Why is innovation important? Is it important to all companies, small and large? Yes, it is. Some argue that smaller companies (especially start-ups) are naturally innovative and the large companies struggle to innovate. There are certainly some examples of innovative larger companies: Google, Apple, Proctor & Gamble and Reckitt Benckiser to name a few. But it is true; many large companies do struggle to be innovative and keep up with the smaller, more agile competition - I'll cover this in more detail on a later blog entry. Regardless of size, innovation is important to all companies.
So what does innovation really mean? Well, it is commonly thought of as being new products or services, but it is much more than that. I think innovation is fundamentally about value creation, but you can create value in many ways not just by launching new products or services. There are multiple types of innovation: in business models, cost containment, process and even in the way you manage your company and your people. There are many reasons to innovate as well, I think of them as degrees of innovation: to sustain and grow your existing business, to create new revenue streams, to create whole new businesses, or to provide strategic alternatives for your business should the unforseen (or possibly forseen, but you hoped it would not happen) happen.
It is imperative that innovation be linked to your strategy, the thought of 'letting a thousand flowers bloom' and 'you do not know where the next big idea will come from' are fallacious in real business. You can not afford to spread your precious capital and resources too thin, you must know where the likely targets for successful innovation, regardless of type or degree, are going to be.
We can not just be innovative and link it to strategy, however. We have to execute as well. It is imperitive to follow through on the good ideas (and kill the bad ones quickly) and make sure follow through all the way to delivery so that you can create value.
So why is innovation important? Because it is the primary driver of growth for your business, be it of different types and in different degrees, it is still about value creation and creating value is what business is all about. I like to think of a simple formula that forms the tag line for Dunbar Ventures. In mathmatical terms it is multiplication, because if any of the values are zero the whole thing results in nothing.
Strategy x Innovation x Execution = Growth