What is Innovation?
INNOVATION is a very special word that has been hijacked for use to describe any new idea.
In reality, most new business ideas are not very well thought through; they won’t work, can’t be done, are too expensive or are not needed by sufficient people to be worth developing.
One of the UK Government’s definition of Innovation is ” The IMPLEMENTATION on a new idea that MAKES A DIFFERENCE to the business”
There are two key phrases here:
IMPLEMENTATION: You have to develop it and make it and sell it to customers who use it. Just developing it, showing it works, and not selling it is NOT implementing it.
MAKES a DIFFERENCE: This can always and only be measured in terms of (positive) PROFIT to the company from Value to the .
A related Phrase to INNOVATION is RETURN ON INVESTMENT.
The idea only “makes a difference” if it achieves and exceeds its planned Return on Investment (ROI).
THUS to say something is innovative can only be a retrospective statement when the idea has been developed and implemented and achieved its ROI to a degree that is makes a “significant” difference to the business. NOTE I have added the “Significant” as I believe that the use of the word INNOVATION is so special that is should be limited to successful investments that significantly benefit the business. Otherwise why bother?
What INNOVATION is not!
How do you turn an idea into an Innovative one?
(PLEASE READ THIS – THIS IS THE IMPORTANT PART)
By following a structure programme of research, analysis, selection / rejection, business planning, evaluation and viability checking; before you start spending real money and certainly before you start building a prototype.
Until you do your market research, you don’t really what your customers really want, what for, The What, When, Where, Why and How the idea will benefit the customer.
Importantly, are there sufficient customers, buying in sufficient numbers at an acceptable price to make it worth while?
Taking the first years potential profit as a guide, can you develop a prototype for this amount? – Probably not. If not question then seriously if it is worth it otherwise all profit for a long time will be “spent” recovering development costs.
Remember that it will almost certainly take twice as long and cost twice as much as first thought to develop.
Most “Inventions” from individuals, that become successful, take 10 years to get to market
Consider also the costs of putting it into manufacture and the marketing costs to get the required sales to generate the profit to cover these costs. These will be of the order of 5 to 10 times the cost to develop the idea to prototype stage! Then remember to add additional profit required to achieve your expected ROI and real money in the bank.
WOW! Now can you see why the statistics on Innovation are so poor. Research has shown that only 1 on 300 inventions every become commercial (i.e. sell more than a few), Only approximately 1 in 200 business ideas achieve the ROI that was used to justify their development in the first place.
This is because most ideas are developed based on the creator’s passion, not commercial evidence and planning.
Remember ALL development is an INVESTMENT cost.
The costs have to come from somewhere, either if you are lucky, from past retained profits being used as an investment for the future, or from working capital (Be very careful here that this does not destroy the cash-flow of the business). You are spending now in the hope of more profit in the future. Why spend anything on idea that are not going to achieve this – look at the 199 in every 200 ideas that fail to get market success. Therefore to succeed you must plan and get the evidence on which to make a sensible commercial decision and create an implementation plan for market success. – Easy! This is called the INNOVATION PROCESS – the evaluation & selection of the more commercially viable idea and creating implementation plans for success
This is what I do to help you to become innovative.
Why does Innovation Fail?
In my experience it is mainly due non-existent markets. No one , or only a few, want to buy it. This is due to poor market research that would have shown the market reaction before it was developed. Often the wrong product has been developed for the market. This can be changed by re-design and re-development but often by then the allocated budget has been spent and there is now an aversion to spending more when the initial concept has proved to be so wrong.
I often hear failures being blamed on “management” but when looked at, it is lack of belief in the idea from many of the project team, often subconsciously in that they don’t think it will work or be commercially viable and so don’t make the effort expected of them – they don’t want it to get to market and then fail and the be blamed for the failure, they would rather it failed sooner. It takes a brave person to stand up to passionate , driven individuals who are driving the project.
From this you can see that successful innovation is very dependent on the company culture. Supportive well led teamwork is essential. No silo mentality. Good communication and delegation skills are required. In a word LEADERSHIP.
Also essential is the existence of a good initial business plan identifying spare capacity, resources and the availability of cash AND a well developed and agreed business development STRATEGY where the new idea potentially will contribute towards its achievement.
If it’s not in the strategy – don’t do it.
If you don’t have a strategy – don’t do it.
If you don’t have the cash & resources, – don’t do it.
How to ensure Innovation success.
Revisit your business plan
Develop a rugged strategy
Put the ideas through the Innovation Process to select those less likely to fail
Create an implementation plan
Make a commercial decision.
Then, and only then, do it.
Successful Innovation? How to reduce the risk of Failure.