With technology advancing at breakneck speed, businesses in every industry are hard-pressed to stay ahead of the curve. With so many new developments, companies on the bleeding edge are often caught playing a costly game of “risk versus reward” with tech investments. Rising above the chaos are those that incorporate innovation in business to secure competitive advantages in their fields.
Why is innovation important in business?
While innovation is a big factor in staying competitive, the average company only spends 3-4% of its revenue on research and development. Meanwhile, top performers like Amazon, have R&D budgets dwarfing those of their peers. Amazon’s focus on trying new things has contributed to its massive earnings.
Innovative companies generally benefit from:
- capitalizing on owned patents
- identifying new opportunities for generating revenue
- finding ways to maximize their profitability using novel solutions.
So, what makes a business innovative?
Characteristics of Innovative Businesses
Innovation in many industries is often short-lived or dead upon arrival. While there is a myriad of ways to execute innovation initiatives poorly, success seems to have a few consistent elements. Top performers in innovation tend to share the following characteristics.
- Leadership values innovation and makes it part of company culture.
- Innovation is collaborative and drawn from internal talent and external expertise.
- There is dedicated investment allocated to fostering innovative solutions.
- Innovation strategies are tied to business strategies for sustained success.
- Knowledge management systems improve information exchange and collaboration.
- Innovation is informed by and focused on customer needs.
While each of these characteristics is powerful, businesses that can combine them all see more success from their innovation initiatives.
What are the 4 types of innovation in business?
There are 4 primary ways in which companies can innovate.
Disruptive Innovation: new technology leading to high-impact market results. (think startups)
Incremental Innovation: improvements on pre-existing products and services that are gradual and continuous.
Sustaining Innovation: large-scale improvements to gain or maintain one's position as a market leader.
Radical Innovation: the transformation of industries or the creation of new markets resulting from the use of a new technological breakthrough. (think airplane or electricity)
4 Examples of Innovation in Business
How innovative a company is can be difficult to measure. Typically, innovation is based on a business’ annual research and development (R&D) spending. However, research suggests that spending on R&D doesn’t necessarily equate to better economic outcomes.
What makes a difference is how they use their investments as well as their people, decision-making, and knowledge to create better products, services, and processes. The following are our picks for innovative businesses in tech to take notes from.
Topping the Boston Consulting Group’s survey of innovation in companies once again, the Silicon Valley giant has been a leader in consumer and business technology since the 1980s. While much has been written about the creative genius of Apple’s late CEO, Steve Jobs, the electronics and software corporation has continued to grow under Tim Cook’s leadership.
The company’s approach to quality is an extension of Job’s legendary perfectionism. Apple’s focus on quality has led them to develop products from the ground up, even going as far as creating its own chip design teams.
While famous for the iPhone and MacBook line of products, some believe that Apple’s innovative potential has slowed. This couldn’t be further from the truth. While they may not be rolling out the Next Big Thing every year, Apple remains dedicated to innovation. Rather than gambling on big winners, the company is seeing success by incremental revolution; little by little rolling out small innovations that make their products different from anything else on the market.
Apple continues to delight consumers with its combination of aesthetically and functionally advanced offerings. They have leveraged this market presence and visionary technology to create value for shareholders and maintain a strong position in the tech industry.
Another top performer in almost every annual innovation list, Amazon closed out 2021 with around $42.4 billion spent on “technology and content.” While most know Amazon as an online retail platform, a significant portion of its growth comes from the Amazon Web Services (AWS) cloud-computing platform.
AWS allows users to offer their own retail goods and services with a robust, customizable platform making reaching customers faster and more scalable. While providing tech solutions to retail competitors might sound counterintuitive, Amazon’s platform allows them to derive profits from their competitors’ business. This is only set to grow as studies project AWS to gain up to 49% of the Cloud computing market.
Amazon’s expansion and growth have been fueled by its willingness to pursue innovation and its relentless acquisition of new businesses. This is further borne out by CEO, Jeff Bezos’ famous “Day 1” innovation strategy. His tip for success is to maintain the energy, aggression, and responsiveness to industry changes and customer needs that more mature businesses tend to lapse on.
One area of focus in this innovation strategy that has paid dividends and established Amazon’s dominance is the focus on innovation in customer needs. As Bezos sees it, providing great service isn’t enough, it’s important to look at why and how you can improve to keep customers loyal.
The undisputed leader of Customer Relationship Management (CRM) solutions, Salesforce is as innovative as they come. As a startup, they were credited with ushering in the era of SaaS. Maturing as an enterprise has not slowed their pursuit of innovative excellence, however.
Much like Amazon or Apple, the primary driver on its quest to provide better services is customer success. Salesforce has been committed to expanding its range of services to create an all-inclusive business operations platform. They have achieved this by acquiring new software solutions and by continually evaluating and responding to customer needs.
According to Chief Innovation Officer, Simon Mulcahy;
Innovation is one of our core values, along with trust, customer success, and equality, so everybody in the company focuses on innovation. The customer is the primary source of innovation for us. Every single touchpoint needs to be constantly thinking, “What can I do better?” This has to happen not just individually, but as a system, together.
Salesforce is innovating not just their products, but the entire customer experience. Expanding their product offerings, improving usability, and developing new solutions to client needs have kept Salesforce head and shoulders above peers in the CRM world. On the horizon for Salesforce now, is producing streaming content for the business world, signifying an impressive move to diversify their offerings.
Tesla is one of the most famous companies around. Famous for its CEO and Co-founder, Elon Musk, the automotive company has made name for itself in the electric vehicle industry. With successful products from the fascinatingly avant-garde Cybertruck to its range of self-driving electric cars, Tesla has shown that daring to challenge convention can pay off. What sets Tesla apart and puts it in BCG’s list of most innovative companies (alongside Amazon and Apple) is its willingness to challenge established ideas and to disrupt wherever it can.
The enterprise itself was an innovation born out of a need to change the world. Tesla's mission “is to accelerate the world's transition to sustainable energy.” From creating consumer-ready electric sportscars to making greener energy commercially viable, Tesla’s innovative bent is informed by that desire. To achieve this, Musk and co. have adopted an unusual innovation strategy––Open Innovation.
Much like the idea behind open-source software, Tesla aims to improve widespread adoption of greener technology by sharing their technological innovations. This drive to innovate coupled with Musk’s cavalier attitude to social media exposure have made Tesla a household name even among non-consumers.
Learning from successful examples
Industries across the board need innovation to stay competitive. While tech innovation may look different from innovation in car manufacturing in practice, the principles underlying their success are similar. By taking note of where the best examples of innovation in business lie, it’s possible to model success in your niche. Remember the following 3 key takeaways:
- Innovation can be incremental
- Focus on meeting your customer’s needs first, then figure out how to do it better
- Collaboration drives innovation
With technology constantly advancing, opportunities abound for new solutions and services to disrupt traditional industries. Learn how innovative startups can get a leg up and improve their chances of success here.