Innovation is the process of transforming new ideas and knowledge into new products and services. Innovation means different things to different sectors. In business, innovation means sustainable growth, development, and most importantly, realization of great profit. For the employees, innovation means new and more interesting jobs that require more mental agility and which results in higher salaries. From the perspective of the whole economy, innovation represents a bigger productivity and prosperity for the nation.
According to statistical data, in all countries, small businesses constitute the majority of commercial enterprises and because of this; they face the most severe competition. In order to survive in this competition, they usually focus on being innovative. In this drive to stay ahead of the crowd, small businesses have been credited with various notable inventions which include air conditioners, zippers, helicopters, computers, video recorders, cameras, optical scanners, contact lenses, etc.
Innovation is not a new phenomenon; in fact, it is old as mankind itself because it played a great part in developing the twenty-first century economy by consistently pumping new and revitalizing activity into the system. Because of growing international competition, innovation became even more vital for companies and even the economy towards the end of the 20th century.
Granted, the process of innovation is well thought out and planned, but most great innovations resulted from trial-and-error experimentation which occurred incidentally when researchers produce something other than what they intended initially.
Innovation benefits businesses and economies in various ways, let’s explore some of them.
How innovation benefits organizations
Business scholars often attribute company success to innovation, and very rightly too. The ability to create something totally different from what others have, have been the launching pad of a lot of great businesses today; think of Apple and the iPhone. This goes to show that innovative organizations stand a better chance in the business world. The following ways are how innovation benefits organizations.
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Competitive advantage
It is a fact that the companies that have remained on top over the long haul are those who are the most creative and innovative. These organizations don’t copy what others do; instead, they make use of innovative ideas from others as a spring board to come up with a unique application, product, or service for themselves. They focus on bringing out new products into the market, or devising new ways of carrying out a service. With these innovations, the organizations tend to monopolize the market for the time being, thus attracting more customers than others. This goes to show that innovation gives an organization competitive advantage over other companies in similar product or service line.
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Economic viability
When business executives and economists think about whether developing an innovation will be worthwhile, they tend to focus on the economic value of the outcome of the innovation process. This is because great innovations sell, and they could be the difference between a company flying high or fading off. Since innovation centrally involves problem solving, and customers would only buy into a product that solves some problems for them, so this then translates to increased income and profitability for the organization.
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Improved productivity
Companies are always looking for ways to reduce overhead costs, and as such a lot of innovations are centered on reducing production costs while improving productivity. Thus, being innovative helps a company to improve the production capacity and/or flexibility of the business in order to enable it exploit economies of scale.
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Produce Better quality products
Innovation enables a company to produce better quality products. Better quality products and services are more likely to meet customer needs. Assuming that they are effectively marketed, they should result in higher sales and profits for the organization.
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Building new product range
It is known fact that most innovations result from modifying existing products or services. A business with a single product or limited product range would almost certainly benefit from innovation, and putting creativity and innovation into action always results to a new product range. A broader product range provides an opportunity for higher sales and profits.
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Become environmentally friendly
Innovation might enable a business to reduce it carbon emissions, produce less waste or perhaps comply with changing product or environmental legislation. Changes in laws often force businesses to innovate when they might not otherwise do so.
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Increased value added
Effective innovation is a great way to establish a unique selling proposition (USP) for a product. A unique selling proposition would enable customers pay whatever amount they are told, and it is also how a business differentiates itself from competitors.
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Improved staff retention and motivation
This may not be an obvious benefit, but it is often very significant. Potential good quality recruits are often drawn to a business with a reputation for innovation. Innovative businesses have a reputation for being inspiring places to work.
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Brand Recognition
Because they have products that set them apart from others, innovative companies generally do not need to do an excess amount of advertising or branding to capture their target market. Instead, their name alone carries considerable weight in their industry and people cannot wait for their products to hit the market. Their name recognition generally sets them apart from other companies in the market, which means that they need to do very little to promote their products. Companies like Google, Apple, Nike, Fed ex etc are currently enjoying this advantage.
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Industry leaders
The creativity exhibited by innovative companies often puts them in positions of leadership within their respective industries. Apple, for example, regularly makes the news for its latest innovations which generally sets the bar for other similar products that are later developed by other companies trying to piggyback off of their success. By the time these companies finally manage to catch up, Apple and other companies taking a leadership role have created another innovative product to once again lead the way.
How innovation benefits the economy
- It creates employment opportunities
The success of a country is mostly measured by its employment capacity. A country struggling to provide employment opportunities for its citizens is not seen in a good economic light. On a large scale, innovation holds the power to create entire industries. Consider bio-medical and alternative energy and other such related industries. Jobs are being created in response to the growing demand for the innovations from these new and fast growing industries. If it weren’t for the innovations that created these industries, these jobs would not exist today. So, innovation helps a country provide employment for her citizens.
- Improves the economy
It is a fact that innovation is the hidden force that keeps every country’s economy moving in the right direction. With an uncertain global economy, bringing out innovative products and services to market to others is the only way a country can boost its economic fortunes. Economists have calculated that approximately 50% of U.S. annual GDP growth is attributed to increases in innovation. America’s genius for innovation and entrepreneurial drive is well known to be the primary reason for America’s economic preeminence.
- Addressing Environmental challenges
It is a fact that environmental challenges and pollution affects the economy of any country as they would spend valuable resources in mitigating pollution and treating diseases and infections that result from pollution. Innovation is increasingly perceived as crucial for tackling environmental challenges like limiting climate change, global greenhouse gas emissions and maintaining biodiversity. Innovation can contribute to addressing environmental challenges through the introduction of new technologies and non-technological innovations.
- Alleviate Social challenges
Innovation can help alleviate social challenges that encompass health and demographic challenges, social exclusion and inequalities, among others. As an example, innovation can help elderly individuals remain healthier, live independently and longer, and counteract the diminishing of physical capabilities that become more prevalent with age.
- Improved healthcare
Healthy citizens have been equated to a healthy economy, because it is only when people are healthy and strong that they can work. Innovation provides more personal, predictive and preventive healthcare products that improve the quality of human health.
Conclusion
The most innovative businesses are the ones that are able to perceive customer demand and invent creative solutions to best meet the demand. Being innovative keeps businesses flexible and able to produce creative solutions to a wide range of problems. Whether this involves changing a business strategy, inventing new technology, or changing business practices in order to stay relevant, innovation can keep companies and economies afloat in an uncertain economic climate.