What is Innovation?
Innovation is yet again, another widely used buzzword we hear amongst businesses, and its definition can range from incremental process improvement, to the roll-out of a brand new product or service. This highlights that there are varying degrees of innovation, which is closely linked to change.  We know the pace of change within the world and within business has speed up considerable, mostly because of the interconnected digital world in which we live, and where there is change there is innovation. Let’s firstly accept a pragmatic definition of innovation as ‘finding new and improved ways of doing things’.

Why Innovate?
The question of ‘should we innovate’ is similarly as irrelevant as the question of ‘should we change’. Change is a given, and businesses that actively choose not to change, will ultimately change in the cessation of their business.

Similarly with innovation, it is not a question of should we innovate, but how much should we innovate. In order to survive, businesses must adopt an incremental, low risk approach to innovation that ensures their survival. However apart from the motivation to survive, innovation has the potential to drive growth and position a business as a future market leader. The real question is how much should we innovate?

Innovation & Risk
The level a business wishes to innovate largely depends on that businesses attitude toward risk, or its risk appetite. What level of risk, where outcomes are uncertain, is the organisational willing to take on for the potential reward of positive outcome that may eventuate? What potential losses may be incurred, and what potential gains may be won? This depends on the organisation itself, the nature of the risk it is taking and the potential rewards/losses associated with the risk.

An Entrepreneurial Approach
Considering the pace of change in customer wants/needs, market convergence & disruption, and technology advancements, a minimum level of innovation is a must for organisations wishing to position themselves for future success.

We sometimes think of entrepreneurs as trail blazing tycoons, gifted with the ability to foresee searing market insights that enable to them to capitalise on emerging market place opportunities. Putting this romantic view to one side, adopting an entrepreneurial approach to innovation and risk taking within an organisation can be the first step in mitigating potential risks, as well as systematically utilising resources to properly identify and capitalise on emerging opportunities.

Adopting an entrepreneurial approach firstly means embedding this in the culture of the organisation. Key decision makers need to have an appetite for risk that is aligned with the present market place positioning of the business and where the business wants to be.

 
The link between Marketing & Innovation

Marketing and innovation are usually consigned to being separate functions with two distinct purposes: Marketing – the acquisition and retention of customers, Innovation – the development of new or improved products/services. (Innovation ofcourse can also entail developing/improving a variety of internal business processes and functions, however for the purpose of this article, we will focus solely on product/service innovation)

A critical mistake businesses make is overlooking key aspects of marketing that should directly influence the innovation agenda. These areas include:

> Competitive Positioning – where is our business currently positioned in relation to competitors and where do we want it to be positioned.

> Competitor Research – what are our competitors doing in relationship to product/service innovation and how will this effect our innovation agenda.

> Customer Insights – what data do we have available from our customer relationship management systems, customer intelligence systems and analytics systems that can show insight on both current and emerging customers wants/needs.

> Market Research – what market research do we have, or should we do, than can substantiate our agenda for product/service innovation.

> Real Time Intelligence – Do we have systems in place to monitor real time informal reviews from customers that are posted on social media platforms and blogs, providing valuable insights into our customers wants and needs?

> Sales/Call Centre Staff Information – What information do our sales staff and/or call centre have about customer wants and needs?

Tough questions to consider

What priority does innovation have within our business? How important do we see product/service innovation to our business? What product/service innovations have we previously developed? What was the response from our customers?

What is our business risk appetite? What risk appetite do our key decision have? What is the pace of change within our market/industry? Is our risk appetite appropriate for our market and competitive positioning?

How can we adopt an entrepreneurial approach? How do we keep abreast of emerging market opportunities? What measures do we have in place to mitigate risk? Do we have employees with entrepreneurial experience?

Is our innovation agenda informed by marketing? On what basis do we decide to innovate our products/services? How reliable are our information sources concerning customer wants/needs? What are our competitors doing or intending to do with their products/services?

Recommendations

1) Identify the priority and innovation level necessary –  Consider the rate of change within your market/industry, the risk appetite of key decision makers within your organisation, and  potential opportunities and risks, in order to prioritise the importance of product/service innovation, and the level of product/service innovation necessary.

2) Adopt an entrepreneurial approach – Create awareness in your business around opportunity identification and risk mitigation, introduce processes for managing and mitigating risk, hire internal employees and/or external consultants with entrepreneurial experience.

3) Integrate innovation with marketing – Ensure that market research, customer insights, and competitive analysis all inform innovation decisions, so that investments in innovation are substantiated by evidence and data supporting the product/service innovation agenda.