Innovation drives profitability! One of the greatest challenges facing businesses is the need to embed a culture of product/service innovation while maintaining business as usual. All too often, customer facing staff fail to flag opportunities identified during conversations with customers. Despite members of staff having numerous ideas for new products and services many of these never even get raised at board level, due to existing work pressures.
UK businesses need to focus on improving skills, stimulating innovation and fostering enterprise, according to Michael Porter, Professor of the Institute of Strategy and Competitiveness at Harvard Business School. In his foreword to the British Government's recent UK Competitiveness Study, he argues that it is only by building such capacity that companies can move on to the next stage of improving competitiveness and achieve sustained higher levels of prosperity.
The potential returns are impressive. A recent market study by INSEAD business professors W. Chan Kim and Renée Mauborgne revealed that 86% of business launches were line extensions or incremental improvements which accounted for 62% of revenue and 39% of total profits. By comparison the remaining 14% of business launches focused on creating new market space accounted for 38% of total revenues, but 61% of profits.
However, the reality is that great ideas are not always commercially successful. In fact, the statistics are alarming, with over 80% of new products failing. So it is essential that businesses prioritise ideas, assess the market potential and focus resources on those ideas that offer the best return on investment with an acceptable level of business risk.
At Shaping Business we believe that innovation is the lifeblood of every company because it has the potential to create lucrative new revenue streams. Successful innovation requires a creative yet pragmatic approach appropriate to the organisations size, culture and markets served. There is little point in creating a sophisticated process to facilitate innovation in an organisation with insufficient resources to maintain momentum.
At Shaping Business we have extensive experience of embedding a culture of innovation in businesses:
Assisted a professional services consultancy with new service development processes to deliver over £1m of revenue within 18 months
Redefined a market focused new product development process for a leading electrical equipment manufacturer to create a pipeline of five new products to address customer needs.
To increase your revenues and profits by creating a culture of innovation in your business, please email results@shapingbusiness.com or contact our office.
