Small Business Blog from Atlantic Canada

I am "CA" Atreya (PMP, MBA), the author of this blog. I help businesses in Atlantic Canada achieve their BHAG successfully. You may subscribe to this blog using a feed reader (RSS).

Innovation.

This is the most often used word in meetings now-a-days, I think. Count the number of times this word pops up in strategy meetings. At a recent quarterly meeting with a client, my count was 27. I couldn’t stand it. I asked, “What do you mean by innovation? When you say we need to innovate, what exactly do you mean?” The answers ranged from “We need to introduce a new product line” to “We need to improve our existing product”. The general theme I heard in all the answers was, “develop and commercialize breakthrough new products and services.” But is that what innovation really is? A quick reference to a dictionary yields the following definitions:

1. The act of introducing something new
2. The act of starting something for the first time

Some even go to the extent of defining innovation as “the creation of new products and/or services”. (Though I am not sure how much of an authority investorwords.com is on the English language.)

I like the first two definitions. It is quite broad and all-encompassing. But why do businesses focus just on products and services? There is much more to innovation than just introducing new products and services. Businesses need to embrace the first two definitions of innovation as outlined above.

In today’s intense competitive environment, product life-cycles are getting shorter and customers are more demanding than ever. Businesses are forced to develop and use whatever tools they can get their hands on to develop and sustain competitive advantages. Innovation is now today’s mantra, just like CRM and ERP were in their prime. It is being used so much that it has become a cliché, a buzz word to throw around. More often than not, when they talk innovation, they mean the introduction of a new breakthrough product. But it is like winning a lottery. What are the chances? Innovation is also an expensive proposition. It needs to follow a process and there are opportunity costs associated with innovation. Process – did you say? Of course! Innovation without process is a complete waste of resources. (For those who are interested, Robert Cooper’s Stage Gate® is the most often used process and it is one of the best too.) Ah-ha! Process – keep this in mind. We will come back to it.

What do steam engines, automobiles, semiconductors, minicomputers, and more recently digital photography and VoIP have in common? You are right, they’re disruptive technologies. I don’t know about you, but 7 out of 10 people I talk to about innovation think about disruptive technologies when asked what the word “Innovation” means to them. Think of FedEx, Dell and Wal-Mart. Did they introduce disruptive technologies? No. The technology was already there. Were their innovations a large breakthrough? No. Were they able to sustain it over a considerable length of time? Yes. And herein lies the other aspect of innovation: Continuous and incremental innovation.

Combine the above two – Continuous and incremental process innovation – and you have a killer competitive advantage that is quite difficult to replicate. It takes experience and domain knowledge to identify a process and introduce incremental changes. Guess what – as a small business you are ideally suited to accomplish this. You have no bureaucracy or paperwork to push around or ask for permission to introduce process change. You can quickly test and accept or discard process changes, and fine tune processes that work. It if works, you competitors will want to follow you and implement similar process innovations. But by the time they catch up, you are into your next round of incremental process innovation. Do this consistently and you are always going to be ahead of the game.

The difficult part is identifying the process. No, actually it may be simpler than you think. Look around your industry; your business landscape. It is filled with ideas and processes that you can innovate in. Just keep an open mind and ask yourself one question for each rule your industry follows, “Can I break this rule?”. Sticking by the rules is for suckers within the context of innovation. It is very tough world out there – specially for small businesses and you have to play on your strengths. Your small size is your biggest strength. Use it against your larger competitors. Use their momentum against them. Break the rules – the assumptions – laid out by the biggies.

You know you do not have the resources to invest in large disruptive technologies. But you do have the resources to introduce quick and incremental process changes. Your lack of resources in-house is your second advantage. You can use this opportunity to look for innovations outside your business. Simple logic – say your business employs 100 people. Population of Canada is approximately 30 million. What is the probability that someone outside your organization is going to introduce a disruptive innovation in your industry? Simply put, if you focus on innovations in-house you are restricting innovation opportunities. You may employ smart people – but there are people out there who are smarter. Sleep on this and see if this makes sense. (Let me know too.)

So to summarize, do not restrict innovation to products or services. Introduce process innovation. Do not look at a large breakthrough or a disruptive product or service. Think continuous and incremental innovation. Lastly, look to appropriate innovations outside of your organization. Now, let’s talk.

Note: You may want to read this article at Knowledge Wharton “Sustaining Corporate Growth Requires “Big I” and “small i” Innovation” (Free registration required). The article talks about having a balance between investing in disruptive innovations and incremental innovations. However, the examples are from large businesses.

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