Innovation: The key to future business?
Innovation is a word very much to the fore, in the business press and media. So what is important about innovation, what does it actually mean and how should a commercial manager develop it?
Innovation can provide creative solutions to today’s commercial requirements in ways which yesterday’s answers cannot. Business growth and development is often considered dependent on future innovation.
The Oxford English Dictionary defines Innovation as: To make changes in something established, especially by introducing new methods, ideas, or products:
The results of innovation may be seen every day with new products and ideas being presented to the potential customer. In business to business markets, innovation often takes place along lines of technological improvements for efficiency and effectiveness. But in consumer markets, innovation is often driven by fashion promulgated through social media. A new IPhone appears every few months, with new features and apps, which appeals to customers who like to be first with the latest technology, and who therefore change their phones regularly in order to have the latest model.
Change and development in commercial markets is probably faster now than at any other time. Developments, especially in IT and communications, such as social media, have been rapid. The skill of successful entrepreneurs lies in their ability to have seen the potential of new ideas and innovations and to have exploited them profitably, in advance of their competitors.
Developing new products with new technology may often take a longer time than there is available in which to recoup the investment and produce profit, before being superseded by later models. This is especially the case in the IT and communication markets, where investment in product development is essential for organisations to maintain their place in the market, or risk becoming seen as obsolescent.
Business exist to make money for the benefit of owners and the workforce, by anticipating and satisfying the demands of customers, who ultimately provide the income on which the business depends. Satisfying customers is not the purpose of business, but is the way by which businesses make money.
Commercial managers are responsible for producing profitable income for their respective businesses with the objective of maximising profitable income for the long term future while minimising costs and the use of assets and investment. Innovation is not solely confined to the development of new products and services, but is about finding new ways to do things better, more productively, more profitably and more efficiently. Thus in a rapidly changing commercial environment, developing innovation is especially important to satisfy customer requirements, and produce efficiency in order to maintain the flow of profitable income.
While product innovation is often seen as the key to satisfying changing customer requirements, it is not in itself a guarantee of financial success and may require considerable investment. Maintaining and improving profitable income may involve the development of new products and services, but more often it requires doing things differently and more efficiently to meet changing circumstances and situations. Developing creative ideas involving doing things differently, through efficiency and productivity may increase profitable income at minimal cost.
How can a commercial manager encourage and develop innovation to maintain efficiency and sustain and increase levels of profitable income? If a commercial manager is by nature more analytical rather than creative, then it pays them to employ and encourage those with more creative abilities. Such creative minds should be encouraged to develop new ideas for the commercial manager to assess for their practicability.
To encourage an atmosphere in the workplace where innovative ideas can develop, commercial managers need to:
- Keep abreast of changes in technology, fashion, and customer requirements.
- Encourage staff to question processes and invite suggestions for improvement.
- Use “brain storming” sessions to review all the commercial processes that relate to satisfying the customer, including media communications, delivery, payment methods, product development and others, in order to assess the need for change and development.
- Realise that small and achievable changes in business processes can have cumulative beneficial effects e.g. By reducing costs by 1%, increasing prices by 1% and increasing sales by 1% the cumulative increase of profit can be as much as 24%
- Develop a working environment that encourages staff to develop new ideas, together with an organization which is adaptable enough to enable change to take place quickly and easily.
Commercial managers need to be aware that innovation requires being alert to changes and development that effect customers, the market environment, and their competition as well as their own business. Being aware of those changes can stimulate creative new ideas to ways of working as well as developing new products and services.
Nicholas Watkis is the founder of Contract Marketing Service, established in 1981. He is a fellow of the Chartered Institute of Marketing and a certified management consultant of the Institute of Business Consultancy.