Is innovation important for a small business?
What if you do not innovate in a small business?
And how can you successfully innovate as a small business?
The Japanese have a word called “Kaizen”. They use it not just in business, but as an overall philosophy of their lives.
It stands for a constant, never ending improvement in your life.
The Japanese people thus talk about kaizen in all areas of their lives - in personal relationships, education, in finances or in business. What they mean is that they will never stop improving all they can in a certain area, and no matter how good it already is, they still know that it can be made better.
Now tell me, what is your kaizen?
And what could be the necessary kaizen for our business?
We all know that times are changing.
And that all the time and faster than ever. And as a small business owner especially, you have to keep up to date with the latest technology and innovations in your market.
In the 70s if a company developed a new product successfully, it was profitable on the market for about 5 years (of course depending on the industry and product specifics).
If today a new smartphone for instance is launched, how long is it new and “hot”?
Maybe 3 months before the competition releases their next big thing?
But the costs for production, research and development are quite the same even though the time to earn returns from a new innovation has become shorter.
Creating a new product, launching it and building it in mass production have not gotten easier. Yet the time to create profits from the end result has gotten shorter.
What does that mean for us now?
Things that used to work years ago probably won't work in the future. And for many small businesses they won’t even work in the present anymore.
With the internet and globalization we have daily new concepts and ideas that are emerging. Disruptive innovations always did and will continue to overthrow market leaders basically overnight.
At the day I'm writing this, there are only theories and vague opinions of experts on how blockchain for instance will transform the way our business world works for example.
Some say this will be the next revolution and change our world in the way the internet did, others think that this technology is too risky and won´t work at all - now you can choose where you personally stand.
I don't want to say one is right and the other wrong, they are just different opinions.
At this point we only can make up our own mind and think for ourselves what we think about it.
What's really certain today, is that nothing is really certain anymore.
Risk has become the new secure.
All businesses have to be more flexible than ever to survive and be successful in the long-term.
It has become an ongoing process of new things and innovations that will come and go faster and faster like a huge river going downhill.
To be able to surf in this river of innovation, you yourself will have to be up to date about what is going on.
And in business, this means that your company has to be always on the latest technology and processes.
If you miss to keep up, your competitors will very soon take advantage of you and in the worst case your company might go out of business.
In previous posts we already covered how such situations happened to Kodak or Nokia.
To be on the latest trends in your industry it often requires to find a way to develop and find new products. In particular this will be important if you run a small business.
The reason is simple:
A business makes its money by selling it´s service or products to a large number of customers with a margin on it, leaving them a gross profit every single time.
This gross profit multiplied by a large number then allows you to cover for all the expenses and leaves a net profit at the end.
The shorter the time a product can be sold and thus creates profits, the faster you will have to come up with new things.
Small businesses often have 1 lead product that gets them going and allows for their first stage growth to rise.
This is the first product that gets the business off the ground and it often is enough to keep the business profitable and grow to a certain size. However, sooner or later the company will hit a plateau if it is based on only one single product. And after a certain time, the first product will be outdated. The small business which brings only one product to the market is therefore basically sitting on a time bomb.
At the next stage, what keeps these small businesses growing and helps them expand is to simply find and create more lead products that are doing well.
Very often it is also a spin-off or add-on to the first product that was created.
Now product creation is often more an art than exact science, but there are certain patterns and guides that you can follow to test the ideas without spending too much on upfront costs.
What becomes a necessity to achieve this stage of growth for your business is to constantly innovate in your company, and therefore to always come up with new ideas.
Clearly not every product idea you and your team will come up with will be a hit, actually many even might miss their target and fail.
Don´t let that discourage you.
Acknowledge it and use the facts to your advantage instead - every mistake has something valuable to learn from it.
Instead you should even be calculating that only a few of your ideas will become profitable products in the end, which will make it a lot easier to deal with the ones that fail.
Anticipating most of your new ideas to fail will lead your innovation process more straight on to eventually landing the big hit that can propel the business forward.
In the end this process of creating new products is a numbers game - if you manage to come up with 100 new product ideas, you will eventually have 5 or 6 to work with for a long time, depending on how good you are and how much research you put in every project.
Due to the large number it is also advisable to think about implementing regular brainstorming and mind map sessions with the target to fail faster and quickly review and learn from mistakes.
The more ideas you can test, the faster you will find the new one to bring your business forward.
Ultimately innovation in a small business should be an ongoing process, to ensure that there are constantly new ideas for products or services tested. And each one of these tests will bring you closer to the next big breakthrough in your small business.