In the modern world of business, innovation is both an equalizer and a differentiator. It can give tiny startups an edge over global conglomerates and enable industry leaders to develop competitive advantages.
But what exactly is innovation? In short, innovation is the introduction of something new and different to an established product, process, or way of thinking. And in a rapidly shrinking and commoditized world, it’s in greater demand than ever.
If you want to drive more business innovation, you’ll need to continually improve operations and services. If you fall into a period of stagnation, you’ll certainly lose your competitive edge.
A Better Way to Innovate
Oftentimes, people associate the concept of business innovation with “radical innovation,” or the delivery of new products to new markets. However, most innovation falls outside of this category. A better model to consider is the “Ten Types” framework, which describes three functional areas for business innovation: configuration, offering, and experience.
Configuration generally subsumes all revenue streams and workflows that define a business, including profit models, key networks, structures, and operational processes. Offering refers to product-related innovation—the kind that could lead to improved product performance or more synergistic product systems. Experience is all about the customer. Your services, channel selection, branding decisions, and engagement strategies fall into this category.
Some business leaders might find that focusing on one of these core domains will yield immediately beneficial outcomes. Others might conclude that the pursuit of innovation in one of these areas can wait because other endeavors could be more valuable. The important thing is to remove potential weaknesses in your business and avoid adhering to certain processes or modes of thinking simply because “that’s how we’ve always done it.”
3 Tips to Drive More Business Innovation
As a leader, you’re always busy—and especially in this new world of remote work and blurred schedules. But it’s important not to conflate being busy with running a successful business. Innovation is about taking the time to pursue new ideas that could create sustained value for your business, which is key to keeping competitors at bay. With that in mind, here are a few strategies that can help promote innovative thinking:
1. Evaluate Your Current Differentiators in the Context of Future Goals
Innovation isn’t a standalone advantage. Rather, it strengthens existing advantages. You can think about your existing advantages in the context of Warren Buffett’s “economic moats” (or areas where differentiation is especially valuable). These moats include cost advantages, high switching costs, network effects, and intangible assets.
Every company tries to develop at least one of these areas well enough to stand out in a given market, so you likely have a natural advantage in one or more of them. Let’s say you enter the market with the advantage of an intangible asset such as a patent. Sustaining that advantage will require you to continue making patents that you can commercialize quickly or build an advantage in another area of your business (or both). In either case, innovative thinking is critical if you want to widen the economic moat you’ve created.
You also need to consider how the advantage aligns with your long-term business objectives. In sticking with the above example, if you’ve decided to separate yourself from the competition through intangible assets such as patents, you’ll want to be sure that this approach reflects a long-term opportunity and the overarching goals of your business moving forward. You must understand where your business can win today and determine whether that’s where you want to win tomorrow.
2. Be Methodical in Your Approach
Once you’ve identified the differentiators you already have (or those you want to develop), you can implement several thematic business brainstorming techniques to help you spot opportunities for innovation. For starters, explore the Ten Types of Innovation framework and assess whether you can reinforce these areas with new, bold thinking. Pay special attention to customer engagement and the experience you’re currently offering your customers, and challenge a cross-functional team to devise ways to improve upon that experience. If you’re satisfied with the results of that exercise, have other teams explore your configuration—particularly your structure and business model—and try to pinpoint opportunities for aligning talent and assets to generate novel ideas.
Although there are various brainstorming techniques leaders have deployed to help create a competitive advantage in business, many are very similar. Advertising executive Alex Osborn highlighted four common ones in his book Your Creative Power. They are:
- No negative feedback
- Quantity over quality
- Build on others’ ideas
- Encourage big thinking
Over the years, these rules have been incorporated into many of the design-thinking frameworks used by the world’s most successful organizations.
3. Prototype and Test Your Most Impactful Ideas
Once the brainstorming process is finished, try to identify ideas that are unique and potentially valuable from an economic standpoint. In a recent study of nanotechnology patents, researchers found that the highest-impact patents—those that resulted in the largest economic moats for their developers—represented a breakthrough in knowledge as well as in economic value. Only around 1% of patents had both characteristics, underscoring the difficulty in achieving true innovation.
By prototyping your best ideas, developing them just enough to serve as testable models, and then collecting feedback on the prototypes, you can maximize your resources and make more decisive decisions about how to proceed.
Just remember that innovation naturally entails experimentation, and by extension, a willingness to make mistakes. Not all of your new ideas will lead to immediate success, but there are steps you can take to improve your chances of achieving an optimal outcome.
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