Part 1 of this two-part series covers innovation. Part 2 will present ways to fund innovation.
Toward the end of Apple’s splashy product launches, as the packed room of invited media and guests grew quiet and people fidgeted with nervous energy, ready to go back to work, the late Steve Jobs was famous for saying, “There is one more thing.”
Every year, the company would outdo the previous year’s announcement with better products. Whether Steve was announcing a new wireless mouse and keyboard, computers in a rainbow of Skittles colors, powerful computer processors, the iPod, the iPhone, an ultra slim MacBook Air (that fits in a interoffice envelope), or the iPad, there was always one more thing.
That one more thing is innovation. The Merriam-Webster Dictionary defines innovation as “the introduction of something new, an idea, method or device.” Innovation is what attracts new customers and keeps them coming back, which is part of the value creation process. Whether big or small, companies know that to stay ahead of furious competition, you have to innovate. If you need a reason why, there’s a growing list of once-dominant companies, no longer in business.
THE INNOVATOR’S EDGE
Fast-growth startups and small businesses are often the breeding ground for innovation. These companies have a competitive advantage, in that they are adept at innovating; thus, they often become acquisition targets of much larger firms, which struggle to develop new products organically. These tiny companies’ innovations become the building blocks for new products integrated into the technology you may see at Apple, Google, Facebook, or Amazon.
Innovation can be released in any industry. For example, let’s look at the pizza business. Modern pizza got its start in Naples, Italy, during the late 18th century. Today, Domino’s is the second-largest pizza chain in the world, with more than 12,500 locations.
In a Harvard Business Review piece, “How Domino Pizza Reinvented Itself,” Patrick Doyle, CEO of Domino’s, says the company is not only in the pizza-making business, but also in the pizza-delivery business. “We are as much a tech company as we are a pizza company,” says Doyle.
Of the 800 employees at corporate headquarters in Michigan, 400 are in software and analytics. Customers can order a pizza on the Domino’s app, Tweet for a pizza, or simply text an emoji. Each order is monitored at every step of the way by technology, giving customers real-time information about the status of their order—vital signs for pizza delivery and the tech-hungry digerati.
IT’S NOT CHEAP
The cost to innovate is not cheap, but failure is costlier. Apple spent more than $10 billion in 2016 on research and development (R&D). For Apple, and many other companies, that’s simply the cost of developing new products and improving existing ones. United Technology Company (UTC), headquartered in Farmington, CT, reported a cost of $3.9 billion on R&D to make better jet engines, elevators, security, and cooling systems, according to its 2015 annual report.
Well, you say, that’s great for Apple, UTC, and their large brethren, but not so good for the 28 million small businesses in the United States. Not so fast. Smaller firms also have benefited from technology to improve their businesses. These firms can learn valuable lessons by investing in an innovative strategy.
The first step is to develop an annual budget for how much you’re going to spend on R&D. This money is not a slush fund for junkets to Las Vegas. It’s money to keep your business at the top. It’s an insurance policy to compete in the future.
The second step is to develop priorities: What will generate the best return, because innovation for the sake of innovating doesn’t produce results. There has to be an end-game for your innovation investment, which means customers must be willing to buy the product or service at a price high enough to generate a profit for the business. Innovation has to solve a pain point (problem) or make life easier for customers. The last step is to manage the process to create the desired outcome and make adjustments as necessary.
INNOVATION IS A BUSINESS MODEL
Startups and small businesses have a competitive advantage because they are closer to the end-user and don’t have layers of management that must green-light a project. These companies can test products without red tape, and the feedback can be instantaneous. When a test doesn’t work as planned, changes can be made in minutes, hours or days, not months.
Innovation must be at the heart of your business model. All businesses must explore ways to utilize technology and the Internet as the source of future innovations. The possibilities are endless, from new touch screen ordering systems at restaurant tables, quicker ordering apps like that of Starbucks, online reservation systems, and point-of-sales (POS) systems. Technology and the Internet will continue to be at the forefront of changes to come.
Your business may not be the next tech darling or industrial conglomerate. However, innovation is a must for large and small companies alike. To keep customers coming back for more, ask yourself, what’s the “one more thing” for your business? The answer to that one question may shape the future of your business. In his Harvard Business Review piece, Patrick Doyle concludes by saying that playing it safe is the riskiest plan of all.
About the Author
Anthony Price is Founder & CEO of LootScout, which counsels small businesses about how to raise capital. Learn more by visiting www.lootscout.com or follow on Twitter @LootScout. Contact Anthony at firstname.lastname@example.org