What is Business Innovation?
Business innovation is the practical implementation of new ideas to improve business operations, products, services, or models. Business innovation can often make or break companies. With the market constantly changing, companies that adapt to meet new customer needs continue to grow. For those who don’t change alongside the times, they risk being left behind.
A classic, real-world example of this is Netflix. What started as a mail-to-order DVD service became a multi-billion-dollar streaming service, all because of innovation. Netflix made a hard pivot in 2007 to digital media, completely reshaping its business model to meet new market needs.
Those who didn’t, like Blockbuster, eventually died out. Failing to acknowledge the growing consumer trends towards streaming, Blockbuster refused to pivot, ultimately going bankrupt in 2010.
Innovation vs. Creativity
Innovation may sound like another name for creativity, though the two are different: while creativity is the ability to generate new ideas in general, innovation is the practical aspect of applying them. Not every creative idea is necessarily innovative, though the two still very much coexist. Creativity and innovation work best when finding an idea that's unique yet practical enough to be truly effective.
Creativity and innovation at work together may look like a brainstorming session, where the best ideas are practically implemented. Throwing around different ideas, thinking outside the box, and asking “what if?” is creativity in its purest form. Only when those ideas are applied does innovation begin.
Why Innovation is Critical for Business Growth
For long-term success, it’s imperative that companies learn to adapt to changing times and continue to optimize their services, products, or internal operations. Here are other ways innovation creates value for a business:
- Creates competitive edge: Instead of relying on what’s already been offered in overcrowded markets, innovative businesses are constantly searching for the gaps. With this mindset, these companies stay one step ahead.
- Enhances adaptability: When innovation is a part of a company's culture, huge pivots in focus are often inevitable. Businesses with flexible approaches can adapt easily as culture, technology, and the world change over time.
- Creates revenue streams: Innovation in business often results in discovering new markets to target and opening up more streams of revenue.
- Increases efficiency: When innovation is focused on operations, efficiency can increase. Founders focused on improving processes, whether it be through production or delivery, can increase productivity.
- Improves brand reputation: When new ideas are the focus of a company, customers begin to view and associate a brand as cutting-edge and high quality.
5 Types of Innovation in Business
Innovation can exist in big and small ways. Below are five types of innovation, what they look like in practice, and questions to inspire innovation in your own company:
Product Innovation
Product innovation involves creating or improving a product or service. Product innovation doesn’t have to be a groundbreaking piece of technology or the next big thing. It can simply be about making an existing offer more optimized or user-friendly.
For SMBs, product innovation may look like:
- A small medical practice offering telehealth options for virtual check-ins.
- A cleaning company switching to eco-friendly cleaning supplies that are safer for human use.
- A marketing agency creating packages for clients, with customizable offers of social media management, content creation, design, and more.
No matter the industry, products and services can always be optimized for quality or customer experience. To create more innovative products, go deep with what’s already working. Here are some questions that can get you started:
- What feedback and suggestions have we been hearing lately?
- Is there a gap in the market that our competitors aren’t seeing?
- How can we make our current offerings more convenient, personalized, or valuable?
- Where do you succeed over our competitors? How can we leverage that success even further?
Process Innovation
Process innovation involves optimizing a production or delivery method. Instead of focusing on the final product, process innovation asks how a process can become more efficient and streamlined. For SMBs, this means getting rid of unnecessary overhead, repetitive tasks, and overcomplicated systems to make more time for what counts.
For SMBs, process innovation may look like:
- A hair salon automates scheduled appointments and cancellations online.
- A construction company uses targeted email campaigns based on real data collected from potential and past clients.
- A dental practice goes paperless to make patient forms, appointments, and records easier to navigate and store.
The key with process innovation is finding and limiting the friction between your product and the customer. Some questions to better understand the focus for process innovation might be:
- What tasks are taking up the most of our time?
- What processes could be digitized or automated?
- What technology investment would help operations become better quality?
- How can we provide a more consistent customer experience?
Business Model Innovation
Business model innovation is improving, shifting, or fundamentally changing the way a company provides value. With business model innovation, businesses discover new avenues to offer their services, opening up new markets and added streams of revenue.
For SMBs, business model innovation may look like:
- A restaurant provides subscription services and meal plans through delivery or pickup outside normal operations.
- A tutoring business creates prerecorded videos and posts them online, creating a content library of resources that can be accessed through a paid membership.
- A bookstore rents out its store space for private events and small parties.
Business model innovation questions the packaging of your current product or service. The value stays the same; only the way it’s delivered changes. Some questions to explore innovating your current business model:
- Are there different ways our customers could be buying from us (subscriptions, memberships, etc.)?
- Could we adapt our products to better serve other markets?
- Are there any nonobvious niches we’re missing?
- How can we make our product/service easier for customers to receive/experience?
Marketing Innovation
Marketing innovation is brainstorming new and unique ways to market a business. Often, marketing innovation goes against the status quo of what typical marketing looks like for a specific industry.
Some examples of marketing innovation in practice might look like:
- A clothing company uses social media content to showcase personalized style guides for customers.
- A SaaS company goes against the grain with print marketing ads and billboards to stand out amongst digital competitors.
- A catering company hosts a catering tasting experience so prospective clients can try foods before booking.
Marketing should stick out to customers. With marketing innovation, creativity can truly shine and be the catalyst for unique strategies that pull people in. Some questions to better understand how your business can apply innovative marketing tactics:
- Where do our customers spend the most time (in person and online)?
- What does everyone else in our industry say about themselves that we could do differently?
- How can we create content that people genuinely want to save or share?
- Can we tailor our messaging to more specific niches?
Organizational Innovation
Organizational innovation is improving new internal and external functions at an organization. Often, creating organizational innovation in a workplace involves cross-functional collaboration and rethinking leadership, team members, and even customer roles.
Some ways SMBs can improve internal functions at work may be:
- A small medical practice cross-trains staff with other basic duties, like scheduling and checking patient records, so bottlenecks are avoided when someone is out.
- A fitness studio’s management checks in with instructors frequently to learn what classes they’d like to offer.
- An IT company supports its employees with free professional development courses to expand their skill set.
Improving communication and internal relationships is often the core of organizational innovation. Some questions to better understand for your own business may be:
- Are there any bottlenecks in leadership that can be reduced?
- What ways can we improve collaboration across all teams?
- What ways can we invest in employees so they can feel better supported?
- What repeated conversations, questions, and misunderstandings keep appearing?
How to Keep Innovation at the Center of Your Company
Innovation isn’t something you can simply add to your company as an afterthought. To be truly effective, an innovative spirit must be felt at every level, from leadership to employees to customers. Here are some other ways founders can create a culture of innovation within their own business:
- Take risks: To stand out and do something different, risk will always be involved. Though taking risks doesn’t mean putting all your eggs in one basket and hoping for the best. The best innovation risks will be based on a mix of real data, changing market needs, and uniquely creative ideas.
- Listen to your customers: The key to innovation that gets to the heart of your customers is listening. Regularly ask for feedback and reviews by sending out surveys, analyzing metrics, and directly asking how services or products can be improved.
- Build up diverse, collaborative teams: Employees from all different age groups, skill sets, backgrounds, and places will offer your company a rich and nuanced perspective. Not only that, but make sure your team regularly communicates with one another, encouraging new ideas with every meeting and conversation.
- Strive for small wins: Founders should embrace experimentation and continuously strive to improve, no matter how small it may seem. A true culture of innovation knows that even the tiniest of improvements can make the biggest impact.
