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:
- Targeting the right problems
- Arriving at solutions to targeted problems
- 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.
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.
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.
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 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.