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The Importance of Innovation

By Shaun Smith and Andy Milligan December 29, 2011 Go to comments

To wow in today's business world, innovation must be a principle that permeates an entire organization and the people who work for it.

History has shown that many of the innovations that we have come to take for granted were a result of entrepreneurs, pioneers and early adopters willing to invest their own money, and sometimes lives, in a big idea.

But let's face it -- most companies wouldn't innovate if they didn't have to. It's not that people hate change -- although some do, of course -- it's that innovation is so risky, so expensive and more often than not leads to failure, wasted investment and, for some people, a career cul de sac in special projects. Maybe that's why the phrase if it ain't broke, don't fix it sums up many people's views on innovation.

But the fact is that innovation is necessary. In fact, now it is mandatory. Increasingly, customers are demanding more and more from the organizations that they feel should be serving them. Their demands keep raising the bar for what is good enough and fueling the need for new, different and better.

Digital, mobile and web technology has sped up the rate of consumer demands and the rate of response they expect from companies. Time has never been a friend to the businessman, but it is now openly hostile. New products have an increasingly limited window before being replaced or copied -- in fact, they are often superseded or imitated while they are still in development. Competition is everywhere and accelerating the rate at which people can find and buy pretty much whatever they want whenever they want it.

So what lessons can we learn from top-notch organizations' approach to innovation?

Realize innovation doesn't just have to do with products
One problem for many people when they think about innovation is that typically they think about product. However, we know that customers form relationships with brands, not products. And we know that the areas of that relationship that are often given the least attention but which mean most to the customer are communications, service, sales and support. According to Peter Fisk of Marketing Genius, whereas the vast majority of innovation efforts by companies have been on product, the biggest returns on innovation have been in business model (such as online shopping) and customer experience.

Challenge conventional thinking
Top notch organizations challenge the beliefs and norms that prevail in their industries. For example, how does an airline charge significantly less than its competitors and still make money? The answer, so far, has been to unbundle the price of the ticket and charge customers accordingly -- a model adopted by Southwest Airlines, easyJet, RyanAir and AirAsia.

But whilst passengers might be willing to forgo food and amenities for a short flight, it is a different proposition when flying between continents. Passengers want the amenities offered by the regular carriers at a price closer to the low cost operators. AirAsia X is the answer. It is the only long-haul carrier that offers flat-bed seats, seat back entertainment and Asian style service at a cost 60 percent lower than competitors. Azran Osman-Ranin AirAsia X's CEO said, We really just started to question every single thing about the airline model and ask if there was different way of doing it. With the company's promise of Now Everyone Can Fly, AirAsia X has extended operations to 20 countries around Asia and has won numerous awards -- most recently being voted best low-cost carrier in the world in both 2009 and 2010.

Constantly innovate in both large and small ways
One problem with innovation is that many business people are obsessed with the big idea. They want game changers and are constantly pouring through strategy reports to find ways of making paradigm shifts. But even more important than these big things are the little day-to-day things that make an enormous difference to consumers and employees and earn their advocacy and loyalty. These are the things that cost little but reap financial rewards and demonstrate your authenticity. Top notch organizations are possessed by a relentless commitment to improvement and to seeking a better way. Sometimes it can be game changing, but often it is just the everyday focus on innovation in many small ways throughout the business -- just so long as they make things better for customers. An important aspect of this relentlessness is that these organizations understand that little things have a big impact, so they are often obsessed with detail and endlessly curious about even the smallest things.

Connect to customers through emotion
It's vital to understand how you can connect emotionally with your customers through a wow moment that is really relevant to them. It's also important to understand that what you sell is not necessarily what customers are buying. RayBan thought they were selling eye protection, but their sunglasses have turned into an essential fashion accessory. This insight led them to create a business model that produced sunglasses of good quality, but exceptional variety -- 10 new product designs are launched in 250 stores every week! Because of this, a typical customer will own three or four pairs and visit the store weekly to check out the latest models.

Use technology to your advantage
Top notch companies use innovative technology and processes to support the delivery of a superior customer experience. And the technology doesn't necessarily have to be digital or high-tech. Six Senses refuses to buy any imported bottled waters for any of their properties. Instead they are investing in water filtration and mineralization plants at their resorts to bottle and sell their own water. 50% of the proceeds of these sales go to a water charity to provide clean water in places like India.

Encourage an innovative company culture
Ensure that your employees demonstrate superior customer service skills and capabilities. Hire young people who are used to being self-sufficient and are unfamiliar with industry practices. As a manager, break down barriers and encourage people to take responsibility. All of these practices serve to increase innovation and reduce costs. The fact is that your culture needs to be very carefully crafted to support your business strategy. When one is a mirror for the other, you get a self-reinforcing effect.

See ideas through
Sir John Hegarty, the founding Creative Director of advertising agency BBH says; "When you're in an environment such as ours, it is fundamentally important that the creatives feel that what they do is the most important thing in the company and that they are being encouraged to do what they want to do. If you don't have that, you won't get them pushing themselves to create the kind of work that they want to create. So it is fundamentally important that I encourage an environment of constant innovation and that they know that when they do creative work, I am going to take it seriously and I am going to sell it as best I can." That quote should remind us of the final point that top notch companies realize about innovation: In the end, it is only important if it is going to make a difference. And if it is going to make a difference, it has to be sold to customers or consumers with passion and with conviction and the commitment that it will be delivered. Having great ideas is all well and good, but you have to deliver them in the real world. Innovation is hard, but execution is harder.

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