Innovation is often touted as the secret to business success. But what exactly does being innovative in small business involve, and how can you do it?
The late US management consultant and scholar Peter Drucker once said, “Business has only two functions – marketing and innovation. All the rest are costs.” The accountant in me has always found this sentiment a bit hard to swallow (does this mean I’m just an expense?), and led me to continuously ponder what innovation in small business is and what value it has.
To explore the concept of innovation I spoke with Mark Paddenburg, CEO of Innovation Centre on the Sunshine Coast. Paddenburg says innovation in a business can take many forms – from changing your business model to the introduction of a new or significantly improved products or services. It could also involve improving business systems and processes or finding a better way of promoting and distributing your products.
According to Paddenburg, the important thing to remember is: innovation shouldn’t be relied on to right wrongs in your business; rather it should be intrinsic to its progression – an “embedded, ongoing practice” as opposed to a quick fix.
When looking to innovate, he says it’s essential business owners understand the competitive environment, the direction their business is heading in and what the unique selling proposition (USP) is.
“Innovation that is misguided, not based on research, or carried out for the sake of innovation itself may prove costly and not be in the interests of the business at all,” he says.
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Innovation can also help to boost business growth.
“For business – it’s essentially innovate or stagnate,” says Paddenburg. “We’re in a highly competitive environment and often it’s innovation that makes the difference.”
He gives the example of the retail sector using technology to attract and keep sticky customers, citing companies such as women’s fitness-wear line Lorna Jane, whose digital strategy has helped it secure over $50 million in extra sales.
Statistics support that innovation is important for business growth, both in terms of profit and workforce. It also helps to improve productivity.
Research from the Australian Bureau of Statistics shows a third of businesses that took steps to innovate during 2011–12 saw an increase in productivity, while only 14 per cent of non-innovation-active businesses reported any increase in productivity.
It’s estimated that only 38.8 per cent of Australian businesses employing 0–4 persons are actively innovative. That means over 60 per cent of micro business are not taking advantage of all that innovation has to offer.
Whether it’s improving the goods or services you provide; enhancing your operational, organisational or managerial processes, or developing your marketing methods, why not embrace innovation as a part of every day practices, and reap the benefits?
How have you been innovative in your small business, and has it been valuable?