How Businesses can Turn Ideas into Profits
“Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.” – Peter Drucker, author and management consultant.
A capacity for continuous innovation is critical to the future of business success. Because when companies fail to innovate, their competitors are first to market with new products and processes – and profits that could be yours.
Paul Allen, cofounder of Microsoft, explains: “For the most part, the best opportunities now lie where your competitors have yet to establish themselves, not where they’re already entrenched.” It’s obvious that finding the next big idea or the next little app before anyone else will play a crucial role in driving a company’s profits in the coming years. But where and how to start?
Begin by Creating and Fostering a Culture of Innovation
To help a company unearth great ideas before anyone else, the diverse skills of every member of the organization must be exploited. Innovation is by its nature a collaborative, social process, and true innovation leaders must be receptive to new ideas, no matter where they come from, whether new product development, engineering, or the mailroom. By establishing a company-wide approach to innovation and giving all collaborators the freedom to contribute to it, innovation leaders are like corporate gardeners, fertilizing the soil in which ideas can flourish.
“By putting innovation at the center of the business, from top to bottom, you can improve the numbers; at the same time, you will discover a much better way of doing things – more productive, more responsive, more inclusive, even more fun. People want to be part of growth, not endless cost cutting”, state Ram Charan and A.G. Lafley in their book, The Game Changer.
Four Ways to Connect Innovation to Profit
1. Make innovation a part of your business strategy: take it up to the boardroom and down to the workers; make it easy for people to participate; remember that innovation is passion-driven, not pressure-driven. Above all, don’t approach innovation from a bureaucratic point of view: “Implementing best practice is copying yesterday, innovation is inventing tomorrow”, writes Paul Sloane in How to be a Brilliant Thinker.
2. Don’t be afraid to take risks: don’t be afraid to start over (and over), and don’t be afraid to occasionally fail. Innovation is part chance, part timing. Sometimes the greatest idea won’t go anywhere – think of the oh-so-promising Segway – but another will hit the bull’s-eye and profits will skyrocket. When a corporate culture is designed to inspire constant innovation, sooner or later that corporate culture will produce game-changing ideas. James Dyson, founder of the wildly successful Dyson vacuum company, had more than 5,000 failed prototypes before finding a winner. In Dyson’s words, “No one doubts that innovation is a money spinner… we are all looking for the magic formula. Well, here you go: Creativity + Iterative Development = Innovation.”
3. Look both inside and outside the box for innovative input. Don’t rely solely on internal resources: get feedback from customers, suppliers, contractors, even friends and family (Dyson’s daughter and her husband helped him create his products); scan the market constantly for emerging trends; read the hottest blogs and social media sites. “The trick to having good ideas is not to sit around in glorious isolation and try to think big thoughts. The trick is to get more parts on the table”, writes Steven Johnson in his book, Where Good Ideas Come From.
4. Create new needs. Remember that every successful innovation solves a “problem” that no one knew they had – until the solution was developed. No one needed a smartphone until they came along and changed the way the world communicates. No one needed GPS, but now that we’ve got it, we’ve stopped going in circles. And apps like Dropbox, Instapaper, Spotify, Evernote: all brilliant solutions to “needs” that no one knew they had until the innovation came about.
The Rewards of Innovation
Innovation leaders remain relevant in today’s highly competitive marketplace. By bringing new ideas and products to market, they enable potential and existing customers to discover or rediscover their companies. Whether their innovations are incremental – improved versions of existing products or services – or radical – true breakthrough technologies like the iPod, they ensure renewable sources of profitability, improved brand recognition and customer loyalty.
And it’s not only about the rewards of innovation; it’s also about rewarding innovation. A vital step in creating an innovative organization, according to Chris MacKechnie of Demand Media, is “to include change in an employee’s goals, performance management process, and compensation plan. This needs to be implemented throughout the organization.” When employees are involved in the innovation process and rewarded for their contributions, they’re more deeply invested in their company and more motivated to help it succeed.
Innovations are like gold nuggets, some hiding in plain sight, others waiting to be dug up and polished. Isn’t it time your company started mining the power and profitability of innovation?