Innovation as a Competitive Advantage: Part 1

Thinking of growing your business? The other day I spoke with a business owner about her plans for the future. Her company currently generates $3.5 million in revenues and I asked how much revenue she planned to generate in 5 years. The response alarmed me. “About the same,” She said, “Maybe 4 million.” Well, that presents an interesting problem because we all know there is no standing still in business. Over time a company either grows or declines, but rarely holds steady.

How do you plan to grow your business? Through acquisition? Price reduction? Through “value added” services or head-to-head competition? Each of these traditional growth strategies has inherent problems, many of which are cannot be easily resolved.

There is another strategy. It’s called innovation. It’s the growth strategy of the new millennium. Innovation provides such a competitive edge that the European Union has created a commission to foster “the innovative culture.” It promotes innovation at the community level, supporting European business to innovate, develop and market new technologies. These are the folks that are competing for your business.

Not to worry, “American business is known for it’s innovation.” Perhaps as a nation we are, but does that statement apply to your company? Is innovation your competitive edge? What’s that you say? In your industry innovation means expensive hardware and software that becomes outdated in a few years? How can you justify the cost of innovation?

We’re not talking about that type of innovation. Lets take a moment to clarify what we mean when we refer to innovation. The definition found in the Random House Dictionary of the English Language is: “To introduce something new.” “To make change in anything established.”

According to this definition, innovation is more of a process than a purchase. It has more to do with people than with assets. At least this is the way companies like 3M view innovation. It is not only about new products and services but, perhaps more importantly, about new ways of performing the day-to-day activities. The owner of a Midwestern company with a regional market (we’ll call him Dave) had the following observation, “It’s not about making another capital investment. It’s about improving the return on my current investment in human resources.”

Stay tuned for Part 2.