What is innovation? The term is often confused with invention, a new idea verified by test or experimentation. In contrast, the best definition of innovation I have seen is: "an idea successfully delivered into the market" .
For much of business there are no shortage of inventions, new ideas with the potential to form the basis of new, profitable, products and services, but there is a significant challenge in bringing these ideas to the market. The idea of nuclear fusion as a source of enormous amounts of clean energy dates back to the 1950s, yet delivery of a product into the market has proved elusive and massively expensive.
When we talk of innovation we are often blinkered in our thinking, we think of Edison, the jet engine, we think of the telephone; we think of 'things'. I was delighted when a Spanish colleague talked of innovation saying "Innovation, by which I mean, innovation in product, process, service or management". He was indicating that business could look a new things - new products, but that new ideas could also be applied to processes, services and the way businesses are managed.
We often say that businesses need to be innovative to survive. Businesses may introduce new products, e.g., the iPad and the iPhone. However, businesses can also be innovative in the processes they use to make products. Cotton cloth is cotton cloth whether produced on a hand loom or in a cotton mill, however the automated process is far more consistent and much cheaper for the consumer. Like products, processes are patentable, offering a valuable period of monopoly to those who invest in the ways that things are made. Analysis of the patent literature has suggested that process patents are, on average, significantly more valuable than product patents.
In the modern world the service economy is booming. When I switch on my phone I have access to services which will plot my route from home to a meeting in south London, when I arrive another service will identify a nearby cafe with free Wi-Fi. An analysis of the market and your competitors can significantly change the way your business operates, supermarkets will now fulfill your shopping list and deliver, some saw the change in society where time for shopping was limited and responded with selection and delivery services others responded to the obvious market created by their competitors.
When considering investments many investors will ask the question "what is your business model"? What is often meant is, "how are you going to manage the business"? If you are manufacturing products how will you sell them? You may sell directly, you may use agents or distributors. Your process may be licensed to relevant manufacturers, your licenses may be offered on a regional or country basis. If you offer a service will it be a flat fee, a charge of use or an annual subscription? Historically, I would buy the licenses for the software I use, today most of the software I use is payed for on a subscription basis. The advantage for me is that my software is regularly updated to the most recent version, the advantage to the software companies is that they make more money and that their income is more predictable.
Business undoubtedly needs to innovate in an increasingly competitive global market. Businesses need to consider innovation in product, process, service and management to ensure that their business is maximally effective with respect to the market and competition. It is important that all potential market opportunities are considered in developing the business model. The model needs regular review to optimise development in a changing market.