The Role of Innovation in Business Development Essay

Introduction

The pressure to develop in business comes from internal and external sources. Internally, a business entity usually wants to develop in order to exceed own previous performances.

Externally, the pressure to develop comes from different sources. Such sources include competitors, and new demands from the consumers market. Business development is defined as “the creation of long-term value for an organisation from customers, markets, and relationships” (Pollack 2012, p.1). The foregoing definition is not a standard definition but it will be used in this paper.

From the definition, it is obvious that for businesses to create long-term value, it needs to relate well with the customers and the markets. In other words, businesses need to provide the customers and market with products and services that meet prevailing consumer needs.

In a fast moving world, customer needs are changing equally fast. Consequently, business development needs to cater for changing customer and markets needs hence the need for innovation.

Innovation is defined differently by various authors. The London Innovation (cited by Fitzgerald & Wynn 2004, p. 336) for example defines it as the “successful exploitation of new ideas”. On their part, Fitzgerald and Wynn (2004, p. 336) define innovation as a “new product, method, or process that brings improvement and competitive advantage”.

Notably, the foregoing definition perceives innovation as a process, method or product. Often times, all three are beneficial to business development, because the process can enhance the manner in which business is done; the new method can transform business for the better; while a product may serve prevailing customer needs.

The role of innovation in business development

Business development has become an essential component of modern day organisations because stagnation provides competitors an easy way to overtake the business. Such competitors may be more aware of the needs and preferences of the consumer market.

To create long-term value from relationships, markets and customers, businesses need to know the specific customers and market needs, and the relationships that are most beneficial to both parties (i.e. the business and the markets) (Stonehouse & Houston 2002).

Having indicated that business development is concerned with creating long-term value for an organisation, innovation comes in because it can make small changes to business models or technologies through incremental innovations hence leading to the creation of business value (PricewaterhouseCoopers (PwC) 2012).

Additionally, breakthrough innovations can create long-term value for the business by making significant changes to the business model or technology hence bringing about growth in the business (PwC 2012). Radical innovations can also help a business attain long-term value by combining business model innovations and technology innovations to create new business lines, which have growth potential (PwC 2012).

Notably, radical innovations are rare in business despite the fact that they would have major effects on business development. The foregoing situation could be explained by the fact that every innovation has risks, and often times, business managers chose to protect their businesses from the risks (PwC 2012).

Innovation’s role in business development is further explained by Campbell, Stonehouse and Houston (2002, p. 171), who note that “the ability of a business to get ahead and stay ahead of competitors depends upon its success in researching, designing, developing and marketing new products”.

In other words, Campbell et al. (2002) are saying that in order to create long-term value, a business needs to stay ahead of its competitors through innovative processes.

Researching, designing and developing new products are all steps which are followed in the innovation process. Businesses can also engage innovation in business development through improving how they organise and design the value-adding activities in their businesses (Campbell 2002).

Fitzgerald and Wynn (2004) imply that innovations bring competitive advantage to a business. Such competitive advantage is usually in the form of money, prestige or access. Money, prestige or access makes the business grow both in the short- and long-term.

The competitive advantage concept is further discussed by Porter (1985, p. xvi), where he defines it as the manner in which “a firm actually puts the generic strategies into practice”.

In subsequent writings, Porter (1990) argues that firms are able to create and sustain competitive advantage if they create or discover new and better ways through which they can compete in the market. The foregoing explanation by Porter (1990) describes the act of innovation.

Porter (1990) indicates that innovation can be included in any activity of an organisation’s value chain, which culminates in business development. Such value chain activities include product design, production processes, new marketing approaches, or new ways of organising or training employees (Porter 1990, p. 579).

A major role of innovation in business development is the creation of new designs, products, marketing approaches and service delivery approaches (Piperopoulos 2012). Such innovations are strategic in nature and a business usually develops them in response to new technologies.

Innovation also has a role in business development when there are new or different buyer needs. Businesses should be perceptive enough to identify shifting or new consumer needs, since such, provide innovative opportunities, through which they can create a competitive advantage.

The role of innovation in business development also emerges when there is a new segment in an industry, that the business can take advantage of (Piperopoulous 2012). New industry segments provide an existing business with opportunities to access new customers, make use of new marketing methods and utilise new ways of producing specific products.

Innovation plays a critical role in business development where the costs or availability of raw materials are shifting (Piperopoulos 2012). Specifically, when the costs or availability of raw materials, transportation, energy, labour, or machinery change, it can shift the competitive advantage of a business.

As a result, innovation is required in order to deal with the changes and restore a business’ ability to compete with others in the industry in spite of the changes.

Innovation also has a role in business development when there are changes in government regulations (Piperopoulos 2012). Changes in government regulations can be in areas such as trade restrictions, barriers to entry, product standards and environmental rules among others.

When such changes occur, they can change the dynamics of business usually requiring businesses to find new ways to compete in the market. According to Piperopoulos (2012, p. 27), adjusting quickly to changes in government regulations is important for business to gain competitive advantage against other businesses that “have built their businesses around certain regulatory regimes”.

Notably, Porter (1990), Piperopoulos (2012) and Robinson and Stern (1997) perceive innovation as a means through which businesses can gain and sustain a competitive advantage. Arguably, a competitive advantage is essential for business development since it assures the business of profits, which in turn, translate into long-term value for the business.

Fitzgerald and Wynn (2004) also indicate that innovation brings improvement to a business. Their argument is supported by Grupp and Maital (2001, p. Xv), who argue that “in the third industrial revolution, companies that excel in innovation have become phenomenal engines for generating wealth, income and jobs…”

In other words, Grupp and Maital (2001) imply that long-term value creation, which is responsible for business development, occurs through innovation. Grupp and Maital (2001) give the example of companies like General Electric, Cisco Systems and Microsoft, which according the authors are companies whose business development and success are as a result of innovation.

Drucker (2006) perceives innovation as the tool through which businesses are able to exploit change. He further argues that innovation gives businesses transformation and continuity (Drucker 2006). Notably, Innovation is incremental and as such, gives the business enough time to adjust to newly formed objectives.

The new objectives are often the fruit of introspection by business managers, who are then able to decide how they will align their resources in a manner that achieves greater yields and higher productivity (Drucker 2006). Higher yields and productivity on the other hand is responsible for creating long-term business value hence business development.

Business development can be achieved through one or a combination of different types of innovations. Oslo Manual (2005, p. 47) identifies four types of innovations as: organisational innovations, process innovations, product innovations and marketing innovations.

Organisational innovation occurs when a business implements a new way of organising business practices and workplace and external relations (Oslo Manual 2005).

Usually, organisational innovations increase business performance in various ways, which include: reducing supplies’ costs; providing the business access to external knowledge; enhancing labour productivity through workplace satisfaction; and reducing costs related to business transactions and business administration.

Organisational innovation has a role in business development because by saving costs, it adds value to the business through enabling it to enjoy higher profit margins which undoubtedly create long-term value for the business owners (Oslo Manual 2005, p. 51). Where process innovation is applied, the business comes up with a new product or implements a new process of manufacturing the product.

In other cases however, process innovation can be implemented through an improvement of how the product is delivered to customers. Process innovation also contributes to business development by adding value to the equipment, software or techniques used in the production process, thereby decreasing the costs used in the production or delivery of a consumer item (Oslo Manual 2005).

Product innovations contribute to business development because they introduce enhanced products or services, which in turn appeal to prevailing consumer needs and preferences. Consequently, it becomes easier for a business to sell its product or service (Oslo Manual 2005).

Marketing innovation is also relevant to business development because it introduces new marketing methods and strategies, which result in more sales for the business, hence creating short-term value.

The role of innovation in business development has also been underscored by Rainey (2006, p. 17) who argues that innovative solutions are required to resolve “social, economic, environmental and business challenges” that firms face. To attain sustainable business development however, Rainey (2006) indicates that innovations need to be properly management.

Failure to manage innovations well would lead to disillusionment among stakeholders who include employees, customers, and shareholders. Among innovations that Rainey (2006) points out as having the capacity to provide sustainable solutions to businesses are product and technological innovations.

Ideally, product and technological innovations can contribute to sustainable social, economical, political and environmental solutions, which in turn lead to sustainable business development (Rainey 2006).

For most firms, business development is a well thought concept, which is supported by goals and objectives (McDaniel 2000; McDonough, Athanassiou & Barczak 2006). Innovation therefore plays a role in ensuring that the identified goals and objectives are met (Kinkel, Lay & Wengel 2005; Rainey 2006).

Conclusion

From the discussion, it is clear that the role of innovation in business development is to create value, which sustains the business in the long-term. Such value is created through enhancing the business’s competitive position in the market through improving its product offers (i.e. through new product designs, new products, new marketing approaches and new service delivery approaches).

Innovations also contribute to business development by understanding the consumer and market needs and developing products or services that meet those needs. It is important to note that long-term value for business is attained from customers, markets and relationships, which every business must treat with care and ingenuity.

The foregoing argument suggests that, without customers, markets and relationships, innovation’s role in business development would not have much effect.

The role of innovation in business development can therefore be summed up as involving the development of products, services and processes, which enable the business to forge lasting relationships with its customers and markets, in a manner that enables it to create long-term value.

References

Campbell, D, Stonehouse, G & Houston, B 2000, Business Strategy – an introduction, 2nd edn, Butterworth Heinemann, Oxford.

Drucker, P 2006, Innovation and entrepreneurship, reprint edition, Harper Collins, New York.

Fitzgerald, B & Wynn, E 2004, IT innovation for adaptability and competitiveness, Springer, New York.

Grupp, H & Maital, S 2001, Managing new product development and innovation: a microeconomic toolbox, Edward Elgar, London.

Kinkel, S, Lay, G & Wengel, J 2005, ‘Innovation: more than research and development- growth opportunities on different innovation paths’, Bulletins of the Manufacturing Performance Survey, no. 33, pp. 1-12.

McDaniel, B 2000, ‘A survey of entrepreneurship and innovation’, The Social Science Journal, vol. 37, no. 2, pp. 277-284.

McDonough, E, Athanassiou, N & Barczak, G 2006, ‘Networking for global new product innovation’, International Journal of Business Innovation and Research, vol. 1, no. 1, pp. 9-26.

Oslo Manual 2005, Guidelines for collecting and interpreting technological innovation data, 3rd edn, OECD Publishing, Brussels.

Piperopoulos, P 2012, Entrepreneurship, innovation and business clusters, Gower Publishing, Aldershot, UK.

Pollack, S 2012, What, exactly, is business development. Web.

Porter, M 1985, Competitive advantage: creating and sustaining superior performance, The Free Press, Burlington, VT.

Porter, M 1990, The Competitive advantage of nations, The Free Press, Burlington, VT.

PricewaterhouseCoopers (PwC) 2012, ‘How to drive innovation and business growth’, PwC-Oracle Innovation White Paper, pp. 1-10.

Rainey, D 2006, Sustainable business development: inventing the future through strategy, innovation, and leadership, Cambridge University Press, Cambridge.

Robinson, A & Stern, S 1997, Corporate creativity: how innovation and improvement actually happen, Berrett-Koehler Publishers, San Francisco, CA.