Posts Tagged innovation
Innovation is Insurance against the Future
Yesterday, I wrote about how innovation is the fourth arena of excellence. The importance to investors is that a highly innovative company is one of the best ways to insure their investment against the changing needs of the marketplace.
For example, examine a company that has a very popular product. An investor puts their money into the company hoping that the company grows over five years and then is purchased for a much higher value. That purchase could be by the public in an IPO or by another company, but that purchase provides the investor with their exit plan.
The company value increases as the company increases its sales and likelihood of future sales. This in turn only happens if the product (and products) continues to sell. If something happens in the marketplace that makes the product unpopular (another product from a competitor) then the company needs to be innovative again and come up with an improved offering (or another offering) that insures the investor will get their money.
One of the barriers to getting that investment is that companies often do not show signs of future innovation but rather an inability to identify growth points. Without these insurances against marketplace changes, the investors are not likely to provide their money.
Just as likely investors will not provide their money, customers will not buy products from young companies because they are unsure of the lasting power. If they know that the company will continue to innovate and provide their customers with future advantages, the potential buyer will more likely take a chance and buy.
Innovation in what gets a startup company created. Too many startups stop at that innovative step…by examining how they innovate and can continue to innovate, startup companies can be more attractive to both potential customers and investors.
Innovation Is the Fourth Arena of Excellence
The general arenas of where a business may excel is lowest price, best quality or best service. Typically, they start with one, and then as they grow they move into the other areas. What happens though when the level of quality gets to the commonly acceptable level and they cannot be even cheaper? What if they are at a level of customer service that meets the current needs and the price cannot be lowered any further?
The answer is innovation. Those companies that are better innovators and provide newer and smarter products to their customers have the advantage. The reason is that this allows their customers to now become better in one of the three categories: price, quality or service.
When you are looking for the next critical component to develop your company, think about how you change your offering. How do you develop new products and services? Where do the ideas come from? How are they validated? How is an idea moved from thought to reality? What are your launch, learning, and growth processes on that product? Furthermore, how can you adapt to the changing market in mid-launch?
Adapting to the changing market environment is part of being a leader in innovation; and furthermore, enabling your customers to adapt through your innovation will help keep them as your customers.