I recently spoke to a group of potential business owners on how innovation drives profit, and that inspired this post. There’s also a short video using the slides from the presentation; see the link at the bottom of this post.
REGARDLESS of your business’s size, stage or industry, innovating is critical to its success. Are you a small retailer? An electrician? A graphics designer? Innovation extends your business’s life and increases its profit. It’s not just for high-tech giants!
INNOVATION FROM BIG TO SMALL
Innovation Starts Industries
Every industry goes through a well known life cycle which is often illustrated as an “S-Curve”. It starts when somebody comes up with a radical new idea. An industry forms as new companies and new products are created that try and figure out the best way to make money from the idea. As the industry proves itself and grows, competitors flood in. Markets get saturated; profitability gets squeezed; the industry matures. Finally, the industry declines and companies consolidate, exit or die.
Innovation Starts Large Companies: Kodak
Kodak took 125 years to go through its S-curve: a radical innovation to start things off, then rapid and prolonged growth continuously supported by innovation, eventually a struggle with saturated markets, and a Chapter 11 death.
Innovation Prolongs Large Companies: Apple
Apple’s success, ingeniously, comes from a series of interlocking S-curves. It created four distinct businesses under the same roof: Macintosh, iPod/iTunes, iPhone and iPad. Each started with a unique insight or approach, each has its own distinct life cycle, and each is rising and falling independently. The genius is that, like relay runners, each has taken the responsibility for Apple’s growth just when a previous S-curve was starting to decline.
Innovation Sustains EVERY Company
Like Kodak, Apple has kept up a steady stream of larger and smaller innovations each of which generates its own small S-curve. Every marketable innovation, large or small, product or feature or process, has its own small value life cycle. At first it is unique and so commands premium attention and pricing. Competitors soon imitate it, reducing its uniqueness and squeezing its price. Eventually, its innovative energies are spent and it must be replaced by the next innovation.
Our Companies Are Only As Good As Our Ability To Innovate
Smaller businesses follow the same macro S-curve as large companies, albeit in a (usually) shorter time-frame: a good idea starts things off, then some growth, some competition, and an inevitable decline. As leader, our job is to get the most from our company: extend its lifespan and increase its profitability at every stage.
Every innovation, however small, helps us achieve this.
Every innovation, however small, helps our business grow and strengthen.
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Of course, none of our companies have Apple’s resources and few of us have Steve Jobs’ creative genius. But we don’t need them. We simply have to keep our customers uppermost in our mind. We must learn what’s important to their long-term success. We then create solutions that help them get there. THIS is how we innovate. THIS is how we succeed.
HOW TO INNOVATE: TEN STEPS THAT INCREASE PROFIT
Increase your company’s innovation and profit with these 10 steps:*
- Change your perspective.
Spend time every week (or every day!) thinking about your customer’s future, your customer’s long-term goals, and your customer’s aspiration.
- Change your language…
…from short-term business transaction words (like problem, solution, price) to long-term human relationship words like feel, inspire, hope, and dream.
- Focus on your customer’s aspiration, not your offerings.
It’s not about what you do; it’s about what your customer wants to achieve.
- Create a guiding principle…
…that clearly and quickly communicates why you do what you do, and who you’re doing it for. Use it to remind yourself and shape your team.
- Remember that not everybody’s your customer.
Your customers are ONLY those who LOVE what you do and are willing to pay your price. Assess your offerings and your marketing accordingly.
- Repackage your offerings…
…so that they fully support your customer’s long-term aspiration, not just their short-term need.
- Revisit your pricing.
Your pricing needs to reflect the high value you deliver to your customers (re-read point 5). You’ve listened. You’ve innovated. Now you need to get paid for your unique and wonderful offerings.
- Choose three metrics…
…that help you and your team stay focused on what’s truly important for the next 3 months.
- Repeat. I say again, Repeat.
Re-read this list every three months. Want me to remind you? Join my blog.
- Enjoy yourself.
Sure, business ownership requires hard work and has its stresses. But it’s gotta be fun, too. Otherwise, what’s the point?
* Want to learn more? Take a look at my new book, Customer Dreams.
What one SMALL innovation could you put in place right away? You can leave a comment below.
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Do you know somebody GREAT? Someone who SO gets this stuff? If so, you’d be doing me a HUGE favor by sending them this link. Thank you!