It is important for business managers to understand the difference between creativity and innovation.
Creativity is the process of generating new ideas, often stemming from divergent thinking. While innovation is the act of commercializing a new idea or concept.
In other words, creativity is the generation of new ideas whereas innovation goes one step further by turning these ideas into action – marketable products.
What is innovation?
Innovation is the process of commercially bringing new creative ideas – through the production process – into the market.
It is driven by successful Research and Development (R&D) that aims to fulfill customer needs, both identified and undiscovered. Steve Jobs, co-founder of Apple, famously emphasized creating products that address customers’ yet-to-be-articulated needs.
The rapid pace of change compels businesses to continuously innovate.
Examples of innovation
Let’s take a look at several examples of innovations including:
- Introducing new products. Coco Chanel’s timeless ‘little black dress’ from 1928 remains popular today. The Apple iPod revolutionized music delivery, contributing significantly to the decline of music CDs. Similarly, the iPhone transformed the mobile phone market. Australia’s pioneering use of polymer banknotes, now adopted by over 20 countries, and the Bank of England’s upcoming switch from cotton paper to polymer notes are further illustrations.
- New production processes. Pioneering advancements like Henry Ford’s mass production and mechanization in automobiles, or the online banking revolution in finance, demonstrate innovation’s impact. Marketing strategies have also seen innovative leaps with the rise of social media, viral marketing, and guerrilla tactics.
- Capitalizing on creative ideas. James Dyson’s invention of the bagless vacuum cleaner and Sabeer Bhatia’s creation of Hotmail, later sold to Microsoft for a staggering USD$400 million, exemplify successful commercialization of creative ideas. YouTube, founded by former PayPal employees, was acquired by Google for USD$1.65 billion within just two years.
- Entering into new markets. Ferrari, known for its exclusive brand image, addressed the challenge of increasing sales without compromising its luxury appeal by expanding into China. This strategy allowed them to exceed production quotas without affecting their established market reputation.
Factors affecting innovation
Management consultant Peter Drucker identified seven key drivers of innovation:
- The unexpected. Unforeseen events can spark innovative solutions.
- Incongruities. Inconsistencies or gaps in existing systems present opportunities for innovation.
- Process needs. Inefficiencies in current processes can lead to innovative improvements.
- Industry and market structure. Shifts in industry or market dynamics can necessitate innovation.
- Demographics. Changing demographics can create new demands and opportunities for innovation.
- Changes in perception. Evolving societal values and attitudes can drive innovation.
- New knowledge: Emerging scientific discoveries and technological advancements fuel innovation.
Drucker emphasized that successful businesses require courageous leaders who invest in Research and Development (R&D) and innovation alongside cost-cutting measures.
‘The future success of a company hinges on its ability to invest in meeting customer expectations and staying competitive.’
Benefits and drawbacks of innovation
Innovation offers numerous advantages including:
- Growth. Innovation can lead to business expansion and market share increase.
- Productivity. Innovative solutions can streamline processes and improve efficiency.
- Competitiveness. Companies that innovate stay ahead of the curve and maintain a competitive edge.
- Brand loyalty. Innovation that addresses customer needs and preferences can foster brand loyalty.
However, innovation also comes with some potential drawbacks:
- High costs. Research, development, and implementation of innovative ideas can be expensive.
- Risk of failure. Not all innovative ideas succeed, and some may result in financial losses.
Despite these potential drawbacks, innovation remains a critical driver of progress in today’s dynamic business landscape. By carefully considering the factors that influence innovation and strategically managing the risks involved, companies can leverage innovation to achieve sustainable success.
