Think of the world of business as a treadmill that’s operating at high speed. If you stand still, you will be flung off!
Innovation is how you stay on the treadmill. It’s the way to keep moving to survive and thrive in today’s competitive environment.
Turbulent business times require companies to innovate constantly to maintain their edge in the market. The direction of many business organizations’ thinking is leaning towards the concept of transient competitive advantage. This concept says that a business needs to continuously innovate to stay afloat in the market.
However, there is a catch here…
Innovation always entails certain risks. Well, that’s to be expected, isn’t it? After all, innovation involves betting on something that’s hitherto untried and untested…
Can you afford to invest in innovation? Where will the money come from? What can constant innovation cost your company? Who will manage it?
Often, investment in innovation comes out of funds that would otherwise go into the company reserves strengthening the organization or be distributed as profits/dividends thereby making investors happy. Investing in innovation has an opportunity cost that needs to be quantified to see what ROI justifies the investment. However, not all aspects of this decision can be quantified.
You should invest in exploring innovative ideas only if you can provide the necessary resources and hold out until your idea turns profitable. There is no point in kicking off ambitious innovative projects only to slacken the pace midway due to financial constraints. All business ventures, especially innovative concepts have a gestation period. It takes considerable time to:
There are also other important factors that affect the success of an innovative business venture:
Investing in an innovative idea is often worth its while. Creating a separate fund out of your profits, for exploring and supporting innovative ideas is a great way to ensure continued investment in innovation. If you do this, you wouldn’t need to dip into your profits every time someone in your organization comes up with an idea worth checking out. You can just use your ‘innovation fund’.
An important factor that you need to consider is the employee in charge of innovation. The best person to manage innovation is someone interested in trying out new ideas and one who is not demotivated by the losses to the division that are inevitable till profits start rolling in.
Ideally, whoever is handling innovation should be remunerated so that he doesn’t pay the price for the long gestation yet is incentivized if the innovation is successful. Willingness to invest resources and absorb losses is imperative for success in innovation.
Let’s take a look at two examples of innovative products and their later modifications:
What is your opinion about innovation? Are there any other steps a business can take to ensure continued exploration of innovative ideas?