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Business innovation can be very common in a lot of different sectors but is most common in sectors which rely heavily on technology or other fast-paced industries. For example, IT and web design companies must be very open to innovation as technical procedures can become outdated incredibly quickly. If a company is stuck using old methods, it may be of detriment to the business. Other industries that do not change as quickly, such as education or housing, do not require innovation to be quite as fast paced but must still be open to change in order to improve and run more efficiently.
Key term – Business innovation is an organisation’s process and procedure for introducing new ideas, methods, services or products. This has a large number of positives and can enable a company to operate more efficiently, quickly or in new markets.
Companies which are unable or unwilling to adapt to new situations or advances in a sector are at risk of being beaten by their competitors. Without innovation, companies could be in danger of the products or services they offer becoming outdated/unwanted, or the business may struggle to keep up with new procedures internally. This can cause them to waste resources and pay excessive running costs. Some of the most common types of change which happen in business include:
- Introducing automated systems to complete tasks in the office or automatically send messages both internally and externally
- Changing payment methods to being online rather than paper-based invoices
- Setting up new ways to store data online so that employees can access information quickly and save time
- Outsourcing certain tasks to ensure that the workforce can stay focused and specialise in their strengths
- Adding new ways to work with customers and provide support
Change can happen as a result of many factors. It could be that a company is forced into changes due to new legislation coming into force or that the business actively decides to change in order to run more efficiently.
External triggers for change
Usually, change is triggered in a company due to an external source. These sources ensure the company must make a change that will be financially beneficial. Companies must keep up to date with new technology, laws and other external factors that may have the ability to alter their approach to the way they do business. The reasons businesses make changes that come from external sources include:
- New legislation that comes into force – this could be to do with employment law, health and safety, wages or anything else that is connected to the legal side of a company.
- Changes that occur in the market – such as demand for products and the likes and dislikes of customers.
- Changes that are made by a competitor – they may begin to offer new products, change their pricing strategies or begin to work in new areas.
- Competition from a new start-up company – usually new companies that come to a sector will do things differently and try to undercut established businesses in order to gain a reputation. Companies must be vigilant and react if this happens.
- Competition from overseas – businesses that enter markets in a new country will have often found a lot of success in their place of origin and can seriously threaten established business. This has happened most recently with the emergence of new supermarket chains which have caused some nationally recognised chains to see a dip in sales.
- Changes in economic conditions – when the economy of a country is in a recession people are much less likely to spend so this can have an adverse effect on business. Alternatively, companies can see a rise in spending during economic booms.
Internal triggers for change
Change may not always be triggered by external factors or competition. In some cases, it may be an internal factor that causes change in a business environment. These reasons can be just as hard to predict and can have huge effects on companies in the same way as external triggers. These internal triggers could include:
- A change in product lines or services
- Different members of staff that join the company or staff that leave
- Changes in the way that the business is owned or organised
- The need for new skills which the company does not currently have
- Identifying ways to save or make more money and changing to meet financial targets.
Models of innovation in businesses
Business innovation can be a result of a wide array of factors. Usually business innovation will relate to the design and creation of new products that are not yet offered by a company. This can be done with many different changes in the company’s plans including:
- Finding ‘white space’ growth opportunities – this is when a business creates something completely new that is not offered by themselves yet or any competitors. This type of innovation includes offering new services that are not yet on the market or innovative new products to customers.
- New customer engagement – a company can change their business model so that they can gain more information from their customers on what types of products and services they require. This can help a company run more efficiently and profitably by only focusing on what is making them money.
- Entering new markets – usually innovation is about expansion. This takes the form of a company entering a new market by developing a range of new offerings that can help to attract new clients that may not have been served previously.
- Creating new systems and rules – business innovation does not always have to be about who has the latest technology. Often simply running a company in an innovative way can help to cut costs, organise the hierarchy efficiently and encourage brand loyalty.
The vast majority of businesses try to innovate by creating new products that their competitors do not yet offer. In doing this they can offer something completely unique that is not available elsewhere – making them the only choice for consumers.
When creating new and innovative products there are two popular models for innovation that are widely used: Market Pull and Technology Push.
Innovation that arises from market pull is closely linked to demand by consumers. A company will look at the market and see what is popular before designing a competing product that can give them a share of this market.
The Market Pull model of innovation relies on a product being new and desirable to customers. The product has to be in demand and create a ‘buzz’ amongst consumers that want the latest and most innovative products available.
A good example of Market Pull is seen with digital cameras. Years ago there was a demand for cameras that could take a large number of photographs without the need for rolls of film – some companies decided to invest their efforts in developing the technology required to do this.
Technology Push is another popular model of business innovation. It differs from Market Pull in that the technology is developed before the product and is then incorporated into what a company offers. This means that the company has not carried out market research and then specifically come up with a new product to suit demand – they have heard about new technology and then applied this to their products. Because of this, Technology Push is often linked with making existing products better rather than creating completely new products.
Examples of the Technology Push model of innovation can be seen throughout the automotive industry. Often new technology will enable engines to run more efficiently or cars to handle better and this technology is then adopted by automotive companies and used in their new cars.
The difference between Technology Push and Market Pull is why the new technology has been created. Innovation in the Market Pull model is a direct result of demand and is therefore forced in order to meet the needs of the market. Technology Push will normally incorporate new products that have been developed independently and then used to improve what is offered by a business.