There are two types of companies: those who innovate and those who improve. The former tend to be smaller and leaner, and the latter larger and more established. Regardless of size or scale though, many businesses struggle to decide whether they should invest their resources in innovation or improvement.
In fact, you might be tempted to say that both approaches are equally important. After all, you don’t want to miss out on opportunities to improve your company, right? But the two are distinct, and the distinction needs to be clear before you proceed.
What is Innovation?
Innovation is the process of taking an idea and developing it further. Think of this as taking a product from concept to completion. It’s when you start with nothing and create something new. Innovation can happen quickly, (known as radical innovation), or it can take place over time, (incremental innovation).
Innovation requires creative thinking, imagination, and risk-taking. When you’re trying to come up with new ideas, you can use brainstorming techniques such as mind mapping, free association, and ideation exercises to help you generate a broad range of ideas.
Another approach to innovation is using internal and customer feedback. By asking customers what they’d like to see in future products, you can identify areas that aren’t working well. Similarly, the people inside your company are likely to have interesting perspectives to share, and their ideas are extremely valuable too.
The benefits of innovation include increased revenue, profits, brand recognition, market share, competitiveness, and productivity.
The three main types of innovation are product innovation, process innovation, and business model innovation.
Product innovation is the development of new products. It includes everything from developing new features and functions, to creating entirely new products.
Product innovation isn’t limited to software. It can also include hardware such as smartphones or tablets. The main advantage of product innovation is that it helps you to fulfill a customer need, thereby increasing your own profits.
Process innovation is when you change the way you operate. This could involve changing the way you deliver services, the way you communicate internally, or even the way you do your hiring and onboarding of staff.
Often process innovation involves applying a new technology to your business processes, that helps your business stay competitive and keeps your customers happy.
Business Model Innovation
Finally, business model innovation means completely changing your business operations or your value proposition (what you are offering and promising customers). Often, business model innovation involves coming up with new distribution channels or revenue streams and allows you to keep up with changing consumer expectations and needs.
What is Improvement?
Improvement is more straightforward, in as much as it literally means making changes to existing processes and systems.
The aim is to reduce costs, improve efficiency and cut down on waste. Just as with innovation, there is both radical and incremental improvement.
There are many benefits to improving your processes. These include:
- Reduced cost per unit
- Increased output
- Improved quality
- Better safety record
- Increased employee satisfaction
It’s important to note though that there are some downsides too. For example, improvements don’t always result in immediate gains. Sometimes they require a lot of effort before you start seeing results. It’s difficult to measure whether an improvement has been successful.
There are many different improvement processes, including:
- Six Sigma
- LEAN method
- Continuous Improvement
- The 5 Whys
The Six Sigma improvement process is one of the most popular. It was developed by Motorola in 1986. It focuses on eliminating defects and reducing variation. The Six Sigma method works by asking questions about why something went wrong. This allows you to identify root causes and fix them. The techniques involved include define, measure, analyze, improve, control, and verify.
These steps can be applied to any area of your business including customer service, manufacturing, and finance.
The Lean approach is similar to Six Sigma, but instead of focusing on eliminating defects, it aims to eliminate waste. Waste is anything that doesn’t add value to your company. It can include things like excess inventory, unnecessary paperwork, and poor communication. LEAN methods focus on identifying problems and fixing them quickly.
Continuous Improvement (CI) is another approach that focuses on continuous learning. It encourages teams to constantly improve their performance. CI uses tools such as Pareto analysis, which helps you spot areas where you’re wasting time and resources.
The Five Whys
The Five Why Process is used to identify problems and potential solutions. It’s based on the idea that if you ask ‘why’ five times, you will eventually discover the root cause of the problem.
A common misconception about improvement is that it only applies to large companies. In fact, small businesses have embraced this concept just as much as larger ones. So, what are you waiting for? Isn’t it time you started thinking about improvement vs innovation, and which is right for your business?
Improvement vs Innovation
The lines between innovation and improvement are often blurred. Both involve coming up with new ideas. However, innovation is usually associated with high-tech industries while improvement tends to be more widespread.Another difference is that innovation is focused on creating something new whereas improvement is focused on refining something already created.
An example of innovation is when Apple came out with the very first iPhone. An example of improvement would be when they improved the design of the device, i.e. iPhone 6 vs iPhone 13.
Which is Right for Your Business?
In the battle of improvement vs innovation, both approaches have benefits and drawbacks. In essence it depends on the stage your business is at. If you’re still growing, for example, then it may make sense to stick with improving existing products or services. However, once you reach a certain level of maturity, it makes sense to start innovating.
A good way to decide which approach to take is to look at how you spend your budget. If you’re spending too much on research and development, then it may be time to switch over to innovation. If you’re not sure which approach is right for your business, try implementing both. You’ll see pretty quickly which one works best for you.
How Do I Know if my Business Needs Improvement?
In order for your business to benefit from improvement, you need to know what needs to change. There are several ways to do this.
One is to perform an audit. An audit is a systematic review of all aspects of your business. It looks at everything from how well you communicate with customers to how efficient your production line is. Audits help you to see where you could make improvements. They also allow you to compare yourself against other businesses.
Another way to determine whether or not your business needs improvement is to use the Balanced Scorecard. This measures both financial and non-financial success factors and is designed to help you track your progress over time.
If you aren’t making progress, then it may be time to make some improvements to your products, processes or business in general.
How Do I Know If My Business Needs Innovation?
Innovation is advantageous if you want to create something completely new. Before you innovate you should consider:
- What problem does your solution solve?
- How will your solution affect your customer base?
- Will your solution generate revenue?
- Will it make a difference?
If the answer is yes, then you’re good to go.
As to our original question with regard to which conquers all when it comes to improvement vs innovation, it wholly depends on your industry, your resources and your goals.
You may find that no single method works best for every situation. However, improvement is valuable if you want to stay competitive and innovation is valuable if you want to be a pioneer in an industry and if you have the resources to do so.
At Qmarkets we recommned employing a combination of both improvement and innovation efforts to bring value to your business. Whichever approach you choose, our platform can be configured to your requirements quickly and easily with the help of our customer success team. Take a look at our product page to learn more.