How to Increase Innovation in Business and Reap its Benefits

Business Analyst

11/06/2024

8 minute read

What is Innovation?

Innovation is the process of creating new ideas, products, services, or methods that improve and add value. Business innovation is identified through novelty and value creation. Introducing a new or improved solution that solves problems is a hallmark of innovation. Companies may seek to improve efficiency, enhance quality, or provide cost benefits and other advantages.

These ideas are brought to fruition through development, testing and deployment. Depending on the industry, companies can be looking to develop new products, processes, and services and make more internal improvements to business models or organisational practices. Novelty alone is not enough to be innovative; companies must combine creativity with usefulness to shake up the standard.

Companies across diverse industries can innovate in different ways. Tech companies are not the only ones at the cutting edge; businesses like Uber and Airbnb reset how we look at travel and accommodation, and charitable enterprises use innovative methods to solve the world's problems.

Why is innovation important?

Innovation has many benefits, from an employee level to wider economic effects.

At the individual level, staff are engaged and motivated by improvements and encouraged to suggest advances where they are seen, increasing intra-company communication and fostering a dynamic work environment. Internal innovation can streamline processes and improve efficiency, positively impacting individuals who prioritise productivity and feel supported in seeking this goal. Ultimately, this leads to higher employee satisfaction and, thus, retention.

The company benefits from happier staff and customers. New products, processes, and ideas help businesses stay ahead of competitors; innovative products and services help businesses stand out from competitors, attracting and retaining customers. Innovative organisations can quickly respond to changes in market demands and trends, maintaining relevance and competitiveness. This can also build a company's reputation as a leader in its industry, resulting in brand loyalty and trust.

Outside of internal benefits, innovation in business leads to economic growth. Generating jobs, attracting public and private investment, and developing new markets are all potential additional outputs of innovation. The future-proofing work done today leads to better results later down the line. Companies working at the edge of the state of the art developing technological advances are equally developing tangible benefits for future generations. Often, these companies engage in cross-industrial research and development, potentially working with universities or foreign businesses. The Irish Government recognises the wider importance of innovation and supports this through investment and the R&D tax credit scheme.

Innovation is a powerful catalyst for growth, improvement, and positive change across multiple dimensions of society.

What are the risks of not innovating?

Though the above advantages seem like no-brainers, innovation comes with risk. It involves heavy investment in both research and development and doesn't always pay off. Some attempts will fail, and some will succeed in feasibility without commercial payoff. In fast-moving industries, the time spent innovating may result in a clear success, but it may equally be superseded quickly by competitors. Innovation can also be discouraging, as many ideas generated during early ideation stages may not be taken up.

However, playing it safe may not be as safe as it seems. Not innovating carries its own risks. Businesses can't afford to rest on their laurels forever, which harms their reputation, employee satisfaction, and bottom line.

Carrying on without an innovation strategy will lead companies to stagnate and potentially to the following circumstances:

Reduced productivity: Employees without challenges may deliver consistent results, which is likely not enough to sustain a company long-term. In the best case, companies aren't getting the best from their staff; in the worst case, companies can expect high employee turnover as staff, especially Millennials and Gen-Z, seek new, more mission-driven, dynamic horizons.
Losing clients: Customers are constantly being marketed to. Without improvement or added usefulness, customers have little reason not to hear out the alternatives. Companies without a strong client retention plan, through customer service, new features, and consistent value add, may find it difficult to stop the client bleed.
Poor brand positioning: A business that fails to innovate falls into obscurity. It loses visibility among its stakeholders and struggles to attract new customers, investment or new blood. The longer left to stagnate, the harder it is for companies to update their brand. Settling into a comfortable rhythm may mean you cannot get back out.
Reduced market share: More adaptable Competitors will slowly creep up on incumbents. No novel features mean consumers are less likely to stay put. Coupled with lower customer satisfaction and the novelty and usefulness of competitors, companies that do not innovate can expect to fall by the wayside.

How can you increase innovation?

Companies must have a clear plan for supporting innovation to avoid the pitfalls of stagnation and reach the heights of other innovators. A "no bad ideas" statement means very little without actions that foster this kind of environment. Innovation is much easier said than done. It requires collaboration with others, both internally cross-department and externally with other organisations, overcoming resistance from stakeholders, and investing time and resources into solutions.

Companies need to overtly plan for innovation in order to build a culture of it. Though innovation can be learned and left to a single person or team, it is most successfully implemented when it is accounted for across the company.

Creative resources for employees: Employees should feel free and supported to brainstorm and raise new suggestions. Leaving space for collaboration and free-flowing thought may bring forth new ideas without additional outside investment. Creating channels for novel suggestions to be introduced and discussed and leaving time and resources for team members to follow through on these points will make it clear to the team that they are encouraged to try new things.
Embrace failure: Failure is part of the solution. To ensure the culture you've spent a while building holds, it must weather the storm. Failures are opportunities to learn; integrating review stages and time to recover from setbacks may illuminate new angles that would not have been spotted without an initial failure.
Leverage new technologies: Companies have so many options at their disposal now that almost anything that can be dreamed of can be achieved. AI, blockchain, machine learning, predictive algorithms and automation are not limited to tech start-ups. These technologies are accessible and should be leveraged. These advances are crucial to achieving the value-add that customers want, and companies aspire to give.

What now?

Business innovation can either sustain or disrupt a market. Properly pursued, companies can either improve their own standing through product innovation and organisational improvements or entirely disrupt a market, challenging larger businesses and potentially developing entirely new market segments.

Companies need to actively seek out innovation in their own enterprises. Encouraging and following through on new ideas is key to touching the many benefits of innovation. You may sometimes attract more than new or retained customers; R&D tax credits and grant funding become accessible for those working on technologically and scientifically challenging projects.