Why Is Innovation Important? | SetSchedule

"“If I had asked people what they wanted,” Henry Ford observed, “they would have said ‘faster horses.’” Luckily for generations of motorists (and horses), the founder of the world’s current 4th biggest vehicle manufacturer had the vision and strategic insight to innovate where competitors stalled. The Ford example illustrates why innovation is so important in business. Without the creation of new products and ideas, or the application of fresh perspectives to existing ones, even a successful business can find itself overtaken and outmaneuvered with astonishing speed by competitors. Find out why innovation needs to be a priority for any business, and why it requires investment and talent to support it. 

The Growing Importance of Innovation 

Any business launching in today’s digital, always-on landscape will have the impression of evolving at breakneck speed. We are well into the 4th Industrial Revolution spearheaded by technologies that didn’t exist just decades ago, from artificial intelligence (AI) and machine learning to big data and 3D printing. The pace of change is sometimes hard to fathom. Some 90% of the world’s data, for example, has been created in the last few years alone. Sweeping changes in technology call for new business models, but not all companies have the skills or resources to adapt, to the point where an estimated 40% of Fortune 500 companies may not even exist within a decade without a significant bump in innovation. 

At least the ambition is there for most. According to a Boston Consulting Group (BCG) survey, 75% of companies identify innovation as a top business priority, but many experience a “readiness gap” in their systems or culture, which prevents them from implementing it. 

Clearly, the pandemic has not improved matters, and 90% of business executives surveyed by McKinsey believe the pandemic will fundamentally change their business for the next five years. However, in order to continue to adapt to the new post-pandemic landscape, innovation should remain a priority among business leaders. Innovation is crucial for growth and relevance, and the market devours those who stay still. 

Innovations That Are Transforming Business

Henry Ford would certainly recognize one recent innovation — automation — that businesses today are still getting to grips with. Automation is an ancestor of the Ford production line, and its effects will be just as significant.

Further Innovations Shaping Our World

• Artificial intelligence — From medical treatment to fighting wildfires, AI is transforming the work landscape — and causing many to sound the alarm bell about its potential influence.

• Big data and machine learning have both become integral to the business decision-making process. 
• 3D printing has enabled manufacturing on demand, rather than creating demand. 
• New direct to consumer sales models allow innovative, start-up ideas to flourish at speed. 

The Top Innovators to Watch

Not surprisingly, technology and consumer goods lead the charge when it comes to innovation. BCG’s 2021 ranking of the most innovative companies places Apple in top position, followed by Alphabet (Google’s parent company), Amazon, Microsoft, and Tesla.

How They Innovated

• Apple redefined the business structure of a global multinational, Steve Jobs rid the company of the conventional structure most companies were used to with siloed business units and replaced it with a single functional organization under one profit and loss umbrella. In short, the world’s biggest company organized itself like a start-up, focused once again on a single-minded vision. 

• Google identified small silos as essential to maintaining the competitive spark. By restructuring under the parent company, Alphabet, the business could retain its disruptive, innovative streak and stay in tune with customer needs despite its enormous size. 
• Amazon became the world’s first trillion-dollar company by focusing relentlessly on what’s next and being ready to adapt. In doing so, the business has evolved from selling books to providing the world’s largest cloud data platform, acquiring smaller businesses into the portfolio along the way, from Twitch to Ring. 
• Microsoft has invested heavily in AI, chatbots, and app development for platforms that are not tied exclusively to Windows.
• Tesla has disrupted the automotive industry by building a dedicated fanbase of technology early adopters and marketing directly to them, bypassing dealerships entirely. 

Elsewhere, innovators have disrupted entire sectors with lasting effects. Uber, a company that owns no vehicles, has transformed transportation, while Airbnb has reshaped the hotel industry despite owning no properties at all.

What Businesses Can Learn from the Innovators

The most important lesson any business — no matter its size or maturity — can learn from the innovators is that change is inevitable. If innovation is not an intrinsic part of company culture, even a fast-moving business can grind to a halt before management has time to react. Foster a culture of innovation, however, and the rewards are plentiful, as summarized by the following:

• Improved sales and customer relationships 
• Reduced waste and costs through better operational efficiency
• Growing market share through continued differentiation
• Better employee relations with less turnover and stronger talent retention

To achieve those results it has to be stressed, require investment to achieve. As companies evolve to become leaner and more agile, leadership has to invest in the tools and talent to keep up. Five years in the life of a company today can usher in a generation of change. In that scenario, “doing what we’ve always done” is likely to fall short as a solution for growth.