11 April 2022

The Innovation Process: How to Create a Culture of Great Ideas

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Innovation is the driving force behind progress. 

It’s how companies develop groundbreaking technologies. It’s how laboratories discover life-changing medicines. It’s how conscientious entrepreneurs are attempting to counter the effects of climate change. Yet, while business leaders may recognize the importance of innovation, they may not know how to create a culture that encourages great ideas.

In this post, we’ll look at what innovation is, what the innovation process entails, and the risks and rewards of innovation.

What Is Innovation? 

Innovation can be a creative idea, a new methodology, or a new discovery. In a business context, an innovative concept or idea is one that supports an organization’s objectives (such as a hydrogen-powered ship that produces no harmful emissions). 

The two types of innovation are: 

Incremental. This is the type of ongoing innovation characteristic of most SaaS companies. New features and updates expand the product’s capabilities, which in turn helps grow the customer base. 

Incremental innovation is low-risk, because if innovations aren’t a hit with customers or stakeholders, they can be “rolled back.” 

Disruptive. This type of innovation is high-risk, but high-reward, and ideas in this realm may “disrupt” an existing market or create a new one. An example of disruptive innovation is Airbnb, which in 11 years grew its portfolio from a single rental to 7 million short-term rentals in 220 countries, cutting into hotel profits.

Often, disruptive innovations don’t have wide buy-in initially, because investors may be hesitant to back bold ideas that don’t offer immediate rewards.

Why Is Innovation Important?

One of the best examples of why innovation is important comes from 2018, when Sears — once valued at $440 billion — filed for bankruptcy. When new competitors gained market traction, Sears closed stores and cut jobs instead of retooling its business model. The company also failed to account for their customers’ changing preferences.

The failure of Sears is complicated, but any commentary you’ll find on that subject has a common theme: lack of innovation led to the company’s demise.

Innovation is important for both internal and external growth. Great ideas can help companies:

Evolve. Few businesses have perfect processes. Empowering employees to brainstorm new ways of doing business can lead to significant internal improvements, as well as make employees feel more invested in their work. The best ideas often come not from leadership, but from the people doing the day-to-day work.

Solve Problems. For SaaS companies, many new product features are launched in an effort to solve customers’ problems. And some problems could have multiple solutions. Innovation helps reveal the single best solution to any problem.

Outpace Competitors. In competitive industries, innovation is essential. Even more so when unexpected events upend markets and change customer expectations. For example, when lockdowns and stay-at-home orders began amid the COVID-19 pandemic in 2020, the most successful companies were those that were able to offer new ways of doing business. Telehealth services, curbside pickup, and digital banking services rose in popularity during the pandemic, with innovators finding ways to offer the best experience for consumers.

What Is the Innovation Process?

The innovation process refers to an internal organizational structure that encourages innovation, identifies the most marketable new ideas, and supports ongoing innovation.This process may vary by industry or a business’s size, but it generally includes:

1. Ideation

This is the process of generating ideas. It may begin with a brainstorming session, or a company-wide contest seeking the best solution to a problem. Sometimes, external factors — such as a competitor launching a new product — are what drive the need for ideation.

Ideas may come from people outside the company, such as customers or suppliers. For example, a SaaS company that receives similar feature requests from several customers may want to brainstorm ways to implement those requests.

2. Vetting and Feedback 

This step of innovation management involves exploring the feasibility of ideas. Points to consider include cost of implementation, the level of risk, and whether an internal team has the capability and capacity to execute an idea.

Some seemingly good ideas may fail at this stage. When that happens, it’s important for leadership to talk to employees who suggested those ideas, acknowledge their effort, and explain why their ideas didn’t move forward to the next stage.

3. Beta Testing

At this stage, a company begins to test one or more innovations either internally, or with a select group of customers. Often, this is when any gaps become evident — for example, an idea for improving an assembly line process might not work as expected, if a supplier discontinued an essential component.

Lessons learned during beta testing can help reshape ideas and help companies decide whether to move forward with other options presented in the ideation phase.

4. Commercialization

With product or feature launches, this is the stage in which companies determine how they’ll market their innovation and demonstrate its value. This process might include seeking feedback from focus groups or loyal customers.

5. Diffusion and Implementation

This last step in the innovation process involves sharing details with employees to make sure they understand the new product, service, or process, and that they see its value. Then comes implementation — setting up the final steps for creating or executing an innovation. 

How Do Companies Spur Innovation Internally?

Creating a culture of innovation is more than just asking for ideas. Leadership must explain the steps in the innovation process, so employees know their ideas won’t evaporate or be ignored. After all, innovation requires effort, and employees want some assurance that their efforts will be meaningful (even if their ideas are ultimately rejected).

The rejection process takes tact and requires leaders to be honest with people whose ideas didn’t pan out. When having these conversations, leaders can encourage employees to keep trying.

Finally, recognition is an important part of innovation management. Business leaders should look for ways to acknowledge the people whose great ideas became reality. That might mean making a company-wide announcement, providing a cash reward, or issuing a press release about an employee’s creative new approach to solving a problem.

Innovate With MassChallenge

MassChallenge forges connections between enterprises, startups, and communities to foster innovation on a global scale. If you’re looking for the next great idea, or you need support for your innovative solution to a problem, we invite you to explore MassChallenge. 

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