Innovation refers to a new method of handling processes. An innovative business seeks to create or develop new ideas with the aim of making a niche in the market.
This implies that innovation plays a very important role in the development of businesses across the globe. In any case, contemporary economies demand dynamism that can only be attained trough innovative processes. This paper explores the roles of innovation in the growth and development of a business entity.
Strategic planning and creation of wealth
Innovation lays the platform for strategic planning and creation of wealth in a business entity (Kindström, & Kowalkowski, 2014). It is crucial to mention that strategic planning is central to the work of an organization. Without a strategic framework, it may not be possible to understand the position and direction being taken by an organization.
Strategic planning is designed to prepare strategic options in order to successfully implement the strategy set by the decision maker. Different options are available to the decision-maker and the option selected is sent to different managers in order to be translated into business terms through operational planning.
The manner in which organizations are managed in the contemporary works is rapidly changing. The increasing complexity of the environment requires decision makers to have proper anticipation. New technologies and management methods ought to be adapted.
Through innovation, corporate governance spurred by the systemic and effective leadership can facilitate the growth if an organization. Thus, governance is no longer attached to the only goals of short-term profitability, but is fully consistent with the overall concept of sustainable development.
An innovative business should embrace performance management and steering in order to implement a strategic planning process. Innovation assists in setting the strategic vision of a business and constantly adapts then overall strategic indicators to achieve the strategic objective.
In the absence of innovation, strategic planning can be a rigid tool that seeks to foresee growth since it may leave the decision maker surprised by the unexpected occurrences. A strategic planning process that is too rigid may always lead to strategic break because it probably lacks an innovative idea.
Undeniably, an innovative strategic planning has its virtues in the planning of business activities and designing growth agenda of an organization for a “desirable future”. The objectives set for the future cannot be easily attained if innovation is absent.
An innovative process of strategic planning is an indispensable tool for the decision-maker in an organization. It concerns the determination of the overall objectives of the company and the long-term commitment. It is prudent to note that the operational planning refers to the allocation of resources for each function of an organization.
Any planning process is formalized using methodologies that emphasize efficient decision-making that eventually contributes to the gradual and successful construction of a business plan. When innovation is put into consideration during strategic planning, it can be helpful in understanding the purpose and long-term strategic goals of a business unit.
An innovative strategic planning has yet another benefit. It plays a mobilizing and stimulating role. Among its key factors of success is the necessary adhesion of managers (Broring & Herzog, 2008). Hence, it is essential that they are involved in developing the plan and adhere to its letter and spirit.
Competitive advantage
Innovation is also instrumental in boosting the competitive advantage of a firm. Theorized by Michael Porter in 1985 in an eponymous book, competitive advantage is the element that fundamentally differentiates the offer of a company relative to its competitors, and therefore constitutes its power of differentiation (McAdam, Reid & Mitchell, 2010).
The strategy implemented by a company must contribute to the creation and the sustainability of this advantage. Besides, an absolute advantage gives the company a dominant position which it may be tempted to abuse within the limits of the law. Five forces were defined by the author in 1979 and are a clear depiction of how innovation can be beneficial to an organization (Rae, 2007).
While the concept of Porter Five Forces initially targeted the growth factors of an organisation, it is also used extensively to characterize the advantage of a geographic area of a country or an individual. The sustainability of competitive advantage is related to the establishment of barriers that are similar to distinctive competencies.
Favorable historical conditions, causal ambiguity, the quality of relationships within an organization serve to engender heterogeneity of skills within the business sector and maintains the sustainability of competitive advantage (Broring & Herzog, 2008). Comparative advantage and competitive advantage should not be misconstrued when it comes to the roles and benefits of innovation in a business.
Generally, a competitive advantage that has been curved out of an innovative mind generates a lot of value in a business. Innovation is key to a favourable sales performance when marketing goods and services. This argument is particularly true when competitive advantage results from a differentiation strategy.
For example, in the case of the so-called “top” differentiation, “price / quality” ratio increases due to an increase in the quality perceived as more than proportional to the corresponding increase of price.
The comparative advantage is often the result of a strategic and innovative differentiation during the process of generating value (Belenzon & Berkovitz 2010, p.520). The latter allows a differentiation strategy and the buying value to increase. In most cases, comparative advantage does not lead to a differentiation of the offer if management teams fail to devise innovative measures towards the same process.
Innovation enhances business focus
An innovative business is usually motivated to remain on track irrespective of the severe and difficult times. Hence, it is necessary for a business entity to continually invest in innovation and communication in order to withstand hard or challenging economic times.
When the 2007/2008 recession struck, several businesses were negatively affected by the economic downturn. However, businesses that were innovative enough withstood the rough times and remained on the right course of growth and development.
Innovation and assessing the business situation
In times of crisis, the internal environment of the company becomes a sensitive issue since trust in management is crucial. Competitors are unequally equipped to face the challenges especially as the market changes and new trends emerge. Brands and their priorities change as well (Cassia, De Massis & Pizzurno 2012, p. 231). However, innovation plays a major role of reinventing business skills and tactics.
For instance, communication should be changed accordingly in order to match the growth prospects of a business. In tense period, consistent messaging is crucial.
If corrections are not revolutionary in practice, customers’ expectations may not be met as anticipated. By optimizing communication media and centralizing management, significant annual savings and increased efficiency can be attained with a lot of ease (Maslova, 2013).
Innovation and brand management
The brand image of a business organization is a vital marketing factor that cannot be ignored by contemporary firms. This implies that branding should be done in an innovative manner. A well innovated brand increases the net value of a business.
Moreover, innovation enhances close positioning between brands of the same portfolio. There are also a number of innovative attributes that strengthen and promote the brand of a business organisation (Mullins, 2010).
Business managers can make the right decisions on the maintenance of a brand or changing its position in the market if dynamic innovation is embraced all the time. Knowledge of the value placed by the customers to the brand is a vital lever to make the right choices. This explains why innovation can be used to streamline business portfolio at any given time during the lifetime of its operations (Rajala, Westerlund & Möller, 2012).
Innovation promotes effective marketing
Optimizing the web presence of a business is one of the innovative marketing tools that contemporary organisations employ. Tough times are an opportunity to review the policy of Internet and virtual communication. Internet is a major tool of accessing to information.
In addition, Internet tools have the advantage of flexibility, segmentation or personalization in real time with techniques that are becoming increasingly dynamic (Doppelt, 2010).
Markets continually expect and fear an economic slowdown. However, not all companies suffer as a result of poor economic performance (Holtzman, 2008). Managers who see an opportunity and vividly understand how to capitalise on their brand often succeed in forging a vibrant competitive both in the medium and long term.
However, establishing a web presence with lasting impact requires an innovative mind. One of the benefits of an innovative online presence is the reduction of exorbitant promotion and high advertising costs. Lack of innovation can lead to millions of investment in marketing (Mieres, Sánchez & Vijande, 2012).
In the laws of competition and saturation of markets, business managers may sometimes be compelled to work with the available resources. Since return on investment is not always an obvious occurrence, it is the responsibility of business managers to come up with measures that can cushion their organisations against unprecedented losses (Campbell, Edgar & Stonehouse, 2011).
Rigorous but effective marketing campaigns designed from innovation can minimise the chances of financial loss on investments.
Innovation defines the strategy of a firm
It is obviously not possible to achieve objectives without a set strategy. Innovation is a precursor to strategy. Having a strategy in place assists in identifying essential actions that can boost turnover and retain key customers. Focusing on the customer base of a business may be more profitable than seeking new customers (Lin 2008, p.69).
Hence, customers who are loyal to a firm should be retained as much as possible. A business process that is innovative enough can attract and retain customers. For example, innovation should be used by managers to meet the changing tastes and preferences of customers. Through innovation, managers are in a vantage position to:
- Focus on current customers.
- Optimize and circumscribe the services already offered to their best satisfaction.
- Extend the benefits offered to customers since they are able to optimize sales from repeat customers
- Focus on the media and be able to reach their targets
- Adopt a concise and effective operational marketing (Kindström & Kowalkowski 2014, p.98)
It is always better to build a business strategy around what will work best after the elements of innovation have been applied to the letter. Innovation cab also be instrumental in shaping the relationship between customers and a business enterprise when the needs of the former are met as per the expectations.
When relating with customers, direct communication should be chosen and adopted. Direct communication allows a business entity to meet the needs of customers in order to satisfy them (Belenzon & Berkovitz 2010, p.519).
Innovation also ensures a thorough and effective control of marketing activities in a firm. Control may not necessarily entail checking if the costs of a given transaction are reasonable. It also involves evaluating actions to determine which ones are not worth the process so that they can be separated from those that are most effective (Lasserre, 2012).
In conclusion, innovation and positive business development cannot be separated from each other. New ideas are required all the time for business growth. Owing to strong competition in the modern markets, businesses are being compelled to devise their development chains on a regular basis. As a matter of fact, the natural laws and factors that affect demand and supply cannot permit static strategies.
Dynamic business ideas are fundamental. This calls for innovation throughout the lifetime of a business organisation. Furthermore, customers’ tastes and preferences are always changing. Unless a business unit remains focussed on these needs through innovation, return on investment cannot be guaranteed.
References
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