The relationship between ideas, innovation and business growth

Before discussing the dimensions of a front-end idea system it is important to discuss why it is important for your organisation.

The winning organisations of the next ten years will be those that embrace innovation and build it as a core capability. Put another way, if you are not successful at innovation, your organisation will not be around in ten years.

I passionately believe innovation is vital because:

1. Innovation drives business growth

2. If you aren t innovating your competitors are

3. If you don t innovate, you compete on price only

4. If you don t encourage ideas, your best talent will leave

5. Ideas, not innovation, drive success

6. Innovation requires imagination at the front end.

1. Innovation drives business growth

Ideas drive innovation and innovation drives business growth. Managers know this but they do not live it. They talk about how vital innovation is for success, yet find other more important things to do.

For many managers innovation is like a visit to the dentist, a necessary but often uncomfortable and, at times, painful process. It often takes a downturn in their business or a competitive threat for them to really engage in the process. For example, I talked to the CEO of a manufacturing business for six months, on and off, about the need for innovation and developing a range of different, new revenue streams, yet it was not until he lost a major Korean customer that he started to take it seriously. In the meantime, sales and profitability declined, retrenchments followed and morale dropped. Now, said the CEO, let s start innovating. Fortunately, we turned the ship around. But why did it have to come to this? Why ignore a skin blemish until it becomes a cancer?

If McDonald s, for example, can innovate, then any organisation can. McDonald s business model is built around efficiencies and fixed processes. This model is the antithesis of the innovation process, which relies on trial and error, experimentation and breaking patterns. But somehow McDonald s has found a way for both to profitably co-exist. The new Salad Plus initiative has led to an incremental business increase by offering customers a healthier alternative to their basic menu items.

2. If you aren t innovating, your competitors are

Question:Who are your most dangerous competitors? Answer: Those who compete on imagination and passion.

Why does one of the world s most established airlines, Qantas, worry incessantly about Virgin Blue, a relatively new entrant? It is because Richard Branson s airline has captured the imagination of the flying public. Qantas also knows that it is slow to innovate (can you remember any great ideas emerging recently from Qantas?).

It is not only your direct competitors that you have to worry about. A few years ago the milk producers could not explain why consumption was decreasing . After examining their obvious competitors (for example, water, fruit juice and soft drink) they came to an amazing insight: the real competition was McDonald s. In the past ten years McDonald s has successfully changed the breakfast habits of thousands of people. What is the one thing that you do not eat at McDonald s? Breakfast cereal. No breakfast cereals ”no milk. The milk producers simply had to think more innovatively about their competition.

3. If you don t innovate, you compete on price only

Without a continuous flow of ideas you leave your business open to competitors, and consumers will become tired of your product. With no other way of deciding between different offerings, consumers will focus on price. If this happens, you will face increasing pressure to reduce your price, thus decreasing your profit margins. If the product does not sell, you will decrease your price further and create your own negative cycle. To break out of such a cycle, you need to continuously innovate and add value. The consumer will reward you with greater loyalty because of your efforts to deliver new and exciting solutions, even if the occasional one doesn t work.

Consider the case of Blu-Tack, produced by Bostik. It was an exciting innovation; a product you could use at home or at work to stick things together or up on the wall. But recently, 3M have started to offer giant ˜Post-it ^{[ ]} Notes at a premium price. So, all of a sudden, people who use large bits of paper (for example, in workshops) have the choice between an old-fashioned adhesive (Blu-Tack) and a quicker and easier, but more expensive, alternative. One player competes on price, the other on innovation (at a higher margin). Move over, Blu-Tack.

4. If you don t encourage ideas, your best talent will leave

The best and brightest will want to work in organisations where their ideas are encouraged and supported. Some of the hardest fought battles now and in the future will be those around trying to attract and retain talented staff. One of the best ways to do this is to build an organisation where individuals are encouraged and rewarded for ideas and initiative.

If an organisation provides no opportunities for people to create, evaluate and test their ideas than they will move to places that do. If leaders truly believe that their people are their greatest asset, then they must encourage the whole person ”that includes their head, heart and imagination.

5. Ideas, not information, drive success

Information has become the new raw material. The magic is what managers do with this raw material. We all have to become modern day alchemists and learn the skills to transform information into ideas.

Insights are not enough; they also have to be transformed into workable concepts. This will require non-linear jumps . This chapter provides you with a four-stage system to help you make these imaginative leaps.

6. Innovation requires imagination at the front-end

A useful way to think about innovation is that it contains a front- end and a back-end.

• The front-end is the idea and concept development stage.

• The back-end stage is concerned with the planning, testing and rolling out of any new product, service or process.

It has been my experience that most managers are very good at the back-end stage. They can plan, manage and drive through new initiatives. After all, that is what they are taught at business school. For the most part, the back-end requires a rational, logical approach, a great deal of perseverance and contingency planning.

Many managers who are skilled at the back-end process can also devise front-end ideas, but the trouble is that their ideas often lack imagination or creativity ”they are not innovative. For example, a me-too idea at the front-end will still be a me-too idea at the back-end (albeit a more efficient one). Don t believe me? Ask yourself (or your team) when was the last time the business had an original, surprising and engaging idea.

If something can be imagined, it can be built. The next section will provide you with a front-end ideas framework to stimulate your imagination. The rest is up to you.

^{[ ]} The concept of a ˜BHAG was first developed by JC Collins & JI Porras in Built to Last , Random House, Sydney, 1994.