At a Glance
- Innovation enables you to see potential acquisitions through a different lens and is a means of accelerating profitable top-line revenue growth
- A company that builds a culture of innovation is on the road to growth and those that fail to innovate are on the road to obsolescence
- The first step in bringing innovation to the forefront is to create a strong innovation strategy
An idea that looks great in the lab but fails in the marketplace, is not an innovation. At best, it is a curiosity. Innovation without a customer is nonsense; it’s not even innovation, according to former CEO of General Electric (GE), Jeff Immelt.
Innovation is defined as the transformation of a new idea into revenue and profit. In other words, if an innovation meets customers’ needs, can capture a significant market share, and provides improved economic sense for customers, then it is likely to succeed.
Does innovation pay?
Innovation enables you to see potential acquisitions through a different lens and is a means of accelerating profitable top-line revenue growth. For example, the launch of a foldable phone, with a smart screen on the outside? That is innovation. The product enhances its capabilities, and innovation gives the company an edge in attracting new users and building stronger loyalty among existing ones.
Innovation puts companies on the offensive. A company that builds a culture of innovation is on the road to growth and those that fail to innovate are on the road to obsolescence (think Nokia or Blackberry phones).
Does innovation really pay off? If so, is there any data or research to support this?
- Innovations – be it product, process, or managerial – reduces costs, increases an organisation’s value creation and its ability to attract non-financial assets.
- There is a strong correlation between profit growth and higher rates of ideation based on data from 154 companies. Net profit grew for companies with high rates of employee ideation.
In this current fierce competitive environment, what can you do with your innovation portfolio to achieve effective growth management for business success?
Bringing innovation to the fore
The first step in bringing innovation to the forefront is to create a strong innovation strategy. The strategy should be aligned with the organisation’s mission and values. It should also take into account existing systems and technologies, supplier relationships, and manufacturing capabilities. Misalignment between product and process architectures, resulting in increased costs and risks, frequently leads to failure.
Strategic innovation involves the development of growth strategies, new product categories, services, or business models that aim to create substantial additional value for an organisation and its customers. To start developing an innovation strategy, you need to evaluate the innovativeness of your product and portfolio management organisation.
When evaluating your organisation’s innovativeness, consider the following categories:
- Incremental innovation: Focus on improving existing practices to achieve better results.
- Additive innovation: Leverage your current resources to drive innovation and improve outcomes.
- Complementary innovation: Introduce new products or services while making structural changes to your business.
- Breakthrough Innovation: Change the fundamentals of your business and create new opportunities for revenue growth, potentially expanding into new industries.
Companies can adopt strategies from one or more of the above categories. It is important that all innovations demonstrate the potential for market success.
Criteria for evaluating your innovation portfolio
When assessing your innovation portfolio, use the following criteria:
- Stretch and strategic fit: Assess the extent to which your portfolio pushes industry boundaries that are also align with your long-term business objectives.
- Capabilities and capacity: Check whether your organisation has the necessary skills and resources to execute the innovation strategy or portfolio.
- Leverage and risk management. Ensure that you maximise the benefits of your investment while keeping risk within acceptable limits.
Jump start your innovation with Renoir
An effective innovation strategy can influence many aspects of an organisation. When developing an innovation strategy, remember to evaluate the potential impact on marketing, organisation, product, overall business strategy, process, and technology. It is essential to explore ways to increase revenue, as excess revenue can be used to fund other development projects, increase shareholders’ confidence and become or remain a top industry leader.
We struggle to innovate and bring new offerings to the market quickly.