Innovation is often seen only in the context of new product development; or in the discovery of new materials or technologies that underpin new product development.
However at Roaring Success, we believe that businesses need to take a more holistic viewpoint if they are to realise the full potential of innovation opportunities to create value and improve productivity.
We believe management should consider their ability to create competitive advantage through:
- Innovation in the business model
- Innovation in business and manufacturing processes
- Innovation in products and technologies
- Innovation in added-value services
Our holistic view of innovation is by no means unique. In a paper on the factors contributing to productivity improvement, the Organisation for Economic Cooperation and Development (OECD) defined innovation in the following terms:
Innovation is defined as the implementation of a new or significantly improved:
- Product (goods or services), or
- Process, or
- Marketing method, or
- Business practice, or
- Workplace organisation, or
- External relationship
Innovation in the Business Model:
A company’s business model represents the entire mechanism by which the business creates, delivers, manages and gets paid for something of value, whether that valuable commodity is a product or a service.
Many companies are still following a business model that was established to suit circumstances and technologies that existed in the distant past. Some examples include:
- Sticking to supplying a traditional market, even though it’s in permanent and terminal decline
- Manufacturing standard products, without customisation or options
- Manufacturing to fill production capacity, regardless of actual sales or forecast market demand
- Storing finished products in inventory, then waiting for sales to eventuate
- Vertically integrating manufacturing in-house, regardless of a lack of competence or scale
- Relying on outdated distribution channels that add cost to the customer without adding corresponding value
These out-dated business models create opportunities for an innovative company to create disruptive change and establish a new basis for competitive advantage. Think of the way in which Apple revolutionised the sale of recorded music with the business model innovation of iTunes; which made both CD production and record stores obsolete.
In future blogs we’ll explore other ways in which the various aspects of innovation can create competitive advantage for your business.