It seems that about every 10 years, just when the pundits, politicians and others are bemoaning the dire fate awaiting American business– especially manufacturing–we rediscover a core competitive strength: innovation.

It has been a long time since America could be called a low-cost source of goods and services. It has been, and remains, a high-value source. The primary drivers of this high value are innovations and follow-on investment in great new ideas.Innovation is often misunderstood. It comes in many forms. It has many sources. If you’re running a business, innovation done well and consistently can reward you with success, in any state of the economy. If you don’t innovate at all, or do it poorly, or attempt it sporadically, my bet is that you’re going to have trouble.

Misunderstanding about innovation comes from thinking that it is the sole purview of lab-coated scientists or engineers. It’s not. Or that the result must be a “shake-the-world” product or service. Very rare. Or that it’s very expensive and risky. Not necessarily. Most successful innovation is rather small scale, readily manageable and executable. The most successful innovative companies know the secret: do a lot of it, make it a consistent, fundamental company process–like, for example, accounting–and manage it.

Innovation can be absolute or relative. Absolute innovation means inventing something truly new and unique. Examples abound, but Post-It Notes and spreadsheet software are easily recognized as creating new habits for millions of people. Such ideas, which truly redefine ways of life or business practices, are candidates for protection under patent or copyright laws. Relative innovation means developing products, services, processes, methods or markets that are new, and beneficial, to your organization. Continuous relative innovation is a powerful competitive weapon. As an example of relative innovation, being recruited to turn around a division of a well-known electronics company – the division had lost money for years and was on the verge of extinction. The perceived problem was poor leadership and execution. The real problem was obsolete technology and ineffective marketing. Recovering a technology leadership position would take years. The solution was to find new markets because traditional customers considered the technology a dinosaur. It worked. New uses for old ideas led the division to triple its size in six years. The real innovation was in finding a competitive home for the technology. It required lots of new thinking. Interestingly, the introduction to new markets quickly spurred the company to exceptional amounts of absolute innovation.

Companies confronting fundamental performance and competitiveness issues in most cases need to focus on value creation and innovation almost immediately. Many untapped areas of innovation exist in the customer value chain. For instance, how many manufacturers successfully profit from opportunities related to maintenance? Too few. The problem for performance-challenged companies is that no one in the organization seems to know where to start, how to manage innovation, how to get anything new through the “system”, or whose job it is.

Face it: If you’re a company leader, paralysis removal is your job. That means creating an organization and culture that embraces innovation–and learning how to encourage and manage the new ideas that will strengthen the business. The best way to start is to make the following assumptions:

  1. Innovation potential is everywhere around you. Within the “four walls” and, externally, with your customers and prospects. For example, if you’re worried about outsourcing, look at possibilities for insourcing from your customers.
  2. Every challenge or opportunity has a solution. Learn to set aside the “obvious” answer, if only temporarily, and challenge your organization to find alternatives, as if the most apparent ones didn’t exist.
  3. You and the people in your organization are capable of new thinking and are core sources of innovation.

From these assumptions, a climate can be created where consistent, profitable innovation can–and, if nurtured–will occur. The benefits are plentiful. Companies that consistently innovate and manage innovation will enjoy higher returns, much higher customer (and employee) retention rates, and tend to be more resilient in economic downturns. They’ve learned how to compete in a high-value, differentiated space.

A final word. Profitable innovation requires consistent leadership and attention. It is hardly automatic. The only thing “automatic” is the incredible American culture of innovation. It’s saved us before. It will again.

From : The BusinessLedger