Economics/Business

What is innovation in business/Importance/4 types/challenges/paradigms

Innovation in business is the driving force that drives the global economy in the digital age – and you need to master this concept to compete in the new landscape.

For starters, you need to understand that innovating goes far beyond launching new products or adopting the latest technologies.

It is possible to create something new from scratch , reinvent what already exists, add new features to a solution or even revolutionize an entire market.

What Is Innovation?

Innovation is any initiative that creates something new or reinvents something .

In the corporate context, innovating means successfully exploring new ideas, with the objective of generating value and profit.

Thinking of a more technical definition, we can take as an example the description of the Organization for Economic Co-operation and Development ( OECD ):

“The implementation of a new product or service, marketing process or method, or even a new organizational method with new external relationships and changes in the work environment”.

That is, any improvement or novelty implemented in a company can be considered an innovation.

But it is important to emphasize that innovating is not just creating a product, process or method from scratch.

Often, innovating is a reinvention of something that already exists , executed differently to get a better result.

Likewise, innovating is at the heart of entrepreneurship , as creating new businesses and solutions is the way to succeed in today’s market.

How Does The Innovation Ecosystem Work?

We call innovation ecosystem the network of innovative companies such as startups , scale-ups, accelerators, incubators, innovation hubs, among others.

These businesses and communities form the so-called new economy , which prioritizes products over services, undergoes intense digital transformation and has a people-centric culture .

A great symbol of this ecosystem is Silicon Valley , a technological hub located in California, USA, which was the birthplace of Big Techs such as Apple, Google, Facebook and Amazon.

In addition, the keyword of this trend is “ disruption ”, which represents a break with patterns already rooted in the market and the creation of new concepts, products and processes.

Another concept related to this network is Industry 4.0 , which characterizes the most modern to produce consumer goods: Big Data , Internet of Things , Artificial Intelligence , Machine Learning and much more.

In other words: all sectors of the economy were impacted by digitalization and had to reinvent themselves to remain competitive in a market full of uncertainties.

In this way, the innovation ecosystem is not restricted to startups, since large traditional companies have also adopted new technologies and methodologies to keep up with the pace of change.

How Important Is Innovation In Business?

Innovating has become indispensable for companies that want to remain competitive in the current scenario, which presents several challenges.

In the past, companies had control of the market and there was more demand than supply, with a total focus on the product.

Today, the situation is the opposite: consumers are at the center of the shopping experience and much more demanding, while the offer of products and services has multiplied and competition has increased exponentially.

With globalization and digital transformation, changes happen quickly and companies need to continually evolve to keep up to date and able to compete in their segments.

In addition, the wide access to information provided by the Internet has increased the level of demand in relation to the customer experience .

Therefore, the company that manages to offer the best products and services, the best customer service, the best usability on the website, the fastest delivery, among other criteria, wins.

To stand out in such a competitive market and win customers, the only way out is to innovate .

With innovation, organizations manage to maintain their profitability and, from a macro point of view, the entire economy develops.

After all, innovating increases productivity, brings new solutions, creates new technologies, produces wealth and improves people’s quality of life.

What Are The 4 Types Of Innovation?

Business innovation can be classified into four main types.

Check each of them:

Product Innovation

Product innovation is the best known in the market, as it consists of creating new products and services for commercialization.

It is easy to see that solutions sold by companies become obsolete more and more quickly and are replaced by more advanced versions.

But product innovation is not just about bringing new technologies and features.

It is also possible to reinvent the way of consuming something , as Airbnb did by creating a platform for sharing accommodations between travelers around the world – an innovation that revolutionized the hotel market.

Among the possible innovations that can be applied to an existing product, we have:

  • Changes in packaging and general aesthetic changes
  • Added new functionality and features
  • New collections and trends, in the case of the fashion market
  • New versions of software and applications with bug fixes
  • Product volume and weight change
  • Options for customizing a product or new products derived from an original version.

Process Innovation

Process innovation is any optimization or change carried out in the production and development processes of products and services.

In an industry, for example, it may be the implementation of more advanced machinery or a more modern methodology, with the objective of increasing productivity and the quality of the final product.

In a software company, it can be the implementation of agile methods of development and project management , which speed up the creation of apps and systems through iterative cycles of improvements that count on the participation of customers.

The important thing is that the new process brings advantages to the company and its customers, resulting in a more complete and satisfying experience.

Disruptive Innovation

Disruptive innovation is one that has the power to break with the common order of a segment and implement a new model.

An example is Netflix, which created a revolutionary series and movie streaming service in the late 1990s.

As a result, the Blockbuster video rental network went bankrupt and movie rentals were replaced by subscriptions to online services.

Therefore, we can say that Netflix promoted a disruptive innovation, which completely changed the market and started a new era for the consumption of audiovisual productions.

Disruption is often sudden and uncomfortable, as it abruptly changes consumption habits and, as in the example of Netflix, it can mean the end of several established companies.

Generally speaking, this type of innovation comes from small companies and startups , as larger organizations tend to opt for more gradual and evolutionary paths.

But even this scenario is changing, as corporations are recognizing the importance of promoting more significant changes in their products and services, due to the evolution of the market.

Open Innovation

Open innovation has the differential of opening the process to the contribution of other audiences and institutions, such as other companies, universities, research centers and the users of the product or service themselves.

This type of innovation is very common among startups and its main differential is the collaborative method .

In this case, companies collaborate with each other to reach new levels of innovation, rather than just competing.

On the Distrito open innovation platform , for example, organizations can connect with startups from all segments for new product and process development projects, mentoring, formation of innovation hubs, among other purposes.

Today, it is increasingly common for disruptive companies to join forces with major market players to create innovative solutions with great market potential.

What Are The Innovation Challenges?

Some challenges are common to all types of innovation.

See some of them:

  • Overcoming fear , as it is impossible to innovate without taking some risks
  • Ensuring that innovating is really relevant and has the potential to generate value in the market (innovating for the sake of innovating is a waste of time and money)
  • Getting funding for ambitious projects, in the case of smaller companies such as startups
  • Build a culture of innovation that encourages initiatives despite risks and values ​​mistakes as part of the process
  • Train innovative professionals in the market to meet the new demands of companies
  • Measuring the return on investment in innovation, which is not always clear to managers.

What Are The Innovation Paradigms?

Innovation paradigms are known as the “4 Ps” of innovation.

Check out:

  • Purpose: it is the objective that justifies innovation, such as generating value and increasing competitiveness
  • Processes: is the way an innovation must be executed to fulfill its purposes in the market
  • People: are the interested parties (stakeholders) in innovation, such as managers , customers, employees, partners, community, etc.
  • Policies: are the rules and guidelines for the innovation to be implemented and reach its potential as planned.

What Does The Innovation Law Say?

The Innovation Law ( Law nº 10.973/2004 ) defines the rules for fostering innovation.

Its main objective is to create specialized and cooperative environments in which innovation can be stimulated within the market.

In general, the Innovation Law:

  • Regulates partnerships between the public and private sector in favor of innovation (eg companies and universities)
  • Stimulates the output of academic knowledge to the corporate world
  • It modernizes the internal environments of companies, in order to reduce legal and bureaucratic obstacles and give greater flexibility to institutions operating in the innovation ecosystem
  • It structures project networks between organizations with similar objectives, funding and stimulating technological entrepreneurship actions and creating incubators throughout the country.

How To Innovate In Your Business?

As we have seen, there are several ways to innovate in a business.

You can innovate in products and processes , conduct an open innovation project in partnership with other companies, or even pursue a disruptive launch.

Here are some tips to innovate the right way.

Learn How To Manage Innovation In The Company

Innovation management is the entire process of planning, executing and controlling your innovative initiatives.

To get started, you need to structure your innovation plan from scratch, defining the objectives, strategies, metrics used to track progress, action schedule, among other essential aspects of a project.

It is essential that every initiative is perfectly aligned with its business objectives , so that innovation is, in fact, relevant to the organization’s growth.

In addition, the company itself must have a culture of innovation that encourages new ideas and experimentation among employees.

Leadership, in turn, must be prepared to guide projects and engage teams around the necessary changes.

Tips For Creating A Culture Of Corporate Innovation

To create a culture of innovation, you can follow the tips below:

  • Empower transformative leaders , who can act as mentors and coaches to encourage talent development and innovation
  • Facilitate access to information within the company, so that everyone can share their ideas
  • Give employees a voice and have an open channel for suggestions and projects
  • Avoid the formation of “silos”, which are isolated departments that do not collaborate
  • Try to have a more horizontal structure, giving employees autonomy to take on their projects
  • Invest in collaborative technologies to drive innovation.

Technology, Creativity And Innovation: How Are They Related?

Technology, creativity and innovation are deeply interrelated concepts.

Technology is an essential tool for any initiative to innovate, but it requires a dose of creativity to be used correctly.

For example, it is not enough to implement advanced project management software if the company does not train the team to use all its resources and does not know how to add it to the organization’s culture .

In the same way, a revolutionary technological product can be a sales failure if the consumer is not able to use its features the way the entrepreneur planned.

Hence the importance of uniting technology, creativity and innovation for market success.

What Is The Relationship Between Entrepreneurship And Innovation?

Entrepreneurship and innovation are inseparable concepts.

After all, entrepreneurship basically means exploring the value-generating potential of new ideas .

To successfully undertake, it is necessary to transform good ideas into products and services that solve consumers’ problems and, at the same time, are profitable for the business.

And this is precisely the essence of business innovation.

Examples Of Innovation

A classic example is the tech giant Apple ‘s products , such as the iPhone and iMac, which have new versions constantly released with increasingly impressive technologies.

No wonder Apple ranks among the leading innovators of the digital age.

Another striking example is the collaborative economy companies , such as Uber, Airbnb and 99, which have reinvented common services such as accommodation and taxi through sharing applications.

In addition, there are more and more novelties in the recurrence market , which covers products and services by subscription.

This segment started with streaming services and SaaS (Software as a Service) software and, currently, even has car and home subscription solutions.

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