By Kristófer Páll Lentz

The word innovation originally derives from the Latin word innovare which means “change.” The definition of innovation is the process of creating value from ideas, consequently resulting in change.

Here we are not necessarily talking about changes that are either disruptive or lead to a huge breakthrough, like Apple did when they introduced the iPhone for the very first time. Change can be simple, sometimes dynamic, incremental and can apply to single units or to the entire organisation. Change can be illustrated by the several iPhone launches over the years. The different iPhones are known to have continuously improved, as they have slowly increased in size and undergone constant updates since their very first appearance.

In order to survive and grow in a competitive environment, businesses need to innovate. It is essential for businesses to stay up-to-date as well as gain a competitive advantage by distinguishing themselves from their competitors, which can be done by approaching things in different and innovative ways. However, changes should not be made solely for the sake of changing.

Even though finding ideas can be a fairly easy task, implementing those ideas and turning them into something concrete is where it gets tricky. It is important for businesses to determine how they wish to recognise opportunities in order to develop and implement the ideas, and therefore create the intended value.

Where to Innovate?

Ultimately, businesses usually consider innovating within the four following areas of their business model:

  • Product and/or Service
  • Process
  • Position
  • Paradigm

Firstly, innovation can implicate either the creation and development of a new product or service or the introduction of a new feature to an existing one. This can also be in the form of a new and improved version of a product, launched every year.

Secondly, innovation can involve improvements or changes in the process of creating or delivering products and services. The innovation can appear as a new technique in the production process or as a new design of a store.

Thirdly, the innovation of a position involves the idea of adjusting your position within or between market segments, more commonly known as simply changing places in the market. Existing products are delivered the same way but offered to different markets.

Last but not least, innovation can involve changes in the way of thinking by going beyond what is known as common mentality. This can redefine the paradigm of an organisation or entire industry, often more disruptive innovation.

5 Reasons Why Businesses Need to Innovate

Businesses should avoid thinking of innovation as rare inventions that only a few people can foresee. Businesses should by all means try to implement innovative actions in a standardised routine. There are several reasons why businesses should never underestimate the power of innovation.

1. Create Value

First of all, the most obvious reason businesses should innovate is to create value. The outcome of innovation does not necessarily add value to the business even though that should be the goal. Adding value could be seen in a new product that people are interested in buying, however, the value is not exclusively commercial, it can also be social.

2. Competitive Positioning

Secondly, businesses should innovate for the sake of their competitive position. Businesses need to put emphasis on being innovative because the environment has become extremely dynamic. If you fail to innovate as much as (or more than) your competitors you risk falling behind your competitors’ position.

3. Customers

In a modern business environment, consumers are becoming more and more demanding and their expectations are increasingly rising. It is necessary for businesses to constantly be on their toes in order to make sure that they fulfil the needs of their customers.

4. Create Knowledge

Businesses should also innovate in order to stimulate the creation of knowledge. As business teams and individuals go through the process of innovation, great knowledge can be created and shared. The sharing of knowledge is an excellent trigger for innovation.

5. Share Value

Finally, while businesses constantly innovate they should always consider sharing value. This means businesses should not only innovate in order to make more profit but also innovate for the greater good. Giving something back to the community will only result in a better reputation, which in the long term will benefit the business.