What is the Main Importance of Innovation?
It is widely acknowledged that Innovation plays a vital role in the growth and success of organisations, so a little while ago, Watkins Bay posted the following question with four distinct options to gain insights into people's thinking on why Innovation is important.
The statement: "The main reason why Innovation is important for driving growth in an organisation is because it":
Creates new products/services
Improves efficiency
Enables continuous improvement
Reduces Costs
The results revealed that the top reasons cited by the responses were
creating new products/services (50%) and enabling continuous improvement (40%). Surprisingly, improving efficiency (10%) and reducing costs (0%) received much less attention. So why is this?
Source: Watkins Bay LinkedIn Innovation Importance Survey
So, what is the Main Importance of Innovation?
Creating New Products/Services
The survey results indicate a recognition of the importance of Innovation in developing new products and services. Innovations in products and services help companies stay relevant in a rapidly changing market. By introducing new offerings, businesses can tap into untapped markets, attract new customers, and boost their revenue streams. Furthermore, Innovation in products/services often leads to differentiation, giving companies a competitive edge over their rivals.
Enabling Continuous Improvement
The respondents' emphasis on continuous improvement highlights the significance of ongoing Innovation within organisations. Continuous improvement involves constantly refining and enhancing existing processes, systems, and products. By fostering a culture of Innovation and encouraging employees to contribute ideas, companies can optimise their operations, improve customer satisfaction, and streamline their workflows. This approach enables organisations to adapt to market changes, maintain a competitive advantage, and achieve sustainable growth.
The Relative Neglect of Efficiency Improvement
The lower importance assigned to improving efficiency in the survey results might be attributed to various factors:
Innovation Perception
Efficiency improvements are often seen as incremental advancements rather than groundbreaking innovations. They are typically viewed as optimisation efforts rather than disruptive changes. Consequently, they may be overshadowed by more headline-grabbing innovations, such as new product launches or groundbreaking technologies. Therefore Innovation might be seen through the lens of radical change rather than incremental. Both are valid
Visibility and Measurement
Compared to new product development or continuous improvement initiatives, the impact of efficiency improvements can be challenging to measure and quantify. The outcomes of efficiency enhancements might take time to attribute to innovation efforts.
Prioritisation of Growth Drivers
Companies may prioritise growth drivers directly impacting revenue generation, market expansion, or customer acquisition. While improving efficiency can undoubtedly contribute to profitability, it is often seen as a means to an end rather than a direct growth driver.
The Overlooked Benefits of Cost Reduction
Interestingly, the survey revealed that reducing costs was not a significant reason for considering Innovation important for driving growth. This may be due to the perception that cost reduction primarily involves cost-cutting measures, which can be associated with negative implications such as layoffs or resource constraints. However, it is crucial to recognise that Innovation can play a pivotal role in identifying more efficient processes, technologies, and strategies that drive cost reductions while simultaneously enhancing value creation.
Final Thoughts
Innovation serves as a cornerstone for organisational growth and success. While the survey results highlighted the importance of Innovation in creating new products/services and enabling continuous improvement, it is essential to recognise the significance of efficiency improvements and cost reductions. Organisations should adopt a holistic approach to Innovation, recognising that efficiency enhancements and cost reductions can drive profitability, free up resources for further Innovation, and contribute to overall growth.
Companies can unlock their full potential and thrive in an increasingly competitive business landscape by fostering a culture that values and encourages all forms of Innovation.
About the Author
Adam Ryan is a Professor of Practice (Adjunct Professor) at Monash University and is a principal at Watkins Bay. Adam has over twenty years of start-up experience in Australia and the USA. An expert in Company Structuring for Innovation, Strategy, Mergers & Acquisitions, and Capital for early and growth-stage businesses.
Contact Details
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USA + 1 (858) 252-0954
Email adam@watkinsbay.com
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