Innovation expert, Dr Eva Diedrichs shares practical tips, techniques and ideas to help you improve and enhance your innovation and R&D activities.
Eva was in Scotland recently to lead a masterclass for Scottish firms to help them improve and enhance their businesses through innovation. She answered a few questions that came up during the session.
Why is innovation so important for business?
Innovation should be more than just the 'icing on the cake' for a business, it should be at the core of any businesses that strive for growth.
If companies don’t innovate they will disappear from the market because customers are expecting new products, new services, new business models, and new processes. Otherwise, the companies will be put under price pressure – this is something you can stand as a company for some time. But not forever.
That’s why we see a lot of companies disappear as they don’t manage to innovate on time.
Innovation means to deliver attractive new products or services or to identify new markets or new customer groups. Innovation means to deliver attractive new products or services or to identify new markets or new customer groups. Innovation is not only product or service innovation, it’s innovation in processes, business models or in markets that you enter attracting new customers.
For example, if you look at the smartphone, we have had telecommunications for more than 100 years, but it wasn’t possible to use it in a mobile version and we could not use it as a device that provides us with information and access to connect to our friends, families or business partners. This emerged as a hidden desire that is now addressed with the smartphones.
How can a business be more innovative?
First of all, it very much depends on the leadership. It’s essential that they drive innovation and have ambition to grow. For example, if you have an owner of a business who’s maybe 70 years old who established his business some 35 years ago, he might not be interested in taking much risk and going into new adventures. So, to that company, he might be some sort of a barrier [to innovation], however, if you imagine his son who takes over, he might have some ideas about how to grow that business beyond what his father has achieved and he will think of how to implement these ideas.
The key question you need to answer is: “What are the customers asking for and what is the value that our products and services can offer to the customer?”
If you take the example of Nokia. At one time Nokia had been the company who was most successful in mobile telecommunication devices. They had significant market share, but what Apple understood much better is what the customer might want on their mobile phone. So innovation is about understanding and anticipating needs and going beyond what the customer tells you, by thinking about what could be of value.
When the smartphone came out it was probably not perceived as a need, it was just a value that people appreciated: Today it's a need.
Is all innovation about taking risks – is it possible to do it without taking risk?
It’s not really possible without any risk, however, you can decide the degree of risk you’d like to take.
If you think of the automotive industry, for example, people will say Tesla is a driving computer. So the person who said “I’ll take a computer and put wheels around it and see how it’s accepted in the market,” took a significant amount of risk.
Whereas, for example, Aston Martin might take less of a risk by saying “we change the design, we change the engine, we add some technology that is ready and accepted in the market and we will see whether the customer will pay a significant amount of money for the car”.
So the risk for Aston Martin is probably less than it was for the guy that launched the Tesla. Still the success needs to be proven.
So innovation can be incremental? So innovation can be incremental? Yes, you can have certain degrees of level of risk and then we talk about incremental, radical or disruptive innovation.
What is an innovation strategy?
An innovation strategy will help you get an idea of how you will grow and how you will implement your business strategy.
For example, if the management of a company decides it would like to grow its turnover by 50% then the question is: “Where does this growth come from?” If it’s not doable with the existing product or offering, then they must think about which areas can develop new offerings that will help to achieve that growth. That’s why an innovation strategy is essential.
It’s not only essential for companies who have high growth ambitions, but also companies who say they want to maintain their level. Because maintaining means you don’t want your business to decline. You want it to be stable. And that also means thinking about what is the next generation of our offerings. How will it look? What will be the additional features or new value proposition?
Some people will say we will do it [innovation] based on our gut feeling. This is fine, but especially if you want to grow your company in terms of number of employees you have to communicate your gut feeling. And if there’s another new idea every week, this will not get the organisation focus.
However, if you have a clear innovation strategy and you communicate it into your organisation, the staff members know exactly the areas where they would like to achieve their growth – these are the areas where they have to create ideas, test those ideas and develop them into new offering. It gives the organisation focus and increases the effectiveness and increases the efficiency.
If staff members know which areas the company is interested in, they start thinking in that direction and providing ideas in these fields.
Any advice or tips about becoming more innovative?
First of all, management needs to have a good understanding of their level of ambition. And then they need to engage the organisation saying: “This is our level of ambition and these are our ideas and this means we need your ideas to grow”.
Five dimensions of innovation
- Organisational and cultural
- Innovation processes
- Enabling factors such as IP or knowledge management
- Innovation results
To grow by innovation means you start from the level of ambition to engaging your organisation, developing innovation culture in your organisation. You then have the staff translate the ideas into new offerings. For that, you need very clear innovation processes and these processes you need to monitor and control.
You also need to have intellectual property management and knowledge management in place so that you can then say 'this is our achievement' – we have grown by innovation in terms of revenue, in terms of profit, and in terms of number of employees.
The most important aspect of innovation is managing results. You can manage either from the top – from the strategy – or you can manage from the result aspect by knowing what you want to achieve.
For example, 3M has a very clear target for everybody. They say they would like to have 50% of their revenue coming from products that are not older than three years. This is a very clear statement from the management into the organisation. And that these are KPIs for the organisation. So each member in the organisation is measured by how they contributed to this overall target.
Innovation is in the DNA at 3M. It’s something that management of every organisation should try to achieve to get innovation fully integrated. So innovation becomes a common procedure and not something you do during a workshop or you do next week because your boss asked you for some ideas. It’s something that’s totally integrated in your day-to-day work.
However, innovation is something that can be managed in a very systematic manner. It’s true a lot of people say you cannot manage innovation or not the front-end of the process when you have to be creative. You have to provide freedom and room to explore things, but you can offer the environment, the structures and the support to stimulate this creativity.
Once you have the ideas that you would like to develop, you need to have a bit more management and control built in so that the development projects reach their targets. Alternatively, ideas are stopped at an early stage as it turns out that, say, the idea was good but the technology is not yet ready to really develop the new offering.
Ideally you can launch the innovation before your competitors are able to put it on the market.
A key question to help manage the risk of innovation is to say: “What would happen if our competitor would develop this idea into a product or service? Would it affect our competitiveness? Yes or no? And to what degree?”
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