What is innovation in business?

Innovation sounds fresh, new and exciting — and that’s exactly what it is. Businesses that innovate successfully consistently do better than their competitors. Streamlining processes, adopting new and on-point technologies and partnering with cutting-edge industry peers can help you stay at the head of the pack. But what is innovation in business, and what does the phrase mean in practical terms?

In this guide, we’ll unpack innovation, and we’ll talk about seven ways you can make innovation part of your business strategy.

• What is innovation in business?
• Seven innovation insights

In simple terms, innovation from a business perspective is anything new that helps your company become more agile and more efficient: different methodologies, streamlined workflows, fresh ideas, groundbreaking services or unique products. Business innovation is a broader term than IT innovation, but in many cases business innovation strategies do include things like IT modernisation and cloud adoption.

In a nutshell, well-designed innovation strategies should lead to higher profits and improve a company’s market share. Here’s how business innovation generally unfolds.

In this phase, you’ll consider the current state of your company, and think about your short-term, medium-term and long-term business goals. You might make a list of ideas and consider various policies, procedures and tech products that could help you achieve your aims. 

Before proceeding to the development stage, it’s important to look at your available resources and create an innovation budget. Take cash on hand and liquid assets into account, and consider other financial options, like business loans or investors.

With a list of solid innovation ideas in hand, it’s time to move forward to the design and development phase. You may also decide to launch a pilot program or perform a proof of concept (POC) exercise to evaluate your tactics. 

When you’re satisfied with the results of your pilot program or POC exercise, you can implement your innovation strategy on a full scale basis. Most small business owners monitor new methodologies and workflows closely after implementation to ensure they work as intended.

Specific key performance indicators (KPIs) can help you track the success of your innovation strategy over time. Insightful KPIs include net profit, conversion rate, revenue growth rate and relative market share.

Innovation never stops. To stay ahead of the curve, entrepreneurs constantly need to evaluate their companies, hone existing tactics and create new strategies.

You know what business innovation is — but what does innovation strategy look like on the ground? Here are seven ways to kick start innovation at your small business.

Innovation doesn’t have to be complex: in fact, many innovative tactics are surprisingly simple. Remember — innovation is just another term for improvement. Improvements at your business could include a more cost-effective supply chain, redesigned product packaging, a new marketing strategy or a reliable computer.

We’ve all heard the old adage, ‘the customer is always right’. You can make that mantra work for you by asking customers for feedback about your products or services, or about your company in general. You can use both formal and informal methods of gathering feedback — casual one-to-one conversations, questionnaires and surveys all work well.

Successful entrepreneurs don’t wait to innovate — they incorporate innovation into their everyday routines. You might decide to set aside an hour or two a week to examine your current strategy and think about new innovation ideas. You could also set short-term innovation goals in addition to long-term aims to keep your tactics on point.

Sole proprietors and one-person limited company owners don’t usually have an executive team to bounce ideas off. That doesn’t mean you have to go it alone, though. Many entrepreneurs brainstorm with business peers instead of employees. Meeting with a contact and sharing ideas over coffee can be very useful — especially if your peer has been in business longer than you have.

Winners keep score. In real-world terms, staying informed about developments in your industry, and in the economy in general, can help you generate a more effective innovation strategy. If you operate in a niche market, consider subscribing to industry newsletters and attending workshops, webinars, conferences and trade shows as often as you can.

Think about creating an ongoing budget for innovation. Setting a little money aside can mean the difference between saying no, or saying yes to an innovative new strategy, product or service. Many businesspeople create an innovation slush fund to help them stay on top of the latest trends.

If you don’t have a lot of positive cash flow, you might need financial help to get your innovation strategy going. In that case, government-backed innovation funding could be the right solution. The UK government’s innovation agency, Innovate UK, started its innovation loan pilot program in 2017, and continued to offer loans during the COVID-19 crisis. To find out more about government-backed innovation funding, click here. 

Business innovation can be very exciting. When they’re well conceived and properly implemented innovative strategies make businesses better, stronger and more successful. You can use specific KPIs to ensure you’re making the right changes to your business tactics — and that’s where Countingup comes in. 

Countingup is a business current account and accounting software in one handy app. You can monitor incoming funds and outgoing expenses, get cash flow insights and get profit and loss insights in an instant. All of those financial KPIs can help you gauge how well you’re doing from an innovation standpoint. To find out more, click here.