Innovative innovation

We know that innovation is important, after all, everyone tells us so. We are told it improves our competitive advantage, allows us to charge higher prices, reduces our sales cycles and makes us feel good. Of course, if it was so easy, everyone could do it and that would negate its benefits.

What they don’t say is that it has to be the right innovation. New features and functions, improved processes or different ways of connecting to customers might get us excited but they may not actually improve our bottom line.

So what can we do to ensure you are getting value for your innovation spend?

What we need is some form of metric to test whether it is going to help. Basically, any change should reduce costs or improve revenues. Even if we take a softer approach and say that it improves our working conditions or makes us feel better, from a business perspective it still should end up positively impacting the bottom line.

Obviously, we can look at the impact on other companies, especially in regard to operational processes. Thus, a new machine might increase throughput or a new software product might reduce errors in transactions processing. Suppliers should be willing to provide case studies and testimonials to show how their products will deliver the benefits they claim. We can look at similar operations overseas to see what the latest innovations are. If there is a benchmarking program available for your industry, you can join and find out where improvements are needed, but see what the better companies are doing to get the best results.

When it comes to driving revenue, there are a myriad of things you might do, but you need to have some way of cutting through the options to find those which will work for your business. Competitor analysis and benchmarking might give you some insights into innovations which have worked for others, but will they work for you? In the end, it is the impact on your target customers which is the metric you need. Will your customers and prospects react positively and place additional orders, sign up or allow you to increase your prices? You could get radical and ask them!

Smart companies design ways in which they can connect regularly to their customers and obtain feedback from them on product enhancements, new product additions to their line or changes in the way in which the business connects to them.

Apart from regular customer visits, my former businesses all had annual user conferences where we would show new features of our software products. All our customers were assigned to industry user groups so we could solicit from them suggestions for new features and obtain feedback on current products. Probably 80% of new features in our software products were suggested by our current customers. We surveyed all the customers with lists of proposed additions and had them prioritise them so we knew which ones to develop first. It makes a lot of sense to have your customers to tell you what they would be willing to pay for.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.