Warning to Small Businesses: Innovate or Perish

Innovation Light Bulb

When we speak of inno­va­tion the first things that spring to mind are new products or, at the very least, better products. If you are in a service busi­ness, thoughts turn to new services or improved services. However, truly inno­va­tive compa­nies promote advances across the entire spec­trum of their enter­prise. They are not content to improve a product, or create a new service. While these things are important, they are not suffi­cient in today’s busi­ness climate.

What is needed is a culture of inno­va­tion. Inno­va­tion must be repeat­able and predic­table. Inno­va­tion has to be treated as you would treat any other process in your enter­prise. Inno­va­tion should be expected from all members of your organization.

Define and commu­ni­cate an inno­va­tive process to your employees. It should have three objectives:

  1. Targe­ting the right problems
  2. Arri­ving at solu­tions to targeted problems
  3. Execu­ting the best solu­tions for the problems

Competition is Fierce

To be a compe­ti­tive force in today’s global economy, compa­nies of all stripes need more than inno­va­tive products and services. Inno­va­tion must be embraced by every aspect of the busi­ness. From marke­ting, to accounts payable and receivable, to produc­tion processes and to customer service. A busi­ness that rests on its laurels will not survive. Compe­ti­tion demands inno­va­tion across the entire spec­trum of busi­ness operations.

Level the Playing Field

Take marke­ting for example. Small busi­ness needs to find ways to level the playing field with larger rivals in this important area or they need to find a means to stand out from the crowd. The small busi­ness does not have a bottom­less budget for marke­ting, certainly not the budget of corpo­rate giants. However, with a little inno­va­tion, they can tap into the power of social media marke­ting. By working with the right influ­en­cers, small busi­ness can afford to reach the market that matters most—the people most likely to buy its products or services.

Other Examples

Many small busi­nesses operate in commu­nities with no commu­nity bank (thank you Dodd-Frank). This places these compa­nies at a distinct disad­van­tage to larger rivals with ties to regional or money center banks. A busi­ness finding itself in a cash flow crisis might want to think outside the box and explore alter­na­tive borro­wing options such as facto­ring or invoice financing.

Inno­va­tions in produc­tion processes are another means to gain a compe­ti­tive edge. How much time do you devote to shaving produc­tion costs and enhan­cing efficiencies?

Design is another area that begs for inno­va­tion. Dozens of compa­nies may sell widgets, but the successful company will be the one whose widget has the most attrac­tive design features and appeals to the broa­dest market.

Customer service is another busi­ness func­tion that lends itself to inno­va­tion. Your personal expe­ri­ences tell you that excel­lent customer service will keep you coming back, even if the price of the goods or services are margi­nally higher than a competitor’s whose customer service is shabby. By using the same social media that markets your product or service, you can improve customer service by listening to customer feed­back. However, listening is not enough. You must act on what you hear.

Excellent Customer Service

As I pen this, Netflix comes to mind. I am a great admirer of Reed Hastings, founder and CEO.

In June of 2012, Netflix was trading at around $65 share, 80% off its 52 week high of $305 in July of 2011. A lesser man may have eaten a bullet … not Reed Hastings. He reco­gnized that DVD rentals were going the way of the Dodo bird and, based on that vision, he decided to split Netflix into a strea­ming busi­ness and a DVD rental busi­ness and re-price services accord­ingly. Netflix custo­mers responded by cancel­ling their subscrip­tions … almost 800,000 of them! To Reed’s credit, he went to great lengths to explain his ratio­nale to custo­mers but, they weren’t buying it. He moved his ego to the back seat and listened to his custo­mers, argu­ably saving the company. Netflix, through inno­va­tion, such as crea­ting and produ­cing its own tele­vi­sion shows, a thorough under­stan­ding of his company’s niche and, respon­ding to customer needs, is now trading at around $650. That is ten times its price a short 3 years ago. Netflix has recently announced a 7:1 stock split which will make the price of Netflix stock around $92 per share, post-split. To this day Netflix remains a single entity. It is worth your time to view Hasting’s slide show presen­ta­tion which reveals the corpo­rate culture of Netflix.

Dell is an excel­lent example of a company that makes a product which must compete with multiple manu­fac­tu­rers that produce a similar product, PCs. A product facing this kind of compe­ti­tion requires inno­va­tion to occur in other aspects of the busi­ness. Price is the driving force in this scen­ario and Dell needed inno­va­tion in its produc­tion processes, supply chain manage­ment. Dell captured market share and customer loyalty by pionee­ring made-to-order PCs and laptops for its clientele.

Concluding Thoughts

Inno­va­tion is not confined to products and services. The prac­tice of inno­va­tive thought must permeate your busi­ness. You must be conti­nu­ally alert to oppor­tu­nities to improve all aspects of busi­ness opera­tions. Only in this way can you succeed in the market­place. Inno­va­tion, like evolu­tion is the key to survival. When your busi­ness ceases to inno­vate, it will cease to exist.

About Andrew Cravenho:

Andrew Craven­hoCEO

Andrew Cravenho is the CEO of CBAC, which offers invoice facto­ring for small busi­nesses. As a serial entre­pre­neur, Andrew focuses on helping both small and midsize busi­nesses take control of their cash flow.

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