What is Innovation?

Here’s what business leaders need to know about innovation to utilize it effectively for business growth and to increase customer affinity and trust.

What is Innovation?

Innovation isn’t just an idea or a tool. Instead, it’s a process that guides businesses through developing products or services that deliver value to customers in new and novel ways.

Innovation, as defined by innovation leaders like consulting firm McKinsey, and IDEO, includes several key traits:

• The ability to conceive, develop, deliver, and scale new products, services, processes, and business models for customers.
• The process of taking an idea from inception to impact.
• Knowing when and how to apply methods that allow new ideas to grow.

Ultimately, innovation is taking forward action and developing growth opportunities — not standing still or maintaining the status quo.

What Does the Innovation Process Look Like?

The innovation process will likely not look the same to every company, but there are a few steps that many companies have found to be the best approach. 

Ben Little, instructor of Innovation and Strategy with Harvard Division of Continuing Education’s Professional & Executive Development, calls this process of moving from early stages of development to bringing a new offering into the world the “zones of innovation.”

Understanding the problem

“At the beginning of the process, we typically have a general statement. Something that is a problem that doesn’t quite have shape yet,” Little says. “And we need to explore a little bit. We need to understand it. We need to understand the dynamics of it. And we need to figure out where can we make a change.” 

This step can involve lots of research and learning more about customer pain points.

Exploring solutions

The next zone is about collecting resources and exploring solutions that can address the specific problem, inquiring “what can we do about it and how do we build it,” says Little. For Little, the best approach to innovation involves exploring ideas as long as possible. 

“The longer we can explore multiple really good ideas, the richer the environment we might get to in the end. That sense of concurrency, of exploring more than one option at a time, maintaining just a little bit of potential to move one direction or another, gives us the potential to get somewhere really great,” he says.

Implementation

Lastly, the final zone is  “getting close to launching maybe a going concern, a running operation, a manifested idea that’s brought to life,” says Little. 

Questions to ask at this stage include:

• Am I putting in the right features? 
• Is it designed the right way? 
• Does it have the right technology, the right operations? 

“There’s a whole host of complexity I need to explore in that final zone to make sure [the solution] can be real and sustainable, and that I can bring it to life in a meaningful and impactful way,” Little says.

Another way to implement innovation is through design thinking, which has similar steps: clarify the problem you want to solve, ideate solutions to that problem through brainstorming, research, and talking to customers; develop early prototypes and test them; and then finally launch a product. 

The key to design thinking is collaboration with the customer or end user to make sure you’re solving a problem and providing a solution that meets their needs.

Why is Innovation Important in Business?

The primary goal of a business is to deliver value to its customers, which it can only do if it creates new and original products or services that meet customer needs. Innovation enables businesses to:

• Compete Globally: Stay ahead of competitors by adapting to market needs
• Leverage Technology: Remain at the forefront of technological advancements
• Improve Processes: Streamline operations for better efficiency and cost reduction

Two examples of innovative companies are:

Apple

Since the launch of Apple II in 1977, one of the first mass-produced home computers, Apple has focused on simple product design and interface that makes technology easy to use and more accessible. Its innovation not only centers customer needs but takes risks on creating new products customers didn’t know they needed. 

In addition to innovative products, Apple has an innovative organizational structure as well. Business leaders are given full control over their functions, which Harvard Business Review says “aligns expertise with decision rights” to “meet the needs of their individual units’ customers and maximize their results.”

Netflix

Beginning as a service to rent DVDs by mail, Netflix stayed ahead of societal and technological changes, innovating a new way — online streaming — to connect customers with the entertainment they wanted. It launched an open innovation challenge in 2006 to find developers who could improve its recommendations engine and was one of the first streaming platforms to invest in original content in 2011.

Opposite to Netflix, Blockbuster Video is an example of a company that went out of business in 2010 due to its failure to innovate. Once the world’s largest video and DVD rental company, it failed to meet changing customer behavior that was moving to online streaming services. Instead, it focused on brick-and-mortar rental locations and even passed on purchasing the new start-up Netflix in 2000.

The Competitive Advantage of Innovation

Building innovation into your business strategy can give you a competitive advantage — especially when your industry is highly saturated. This c may come through offering additional products and innovative services to customers, but can also come through enhanced manufacturing processes, supply chain management, organizational structures, technology adoption, and marketing approaches.

Innovating for Growth

According to McKinsey, 70 percent of top companies have used innovation to expand their markets or create new ones. The goal is to develop products and services that meet customers’ changing behaviors, and that solve customer problems and pain points. 

Developing innovative new products for customers can drive business growth, but so can improving internal processes around organizational structures or supply chains both can save time and money.

3 Types of Innovation in Business

There are three different types of innovation a business can adopt: product innovation, process innovation, and business model innovation — all of which can help a company increase revenue, customer trust, and ability to scale.

Driving Innovation Through Your Product

Companies use innovation to create new products or services, or improve their current offerings by taking some of the approaches above. 

Innovating Existing Processes

Innovating existing business processes like manufacturing, supply chain logistics, sales, customer acquisition, and employee management can lead to benefits like increased efficiency and reduced costs. 

For example, innovating on new approaches for supply chain management can bring increased transparency to how goods move through the system, which can increase third-party accountability and customer trust.

Evolving Your Business Model 

Changing the way a company operates, delivers value, or makes money can lead to industry disruption as well. This is why business model innovation re-centers business processes, resources, and practices at the leadership level so a company can better serve customers and deliver value into the future.

Overcoming Barriers to Innovation

Despite the benefits of innovation, barriers can hold companies back from being as innovative as they desire. 

Fear of risk

According to McKinsey, the biggest barrier to innovation is fear, and 85 percent of executives say that “fear holds back innovation efforts often or always in their organizations.” 

Innovation involves risk-taking, and taking big risks may or may not pay off for one’s career and company. Risk aversion and playing it safe with predictable outcomes can undercut innovation efforts and negatively impact a company, from stifling ideas to losing market share by falling behind in meeting customer needs.

Lack of strategy

Innovation involves people, resources, and time. Business leaders who want to successfully adopt and integrate innovation into their current processes must have a strategy for doing so. Otherwise, “innovation” may just be a brainstorming session that goes nowhere.

Diversity deficits

An organization may also be held back from innovation due to a lack of resources: people with great ideas, the time needed for customer research, and the talent or tools needed to prototype. Homogeneous teams lack diverse perspectives, hindering the potential for innovation. 

Building an Innovation-Driven Company Culture

However, many of the barriers to innovation above can be overcome by building an innovation-driven company culture that focuses on the following:

Set the tone for innovation

Apple wouldn’t be the innovative company it is if Steve Jobs hadn’t set the tone for the culture of innovation. Business leaders who want their organizations to further embrace innovation need to set the tone for it: build innovation into strategy, set goals and objectives around innovation, and be a leader in innovative thought and processes.

Encourage experimentation and ideation

Innovation is a process that involves idea generation and creativity, as well as the time and space to let those two actions lead to new and novel solutions. Start by encouraging creative thinking in everyday tasks, like inviting team members to brainstorm ideas at the weekly staff meeting, or challenging workers to come up with creative solutions instead of simply telling them what to execute.

Reward and recognize innovative approaches

Since the biggest roadblock to innovation is fear, business leaders can encourage more innovation if they reward and recognize attempts at innovation. If employees are encouraged to test out new ideas without fear of punishment if those new ideas fail, or if they constantly receive the message that failure is part of the process, they’re more likely to take risks to uncover big, disruptive innovations.

Provide training and tools

Innovative thinking and approaches may not come naturally, especially to those who haven’t been given the freedom to come up with out-of-the-box ideas. If you want to create a culture of innovation, provide the necessary tools and training to your team — like having an outside innovation team come in and train them on conducting a brainstorming session or taking a professional development program on implementing innovation. 

Measuring Innovation Success

Measuring the success of any business venture, including innovation initiatives, involves a few key steps:  

Define Goals: Clearly articulate what success looks like (e.g., new features, market expansion).

Identify KPIs: Track metrics like ROI, market share, customer feedback, and process efficiency.

Evaluate Impact: Measure R&D outcomes and their influence on sales or operational improvements.

Learning and Developing Your Innovation Skills

If you’re looking to introduce innovation into your company or improve your approach to innovation, stay updated on innovation methodologies and tools by enrolling in a business innovation program through Harvard Professional & Executive Development.

Learn how to leverage new technologies like AI in your innovation, grow a culture of creativity, implement the principles of design thinking, and strengthen your organization’s capacity to drive innovation.

Each innovation program is designed to meet the needs of different industry leaders and professionals who want to make an impact in their workplace today and into the future.