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What is innovation, and how can it benefit your company?

A quick Google search for what innovation is shows us that this term has already become a buzzword. But what does this mean in practice?

For many companies, innovation means taking products and services and changing them in detail: color, shape, features, size, etc. However, this form of incremental innovation alone does not work anymore in many markets. Besides, due to digital transformation, companies also need to develop more digital business models.

In summary, innovation is always a big challenge – it needs to be understood, first, and foremost.

We offer to demystify innovation and show you how your organization can benefit from it, as well as the steps needed to achieve it.

What is innovation?

Many scholars have long been concerned with innovation. One of which is German economist Jürgen Hauschildt, who said that “qualitatively, innovations are new products, services, processes, or business models that differ visibly in a comparative state.”  

It is also interesting to investigate the etymology of the word innovation. It comes from Latin and means “change, reform, the introduction of something new, implementing a new and progressive solution to a specific problem”.

In any case, scholars of the subject can all agree that innovation only exists when it represents at least two characteristics:

  1. novelty or renewal of an object or action;
  2. change and application – which means that innovation must be invented, introduced, used, and applied.   

This is precisely where the crucial difference between innovation and invention lies. Often, “innovation” and “invention” are used interchangeably. 

However, if you look more closely at the meanings of the words, it is clear that invention may be the basis for innovation. Inventions start with an idea and the development of a prototype. For innovation to emerge, the prototype must become a product/service introduced into the market and used.

Types of innovation

To help you understand what innovation is, it is essential to remember that there are several types of innovation. Here is a summary:

→ Performance innovation: a new idea for a well-known market. An improvement of the existing offer, usually made possible by new technologies;

→ Incremental innovation: additional development and/or optimization of existing products, services, or models. These adjustments are often used to reduce costs, optimize customer benefits, or reposition;

→ Radical innovation: implementing completely new ideas into products, services, or business models. They have the most significant impact because new markets or customer needs may arise from this innovation;

→ Sustainable innovation: it helps companies to defend their position in the market and remain competitive. Therefore, any innovation that improves an offer is sustainable, regardless of whether it is radical or incremental.

→ Disruptive innovation: innovations that shape new markets and disrupt established ones; they are often possible through new technologies, such as the car, which was disruptive for bus manufacturers 100 years ago. If innovation is disruptive, it usually depends on perspective – although the electric car is a radical innovation for the automotive industry, it is disruptive for the oil industry;

Open innovation: innovation process that revolves around the free flow of ideas, in search of business solutions beyond corporate borders, through partnerships with other organizations and research institutions;

→ Agile innovation: the ideas are implemented using collaboration and iterative prototype loops. With the adaptability of agile innovation processes, innovations can reach the market and get implemented sooner.

→ Go deeper, download our e-book Innovation Lab: Discover, Explore, Co-create!

How innovation can benefit your company

Innovation in the corporate world has advantages on several fronts. Those fronts being: processes, products, services, and business models.

Process innovation

This is a change or new development in processes and procedures. In many companies, process innovation is called a process of continuous improvement or idea management.

Product innovation

Refers to the development of innovative product properties or the creation of new products. Companies are very different in managing the development of innovative products; sometimes, showing off or explaining your product innovation helps sales.

Service innovation

It is the development of new services and service offerings. Service innovation is often a preliminary stage of business model innovation. 

The main difference is monetization: innovation in services is not necessarily linked to customers who pay for that service.

Business model innovation 

This involves the development of innovative types of added value. The focus is on developing innovative benefits for customers, for which customers are willing to pay (they can visualize and value innovations).

What innovation can do for your organization

Competitive factors are continually changing in today’s corporate world. Traditionally, companies’ competitive advantages were mainly attributed to cost and quality; innovation is what has catapulted the most successful brands forward. 

Thus, innovation, creativity, and development are among the most used in business management. Innovation has always been one of the driving forces of competition and has always imparted a high competitive advantage. 

On the other hand, numerous studies and publications in recent years show that the pace of change is increasing. In this sense, what can innovation do for your organization?

A success case

In addition to what you have read so far, we want to show you a success case that illustrates how innovation can raise your business’ competitiveness. 

Check out how a multinational fast-moving consumer goods (FMCG) managed to elevate its customers’ experience using chatbots – and increased their financial results, in addition to differentiating themselves from the competition!

→ Challenge: 

Bring consumers closer together and improve the transmission of values ​​and brand identity. Encourage the consumption of the brand’s main product during the Christmas season.

→ Solution: 

Build an MVP (minimum viable product) of a chatbot capable of interacting, answering questions, and giving suggestions to customers.

The chatbot featured a structured conversation flow, focused on user experience and Artificial Intelligence to build on content and learn from customer interactions.

→ Results:

In just one day:

  • approximately 89% of users considered that the bot helped them;
  • an average of 90 users were reached;
  • 2,200 of the error messages sent were handled;
  • only 2% of users had a negative perception of the chatbot.

Four steps to dive into innovation

Finally, check out the initial steps you can take to dive into innovation!

Step 1: Bring the culture of innovation to light

To promote innovation, it is vital that you also have employees who value new things – who are looking for them. You need to create a culture of innovation, and it won’t happen overnight.

Start by integrating innovation into your business’s strategic planning; then, raise your leaders’ awareness on the topic and, with their help, continue implementation globally. 

Promote lectures, insert innovation in internal communication, empower employees … Finally, show them that innovation has real value, that it’s not just a buzzword. 

Step 2: Set up an innovation committee

Gather a select group of professionals and give them the mission to foster an innovation culture. Ensure that this committee is multidisciplinary and multi-hierarchical – people with different skills, experience, roles, and responsibilities. 

In general terms, this committee can revolve around creating the innovation portfolio, selecting ideas, mediating debates, measuring, and communicating the results of discussions and actions around the innovation strategy.

This team’s main objective is to suggest and build new solutions to problems, delivering value to everyone involved, and generating real results for the company. The greater the volume of ideas, the more innovative the corporate environment becomes.

Step 3: Value collaboration (internal and external)

There is no innovation without collaboration. It is imperative to create a climate of mutual help and exchange of ideas. 

Promote the integration of departments and teams. To do this, invest in internal communication, promote integration events, create common goals with apparently “competing” teams. 

Likewise, you must encourage collaboration with suppliers, customers, and business partners. This gives rise to the innovation mindset. External audiences help employees, usually immersed in their chores, to visualize bottlenecks, modify processes, have disruptive ideas, among other things.

Step 4: Seek expert help.

Finally, a very useful piece of advice is: hire a consultancy specializing in innovation to “unlock” the innovative power of your business. Good consultants have know-how in methods that make everything easier to do. 

From diagnosis to the execution of specific projects, including the development of an innovation culture. The most successful companies have done this: using open innovation to differentiate themselves in the market and enhance their results.

What do you think? Were you able to understand what innovation is and why your company should invest in it? Check out our report with the hottest trends in innovation and business for 2020!