There are three key steps companies can take to integrate innovation and make it a “way of life” during their everyday operations, according to a new report by Ernst & Young.
The findings in the global report, titled Innovating for growth, were taken from a series of interviews with more than 45 participants including academic and business leaders.
Ernst & Young used a hypothesis-led approach to explore how innovation is changing, with a special focus on business model innovation.
According to Maria Pinelli, global vice chair of strategic growth markets, innovative companies do not outsource this function, nor do they “hastily come up with an innovation plan when the corporate strategy calls for it”.
“Rather, for them innovation is a way of life. It is what they do,” Pinelli said in the report.
“To do it well, they change whatever needs to be changed, whether it’s their organisational structure, their business processes or even their core products or services.”
However, Pinelli is quick to point out this doesn’t happen randomly, insisting leading companies do follow a “process to innovate”.
“Our research has found that this tends to be a spiralling, iterative approach that embeds innovation in every aspect of the organisation,” she said.
“In an era of business volatility, where growth is an urgent priority, it is not enough to just be innovative. It is essential to be innovative all the time.”
The report identifies three key ways companies can integrate innovation:
1. Take advantage of changes in the external environment
Companies can be truly innovative by turning a challenging situation to their advantage even when the odds seem stacked against them.
In most rapid-growth markets, innovation tends to be the solution to a fundamental problem. Consequently, companies can innovate themselves into a completely new industry.
2. Revamp your business model regularly to achieve competitive advantage
The research findings confirm companies that continually innovate in their business model are more likely to achieve a sustainable competitive advantage.
“It is much more difficult for a competitor to copy a business model than it is to replicate products or services,” Pinelli said.
Today’s successful companies will be the ones changing their business models from a rigid focus on geographies, local markets and products to a dynamic focus on customer experiences, value generation and problem-solving.
3. Innovate to achieve specific business outcomes
Organisations typically innovate in products, services and processes.
Although research and development in products and services helps businesses be more competitive, the research reveals a major shift in how leading companies go about innovation.
Innovation is slowly being integrated across all areas and levels of company strategy.
“By focusing on five key business outcomes (profitable growth, customer engagement, business sustainability, productivity and business agility), companies can achieve clear competitive advantage” Pinelli said.
“The optimal situation is to achieve all of these outcomes together. To foster an environment conducive to this, the right leadership mindset is one of the key enablers of strategic innovation.”
“It is directly linked to an organisational culture that nurtures, guides, supports and rewards innovative thinking and practices.”