The successful exploitation of new ideas is crucial to a business, being able to improve its processes, bring new and improved products and services to market, increase its efficiency and, most importantly, improve its profitability.

The recipe for innovation in your business

What is the difference between invention and innovation? Invention is a new idea, meanwhile innovation is the commercial application and successful exploitation of the idea.

With that being said, innovation means introducing something new into your business. This could be:

improving or replacing business processes to increase efficiency and productivity,
developing entirely new and improved products and services
adding value to existing products, services or markets

The goal is to:

enable the business, to extend the range or quality of existing products and/or services,
meet rapidly changing customer or consumer demands or needs or
differentiate the business from its competitors and increase the perceived value to the customers and markets

Innovation can mean a single major breakthrough – e.g. a totally new product or service. However, it can also be a series of small, incremental changes.

Whatever form it takes, innovation is a creative process. The ideas may come from:

inside the business, e.g. from employees, managers or in-house research and development work
outside the business, e.g. suppliers, customers, media reports, market research published by another organisation, or universities and other sources of new technologies

Success comes from filtering those ideas, identifying those that the business will focus on and applying resources to exploit them.

Introducing innovation can help you to:

improve productivity
reduce costs
be more competitive
build the value of your brand
establish new partnerships and relationships
increase turnover and improve profitability

Businesses that fail to innovate run the risk of:

losing market share to competitors
falling productivity and efficiency
losing key staff
experiencing steadily reducing margins and profit

Approaches to innovation

Analyse the marketplace

To move your business forward, study your marketplace and understand how innovation can add value to your customers.

Identify opportunities for innovation

You can identify opportunities for innovation by adapting your product or service to the way your marketplace is changing. You could also develop your business by identifying a completely new product. You could innovate by introducing new technology, techniques or working practices - perhaps using better processes.

If your main competitor's products have a reputation for being cheap, rather than trying to undercut them on price you could innovate by revamping your marketing to emphasise the quality of your merchandise - and consider charging a premium for them.

Planning innovation

Some innovative ideas may just come to you out of the blue. However, you should already have innovation as part of your business strategy and a strategic vision of how you want your business to develop - if you dedicate your time to monitoring trends in your business sector, you can then focus your innovative efforts on the most important areas.

Innovation will not only improve the chances of your business surviving, but also help it to shift and drive increased profits.

How to decide which ideas can be turned into profit or other gains?

Examine your competition

Who are your competitors and where do they operate? Find out about their products, prices and operating culture. This can give you an overview of their selling points, as well as any areas you might be able to exploit.

Study market or industry trends

This one is connected to the previous tip about knowing your competition. Being aware of the climate in which your business is operating will help you to set up your plan.

Build a relationship with your customers

It's not enough simply to know who your customer base is. You need to communicate effectively with them as well. Communication involves not only listening to pains and needs but also actively observing their behaviour around current products and services.

Now, consider what taking a particular innovative step could mean for your business. Ask yourself:

what impact it will have on your business processes and practices
what extra training your staff may require
what extra resources you may need
how you'll finance the work
whether you'll be creating any intellectual property that will need protection

Finally, you should include your vision in your business plan by:

putting down your goals, both long and short term and detailing how you intend to achieve them
linking goals to financial targets, such as achieving a specific turnover by a set date
reviewing your plan regularly

Encourage innovation in your business

Your employees are also a vital asset in generating innovative ideas.
What steps can you take to tap into their most creative flows?

Make sure you have processes and events to capture ideas, such as idea boxes, around the workplace, regular workshops, brainstorming.
Create a supportive atmosphere in which people feel free to express their ideas without the risk of criticism or ridicule.
Encourage risk taking and experimentation - don't penalise people who try new ideas that fail.
Everybody should feel involved in taking the business forward, so emphasize that people at all levels of the business share responsibility for innovation.
Reward innovation efforts and celebrate success. The right incentives can play a significant role in encouraging your team to think creatively.
Look for imagination and creativity when recruiting new employees.

Funding innovation

There are a number of ways you can fund your growth through innovation, either by using your own funds or tapping into external funding such as loans or equity finance. However, any route to external funding will need a high-quality business plan that describes your business and sets out detailed forecasts of where it's going.

Businesses often turn to their banks for a line of credit or loans for additional finance, depending on their borrowing needs. If you're willing to relinquish some control of your business to external investors, you could consider using equity finance.

Source: Info Entrepreneurs