Innovation: the basics
Queensland is home to some of the fastest growing small-to-medium sized businesses in Australia. In many cases, innovation differentiates winning businesses from their competitors.
You must continue to innovate during tough economic times to drive performance, growth and profitability when the economy improves. Winners often emerge out of recessions. They almost always beat their competitors because they have something new.
Apple worked on iTunes/iPod and its retail stores during a recession. They hit the ground running once growth returned and they beat their competition.
What is innovation?
Business innovation is about creating and successfully applying new ideas within your organisation. This could be in the form of a major breakthrough such as creating and bringing a new product or service to market, or a series of smaller innovations such as finding better or more efficient ways of working and becoming more profitable.
Innovation is more than simply having a good idea. Innovation is about turning new ideas and concepts into something that will create value. Value can be commercial, social or organisational.
Innovation is not just about products
Innovation can occur in any aspect of your business. The 4 most common types of innovation are:
Developing new products or services, enhancing existing products or services, and technological innovation.
Applying an innovative approach to improve operational processes in your business, such as production line developments, financial systems or human resource management.
How you take your products to market and promote your offering, your pricing strategies, your distribution channels, and the innovative ways you increase your customer base and expand markets.
Business model innovation
Structural and/or financial model changes and strategic partnerships. Some Queensland businesses that have successfully used business model innovations are:
Collaboration with suppliers
Jaden Kanga, a Queensland company that invented the Kanga loader, encourages major suppliers to become business partners. Jaden Kanga's approach is that suppliers need to help them sell more loaders, since supplier products are taken to market integrated in the loaders. Suppliers have contributed to the cost of marketing through motor racing sponsorship, which would otherwise not be affordable for Jaden Kanga.
Collaboration with industry and research
James Cook University scientists have teamed up with Queensland company Fibercon to develop a concrete product made from recycled plastic, reducing the carbon footprint of construction at no additional cost.
Innovation can be incremental or radical
Have you ever made improvements to existing technologies, processes, products or services? This type of innovation is called incremental innovation. It's the most common form of innovation today and often produces incremental growth.
In contrast, radical innovation entails high uncertainty with high risks, and has the potential, though not guaranteed, for high returns.
The camera industry can be used to illustrate the difference between incremental and radical innovation. Kodak led the industry for years, developing new and improved products based on traditional film. However, these incremental innovations were all based on the same technology. Later, a radical innovation – digital imaging – revolutionised the industry and the way people capture, store and use images.
Incremental and radical innovation – which approach do you use?
- Exploits existing technology
- Involves little uncertainty
- Focuses on cost or feature improvements in existing products or services, processes, marketing or business models
- Improves competitiveness within current markets or industries
- Explores new technology
- Can involve high uncertainty
- Focuses on processes, products or services with unprecedented performance features
- Creates a dramatic change that can transform existing markets or industries, or create new ones
Innovation can be closed or open
In your business today, you probably have access to more information that you can use. You do not have to, and should not, rely only on internal knowledge or research. You can acquire (buy or license) processes or inventions from other businesses. You can also take outside any inventions that your business is not using internally (selling or licensing them, or developing them through a joint venture) to raise additional revenue.
The availability of information on the internet has been a catalyst for open innovation. In the past, most innovating businesses used closed innovation, keeping their discoveries highly secret.
Closed and open innovation – which approach do you use?
- The smart people in our field work for us
- To profit from research and development, we must discover it, develop it and ship it ourselves
- External research and development can create significant value. Internal research and development is needed to claim some portion of that value
- If we create the most and the best ideas in the industry, we will win
- We should control our intellectual property, so that our competitors cannot profit from it
- We will own all results from contract research with universities
- Not all smart people work for us. We need to work with smart people inside and outside the business
- The business that gets innovation to market first will win
- Building a better business model is more important than getting to market first
- If we make the best use of internal and external ideas, we will win
- We should profit from others' use of our intellectual property (license out), and we should license in intellectual property belonging to others whenever it advances our business model
- We will partner with universities to create knowledge and encourage use outside our field
Is your business innovative?
You are probably already innovating in your business to be successful, but may not have thought about it in these terms. Could your business be more innovative? Do you want to boost innovation in your business? Refer to the Innovation readiness quiz to identify your stage of innovation development and read about business skills planning to identify strategies and ways to increase innovation.
- Last reviewed: 25 Jul 2019
- Last updated: 26 Nov 2021