Entrepreneurial spirit is key to innovation and must be kept alive for your business to thrive.
How to Put Innovation at the Core of your Business Model
We hear a lot about innovation today, but why is it so essential to sustainable business success?
Innovation is the oxygen of business. Fail to invest in innovation and eventually you will suffocate and be crowded out by a competitor or by an entrepreneur who identifies how to deliver a solution that creates more value than yours (and those of your competitors). Focus too much attention on efficiency at the expense of innovation and eventually you'll end up getting really good at making stuff people no longer want.
To continuously innovate, companies must learn to manage a few key tensions that exist in every organization.
First, there is the tension between the executive mindset and the entrepreneurial mindset.
The executive mindset is focused on avoiding failure and making the trains run on time. The entrepreneurial mindset is focused on pursuing new solutions and willing to risk everything to pursue their success. Resist the entrepreneurial mindset too much and you will turn potentially valuable intrapreneurs and their ideas into entrepreneurs and potential competitors. Pay the executive mindset too little attention and risk unprofitability.
Second: the tension between exploration and exploitation.
Invest too little in exploring for new potential markets and you will starve the firm of future growth. Invest too little in exploiting the potential of current solutions and rob the firm of revenue and income needed to fund future growth. Companies must strike a balance.
Building a strong innovation foundation requires that you conduct an innovation audit to understand where you are. Then, build a common language of innovation built around:
- A shared definition of innovation
- An innovation vision
- An innovation strategy
- Innovation goals
Together these will focus your innovation efforts and explain why and what kinds of innovation you are looking for (and not looking for) and how you plan to measure progress and success. Innovation can't drive results without a clear plan and direction. Unfortunately too few companies take the time to do these things in a cross-functional, participatory way.
But innovation is not free. After building a solid innovation foundation, successful innovators set aside money to fund an innovation portfolio of projects of different risk profiles and time horizons, create the human resource flexibility necessary to staff innovation projects and learn how to instrument and execute innovation project experiments for fast learning.
At the same time the company must do a good job helping customers access that value through effective design, processes, retailing, and service. Meanwhile, powerful value translation must be created to help customers understand how a potential innovation will fit into their lives. Many companies spend large sums of money to create value, without thinking through whether they can do a good job at the value access or value translation for a potential innovation.
As an increasing number of industries become commoditized, innovation is already an important way to not only distinguish your company from the competition, but increasingly it is becoming a necessary investment just to maintain existing market position.
Most companies approach innovation ad hoc -- only when their platform is burning. But it is possible to build an innovation system to power continuous innovation. An increasing number of companies are making investments in their innovation systems both here and abroad. Can you afford to be one of the companies that don't?