Essential guide to making your business more innovative

A lightbulb moment - innovation

In a world of change and competition, innovating is not a luxury - it is essential. All businesses need to innovate, though it may take any number of forms, from the steady refinement of established products to the leap in the dark when an untried idea is launched.

Whether introducing new technology, getting people to work in new ways or creating new products, you must innovate to survive.


Planning the future

External inspiration

Internal inspiration

Improving processes

Product development

Nurturing innovation

1. Opportunities

Whether you are innovating incrementally or developing new products or services, there are always opportunities.

There are three main approaches to consider.

Improve existing processes

  • For example, improving the processes you use to make your product might let you produce exactly the same thing for a lower price.

Improve your existing product

  • Could you repackage it?
  • Could you re-size it?
  • Can you discover new uses for it?
  • Are people using it in ways it was not designed for? You may be able to market it differently.
  • Can you introduce the product to new user groups who do not know about it?
  • Can you achieve the same (or better) benefits for a lower cost, by understanding more precisely why and how your customers use your product?

Create an entirely new situation with quantum leap innovation

  • With a wholly new product or service, you can make innovation itself a key selling point.

2. Planning the future

Your business needs a vision of where it is going.

Know the market sector you should be in

  • Recognise the opportunities, or demand, for change in the markets you serve.
  • Should you focus on the area where your business is strongest and abandon others? For example, there is one UK engineering firm that focuses solely on landing gear for Boeing 737 airliners.
  • Could you take advantage of market opportunities by entering into a strategic partnership with another business? For example, a carpet-fitting firm might develop a preferential working relationship with a local department store.

Know what type of products or services you will offer

  • Do you need to re-develop existing products or services or introduce completely new ones?
  • Will employees need training to provide your new products or services?
  • What resources will you need?

What changes to your business processes will a new product or service involve?

  • Identify which parts of your business work most efficiently. Could methods used there be put to work in other areas?
  • If you are launching a new product or service, which aspects of your business processes will be affected?

Outline your vision in your business plan

  • Break down longer-term goals into specific numerical targets and short-term aims.
  • For example, a long-term goal might be achieving £3 million turnover and national distribution. This might break down into an interim target of £1.2 million in sales and full coverage of the south and west of England within 15 months.
  • Keep your goals challenging and SMART (specific, measurable, agreed, realistic, time-limited).

3. External inspiration

Be market-led, or, better still, market-inspired (so that you can sometimes produce things the market does not yet know are possible).

Find out about existing and potential customers

  • Log customers’ comments, complaints and requests. Seek feedback at meetings, through surveys or by soliciting feedback on bills, receipts or online order confirmations.
  • Find out why you lose customers to your competitors. For example, look at your quotes that didn't convert into orders and see whether there is a trend, or talk with competitors’ customers at industry events and shows.

Know your business environment

  • If you can see change coming, you can often turn it from a threat into an opportunity.
  • Be alert to environmental pressures, new regulations, economic factors, social trends and consumer fashions.

Know your competitors

  • What products or services do they offer?

Communicate with your suppliers

  • Show that you value their opinions.

Identify the people you respect as experts in your field

  • Find opportunities to talk to them.

Investigate opportunities for benchmarking your business performance

  • Compare your business against other companies in your own field - or even in completely different industries.

4. Internal inspiration

No-one knows more about your business than the people who work in it.

Talk to your employees

  • Spend time walking around your business with your eyes and ears open.
  • Use your appraisal process and suggestion schemes to canvass employee ideas.
  • Hold regular team meetings to gather feedback and ideas.
  • Keep hierarchies flat. Short chains of command make it easier for ideas to be heard.

Improve your product by identifying faults

Make full use of internal benchmarking

  • Are there good ideas in one part of the business that can be used elsewhere?

Encourage experiments and be prepared to take risks

  • Allocate new projects to teams. Give employees new responsibilities as part of their team roles.
  • Choose performance measures that will help you monitor the success of each project.
  • Recognise employee-led innovations, both privately in your appraisal process and publicly, using noticeboards or newsletters.
  • Start a system of rewards for individuals or teams who bring business success through innovation.

How do you do it?

Set aside time for innovation workshops

  • Involve cross-functional teams from all parts of the business.
  • Do not let status or position in the company get in the way of good ideas. Discussion in workshops should be open, informal and not too tightly targeted.
  • Consider using an outside facilitator to run the sessions.

Try breaking down complex issues into small pieces

  • This lets people get to work on solving more manageable, clearly defined problems.
  • You can worry later about how the parts of the jigsaw can be fitted together.

Lead people away from thinking innovation must mean radical change

  • A lot of small improvements can add up to a big change for the better - and usually with far less risk.

Show clear evidence that the pursuit of innovation is seen as a continuing process

  • Emphasise that innovation does not just happen in the workshops.
  • The 48 hours after a workshop has ended can be a very productive period. Make sure that good ideas that surface during this time are also followed up.

5. Improving processes

Analyse which of your processes have the biggest impact

  • What could be done more efficiently?
  • What could be done that would increase customer satisfaction?
  • How could cost-effective improvements be made?

New products or services may require technical support

  • Support might be in the form of new machinery or systems. For example, including frequently asked questions on your website may reduce the number of queries to customer support.

Employees must be involved in developing new processes

  • Involving employees helps you to get the right answers and helps ensure employees are motivated to make the changes work.

Parts of your business may need to be restructured to meet your innovation goals

  • Setting up cross-functional teams is one of the best ways to make innovation happen.

Rate your suppliers

  • Meet regularly to monitor the improvement of processes.

6. Product development

Wait until research indicates there is a market for your new product

  • Avoid situations where you have to invent the market as well as the product.

Analyse all the resources available to you

  • Almost all product development these days requires you to set up and manage some sort of ‘virtual team’, involving outsiders as well as your own employees.
  • Put together a team with a mix of talents.

Map out the critical path for developing the product and bringing it to market

  • Check everything, to make sure you are on the right track at the specification stage.
  • Without the right brief, there is a danger of racing ahead up blind alleys.

Look for ways to protect your intellectual property

  • If there are aspects of your innovation that are truly novel, protect your intellectual property with a patent, design registration or registered trade mark.

Apply the same approach to developing new services

  • The distinction between products and services can often be an excuse for sloppy thinking in service sector companies.
  • Whether you are developing metal fasteners or an online estate agency, whatever you dream up, shape, bring to market and ultimately sell can be regarded as a product.

7. Nurturing innovation

Commitment is key. Half-hearted innovation will fail, causing disruption and lowering morale.

Train your managers to lead innovation

  • Encouraging innovation in your business may mean redefining the relationships between managers and employees.
  • Make sure your managers are not afraid to fail.

Involve your employees in the development of your business

  • Share your vision of where you are heading.
  • Make sure business goals are regularly communicated in team meetings.
  • Develop your employees’ skills and ambitions.

Plan for innovation and set new challenges

  • Build your long-term goals into your business plan. Set and review targets and milestones.
  • Track key performance indicators (eg profits, sales, return rates) to monitor progress.
  • Set a target for sales of products less than three years old.
  • Focus on the areas of your business where new ideas can make the biggest difference.

Review your situation regularly

  • If circumstances change, you may need to change policies.

Obstacles to innovation

Recognise that day-to-day tasks are likely to seem more urgent than innovation

  • Make innovation a priority, by setting aside time and money for it.

Combat insecurity and resistance to change through better communication

  • Emphasize the need for innovation by discussing the consequences of not taking action.
  • Increase the amount of contact time between you and your employees.
  • Physically raise the profile of innovation in the business. Set up noticeboards, upgrade your suggestions scheme and circulate an ideas sheet or bulletin.

Prepare for cynicism about ‘yet another management fad’

  • Involve employees in the processes of innovation. People are less cynical about proposals incorporating ideas they have suggested.
  • Show employees what is in it for them. If they can see the opportunity to make their working environment better and resolve common problems, they are more likely to contribute suggestions.


Expert quotes

"Almost as a side effect, a culture of innovation helps to motivate and retain employees." - Dave Collerton, Business Logistix

"A good business plan is the foundation of an innovation strategy. Use it to check you are meeting - then exceeding - your company goals." - John Laurie, Profit from Innovation

What does the * mean?

If a link has a * this means it is an affiliate link. To find out more, see our FAQs.