Small and midsize businesses, too, need to focus on the new.
By Lynn Daniel
Over the past few years, innovation has taken a back seat to cost reduction, expense control and keeping one’s financial head above water for many small and midsize businesses. Given the economy, this was appropriate. Controlling expenses, re-engineering processes to reduce costs, and keeping an eye on the short-term financial ball were all necessary to survival in a challenging economy.
But now the economy appears to be improving, and with that improvement customers are beginning to look at things differently. Customers are asking different questions than in the past. They often want to know “What’s new?” Having a good answer matters for many reasons. Without one, you may miss a sales opportunity.
More strategically, the innovation in your products and services matters now more than ever because:
— It is much easier for competitors to develop alternatives to new products.
— Customers are looking for solutions and answers, but the answer is not always the cheapest product.
— Innovation is critical to profitability and ultimately a company’s value. Without innovation, the most important point that sales people discuss with customers is price, which ultimately affects margin and profitability. CPP is a good example. By most any valuation measure, the company is worth far more now than it was four years ago. — Innovation really matters to the long-term value of a business.
How does your organization become innovative now?
— Live innovation! Make it part of the culture (and perhaps your mission statement).
— Include measurable innovation goals for each key manager — not just the technical development person.
— Create a process for innovation. Recent research from Bain & Co. shows that companies which were most successful at innovating and building new growth opportunities had one or two clearly defined internal processes that were followed when pursuing new innovations.
— Establish milestones for the innovation project. Be able to measure forward progress.
— Pay attention to service innovation. Many companies offer me-too products but offer service that is simply outstanding.
— Sometimes, innovation in service may mean doing what customers expect in the first place.
Why does innovation matter?
With the changing economic environment, what matters to customers is changing. A narrow focus only on improving efficiency and reducing costs won’t create a strategically strong and financially viable company for the long term. Growing organically must be on the strategic agenda for most businesses today. One critical way to do this is through innovation. In our competitive global economy, only those companies whose leaders are innovative will survive and prosper. The opportunity is there for small and midsize businesses — just start looking. Make certain you can give a positive answer to your customers when they ask, “What’s new?”
For the complete story on IndustryWeek.com, go here.