Business Innovation Strategies - The Why and the How.
To succeed in a post COVID-19 world, businesses should consider embracing innovation. The pandemic isn’t the only reason to change though. “The Australian economy is in transition. Australia is moving towards more digitally-enabled, service-oriented industries, on the back of its strength in mining.” according to the Australian Government’s Innovation System Monitor. Some businesses should continue their innovation activities which has helped them improve customer service, reduce costs and increase revenue. For others they’ll need to create or rebuild their innovation capability.
Insights from the Business Characteristics Survey published by the Australian Bureau of Statistics (ABS), show that 44% of all Australian businesses, holding a ABN, identified as Innovation-active businesses in 2018–19. The importance of innovation isn’t lost on these businesses. But, if you are not an innovation-active business where do you begin? You might consider asking:
- Could your business identify new ideas and transform them into new/improved products, services or processes that benefit the firm?
- Do you have people in your organisation who are adept at innovation strategy and execution?
- What, if any, percentage of your annual expenditure is allocated to innovation?
- When was the last time your leaders considered business model innovation, innovative products or innovative services?
- Is innovation training a priority for your business?
- What metrics, if any, does your business use to measure innovation?
Questions like these, which enquire about the extent of your business’ innovation capability, are like asking how good your strategy is. You’re aware it is important, however it’s difficult to conceptualise and measure.
In this article we’ll explore what is an innovative business, why innovation is important and how to empower your people to harness innovation.
How to define an innovative business?
According to the Australian Bureau of Statistics, innovative businesses are classified as ones, “that introduced a new or significantly improved good or service, operational or organisational process or marketing method. Innovative activity refers to, any work that introduced, or intended to introduce, an innovation.”
Why innovation is important for businesses.
Originality, more than ever, has become a means of competitive advantage and success. Critical to an organisation’s ability to develop a compelling business strategy and perform well is the capability to stimulate and manage creativity in its people.
Innovation is critical to successful businesses of all sizes. Turning the spotlight on SMEs, they may not have the capital to compete head-on with many of their larger competitors, requiring them to adapt their operations and their approach. According to a 2020 Australian Parliamentary report, small businesses employ just under 5 million people. Their success contributes to Australia’s success.
These businesses operate in a world that is rapidly changing. COVID-19 has forced many to rethink their go to market channel strategies, their work environment and even the services or products they offer. There are other innovation drivers too, changes in technology, customer behaviour and structural shifts in our economy. It’s the businesses that capitalise on these shifts, that ideate and act in a rapidly changing economy that will be best placed to succeed.
How to enable your business and people to harness innovation.
So how can your business enable your people to drive efficiency, flexibility, and innovation in your organisation? There is no silver bullet, but here are some key areas for your business to consider.
1. Resources to start.
It’s no simple matter to stand out in a competitive industry, and to provide new and innovative solutions to customers. Instead it requires research, the space to experiment, and time. Businesses need a culture that promotes creativity, innovative employees, and the resources to test, learn and implement new ideas. Many of these elements require money that many businesses simply won’t be able to spare unless the investment in innovation produces returns within a reasonable timeframe. To enable the business to find the resources to invest requires innovative thinking around approaches to:
- Market penetration: focusing on increasing sales of existing products or services to an existing market.
- Market development: focusing on entering a new marketing using existing products.
But what if you’re a business facing the headwinds of change and have concerns that there won’t be sufficient cashflow to embark on innovation. Can you start to innovate if you are cash constrained? The answer is yes, there are things that you can still do. For example, it could be setting aside time to meet the people interested in your industry or business. These conversations could spark ideas that might be game changers for your business.
2. Be clear and communicate your innovation ambition for each part of your organisation.
So, you’ve got the resources to get started, next take your people on the journey with you. What’s important is to adopt a clear and conscious strategy. In some parts of your business and operations you may select to be in a certain lane:
- fast lane: a leader of change
- middle lane: a fast follower that adopts innovation from others; or
- slow lane: choosing incremental continuous improvements and drive safe reliable services.
With clarity on your innovation ambition your business can better allocate resources – people, time and funding.
3. Get to know your customers
The most important person in any business is the customer. Too often the customer isn’t central to the purpose of the business or product/service. The best way to be customer centric is to really get to know your customer. Technology is making gathering customer data easier through online tracking, online surveys, customer reviews and comments and the like. But nothing beats talking directly to your customer, in their own environment. It’s important to have a clear picture of the target customer to help your business build more impactful service features, to find and attract more people and to be in a better position to meet your strategic growth targets. To help, consider building:
- Customer profiles. This tool helps you to identify things such as demographics, behaviours and assumptions that need to be validated about your typical or target customer.
- Customer journey maps. This is a representation of a customer experience of your product or service at all stages. Understanding the customer experience provides a greater appreciation of customer pain points, joy points and highlights opportunities to improve.
4. A culture that embraces new ideas.
Idea generation provides source material to enhance customer joy points and address customer pain points. With ideation you can develop more satisfying solutions to problems that are impacting a customer experience.
A good place to start is to define a problem statement: “How might we help/enable <the customer > to achieve <enhance a joy point/remove a pain point>.”
A good problem statement should:
- Define who has the problem.
- Define the problem at the root level.
- Be actionable.
- Inspire ideas for potential solutions – which ultimately can be prioritised, refined and tested.
- Be easy to understand.
- Be informed by business, consumer and technology insights.
Next, aim to come up with as many ideas to solve the problem as possible. Regular brainstorming sessions incorporated into a weekly or monthly meeting rhythm is just one way to create a culture of open engagement and ensure your team feel that their ideas are valued. Leaders should be encouraged to develop an environment that evokes creative thinking for their teams. Your people need to feel that their voice is appreciated and that they have the space to test their ideas, see what works and what could be improved. This creative thinking should be outcome focused. So, its important to ensure the team knows about changing goals and new opportunities for the business. The more they understand the business’ strategy, the more involved they may be to contribute to its success.
5. Being prepared to narrow down ideas
It’s important to have a process or a framework to select the idea or small sub-set of ideas you should leverage. Aim to find which of your ideas contain these essential characteristics:
- A desirable solution, which is one that your customer really needs
- A feasible solution, which builds on the strengths of your current operational capabilities
- A viable solution, with a sustainable business model.
Once this has been completed you can start refining the idea(s) ensuring the right people are engaged in the process. Key questions to ask are:
- What does this idea look like when fully actualised?
- What form might this idea take?
After refining the idea, the next stage is developing the concept to test whether the idea is still solving for the original problem and whether it can be sold/explained to stakeholders.
6. Getting beyond the idea
The real innovation challenge exists beyond the idea. A focus on execution of the idea is critical. You should tap into the opportunities that exist within your organisation. Can you build on existing organisational strengths to address the needs of new markets? If, for example there are small slivers of time when your people have spare capacity, could this time be used for innovation to review how existing products or services could be adapted to serve new customers. Or, if your organisation has a strong process orientation, could attempts as innovation be made as repeatable as possible. If the idea that has been refined is not small nor can be delivered through a repeatable model, then it’s customised innovation which requires a special team and a special plan. The special team requires collaboration between your people who are running the business and a dedicated team that is responsible for the innovation initiative. Planning, project management and reporting systems are critical here and you should consider if your organisation has people with the right capability to execute. If not, then hire leaders with an execution focus.
When creating something new, test and adapt. Sometimes organisations, wait until they’ve finished building a “perfect” product or service before introducing it to customers, only to discover some important detail that require fixing. This can prove costly and is best avoided. Rather, find ways during design to involve your customers and gather their feedback. This will help you to test the market and build momentum for when you release the product or service.
Implementing new ideas to create value for your customers and your business. That’s what innovation should be about. Innovation activities can help businesses to improve customer service, reduce costs and increase revenue as they respond to the COVID-19 situation.
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. ©Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.