the high opportunity cost of not innovating.
For instance, Kodak insisted on the traditional roll films and missed the digital photography while Blackberry faded out for not incorporating easier touchscreen displays. On the other hand, IBM managed to stay at the top of the game by recognising consumers’ needs in the early 90’s and switched from selling hardware to software and consulting services.
Innovation is crucial as globalisation and the rapidly advancing technology scene bring about much disruptions and changes which could potentially threaten the survival of the companies. In fact, small and medium-sized enterprises can be more suited to innovating than large firms because changes can be executed more easily with fewer hurdles to get past. By combating inertia and being innovative, the businesses can potentially cut costs, save time, expand consumer base and boost revenue.
Types of Innovation
Since innovation is broad term which can encompass virtually any new developments, there are many types of innovation, namely product, process, marketing and business model innovation. Each category of innovation comes with its associated risks and payoffs but the biggest determinant of the success of an innovation would be the value it creates.
Product innovation typically comes in the form of an improvement of an existing model, or a completely novel product. When successful, it will help the firm to capture a larger market share and increase the revenue.
One good success model would be Alexa, the virtual assistant AI developed by Amazon. Alexa is capable in performing functions such as voice interaction, controlling smart devices and integrating third-party functionality (sharing current weather). Currently, Alexa maintains 70% of the global smart speaker market share and more than 100 million devices have been sold thus far.
Process innovation helps in improving operational processes such as financial systems, human resource management, internal methodologies and information and communications technology (ICT). This will usually reduce production costs and save time, making the processes more efficient.
Marketing innovation is how products or services are promoted and the channels used to distribute them. This is evident as more and more businesses are recently switching from traditional media to social media as their main platform for marketing and advertising.
Last but not least, business model innovation is revising the structure of a business or developing strategic relationships with suppliers, distributors and customers. It is often the most transformative, radical and risky type of innovation. Businesses can actually spend years improving their way of operating. Therefore, by making any huge changes to the business model in a shorter timeframe can certainly put the company at great risks.
Airbnb, Grab and Spotify are some of the companies that incorporate innovative business models and disrupt the traditional ones, making them as one of the leading enterprises in their respective industries. Such innovations have developed new trends and change some of the consumer behaviours.
Another example will be the recent innovation of cloud kitchen, which is basically a takeaway outlet which offers no dine-in facility. It has been well-received by many consumers who find it more of a hassle to dine outside their homes. Such concept also help in maximising the number of orders by focusing only on the mass production of the food.
All in all, an innovation is not successful if it does not create any commercial value. Each innovation does not have to be a marvellous technological breakthrough but it must be beneficial to the business and the consumers.
About BlackStorm Consulting
BlackStorm Consulting is a boutique growth consultancy firm that specialises in corporate strategy, profit management and investment management. We mainly serve clients in four sectors: FinTech, Gaming, Technology, Media and Telecommunications (TMT), and manufacturing.
Our clients and connections are internationally present and range from small and medium sized businesses, MNCs, to government agencies.