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.

This briefing covers:

  1. The opportunities for innovation.
  2. Where to get new ideas.
  3. How to make your business innovative.

1 Opportunities

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

1.1 Improve existing processes (see 5).

For example, can you change the way you make your product and produce exactly the same thing for a lower price?

1.2 Improve your existing product.

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

1.3 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 (see 6).

2 Planning the future

Your business needs a vision of where it is going.

2.1 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 overhauling 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.

2.2 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?

2.3 What, if any, 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, what aspects of your business processes will be affected?

2.4 Outline your vision in your business plan.

  • Break down longer-term goals into specific numerical targets and short-term aims.

    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).

3.1 Find out about existing and potential customers.

  • Log customers’ comments, complaints and requests. Seek feedback at meetings, through surveys or by printing a feedback form on invoices or receipts.
  • Find out why you lose customers to your competitors. For example, look for trends in quotations that do not convert into orders, or talk with competitors’ customers at industry events and shows.

3.2 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.

3.3 Know your competitors. What products or services do they offer?

3.4 Communicate with your suppliers and show that you value their opinions.

3.5 Identify the people you respect as experts in your field and find ways to talk to them.

3.6 Investigate opportunities for benchmarking aspects of your business performance against other companies in your field — or even in completely different industries.

4 Internal inspiration

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

4.1 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 filter through.

4.2 Improve your product by identifying faults.

4.3 Make full use of internal benchmarking.

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

4.4 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 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.

5 Improving processes

5.1 Analyse which of your processes have the most impact on your customers.

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

5.2 New products or services may require technical support in the form of new machinery or systems.

  • For example, a set of frequently asked questions (and answers) on your website may cut the customer support workload.

5.3 Employees must be involved in developing new processes, both to get the right answers and to ensure they are motivated to make the changes work.

5.4 Parts of your business may need to be restructured to meet your innovating goals.

Setting up cross-functional teams is one of the best ways of making innovation happen.

5.5 Rate your suppliers and meet regularly to monitor the improvement of processes.

6 Product development

The distinction between products and services can often be an excuse for sloppy thinking in service sector companies.

6.1 Do not make a move 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.

6.2 Analyse the resources available to you within your business and outside.

  • 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.

6.3 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.

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

7 Nurturing innovation

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

7.1 Train your managers to lead innovation.

Encouraging innovation in your business may mean redefining the relationships between managers and employees.

  • Make sure managers are not afraid to fail.

7.2 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.

7.3 Plan for innovation and set new challenges.

  • Build your long-term goals into your business plan. Set and review numerical targets and milestones.
  • Track key performance indicators (eg profits, sales and rate of return) to monitor your 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 most difference.

7.4 Review your situation regularly.

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

8 Support for innovation

8.1 For general information, contact:

8.2 For advice on new technologies, contact:

8.3 You may be able to attract grant finance.

  • A range of funding is available under Smart (formerly Government Grant for Research and Development).
  • Smart is a Technology Strategy Board scheme offering funding to small and medium-sized businesses.
  • European Structural Funds money may also be available on a matched funding basis.

8.4 You may qualify for reduced corporation tax.

  • Under the Patent Box scheme, profits that can be attributed to patented inventions and certain other intellectual property can elect to pay a reduced rate of 10% tax on those profits.