Innovation

In today's rapidly changing business environment, all businesses can be innovative with the right tools and techniques. Innovation can ensure you stay competitive and enable longer-term survival or growth.

Innovation is more than just inventing something. Innovation describes the ideas and activities that improve or create business value. These include increased efficiency, effectiveness, quality, and profits, as well as improving social and environmental issues. Some innovation involves improving your business internally while others may include developing new products that you can sell to customers. An innovation can be a process and an outcome.

  • What is innovation?

    Innovation can occur in all aspects of your business, but not all innovations are the same. An innovation can be defined by its type, novelty and contribution.

    Innovation type
    Innovation type typically includes the following categories:
    • Product/Service – developing new or existing products, services and technologies.
    • Process/System – improving operational processes such as financial systems, human resource management, production systems, and information technologies (IT).
    • Marketing model – improving how products or services are promoted and the channels used to distribute them.
    • Business model – revising the structure of a business or developing better relationships with suppliers, distributors and customers.

    Innovation novelty
    Innovation novelty explains how new the innovation is to your business, to the market, to the industry, or to the world. Innovation novelty is in the eye of the beholder – what may be new and valuable for one business, could be old and unusable to another.

    Innovation contribution
    Innovation contribution describes the scale and impact of an innovation after it’s developed and released, based on the following categories:
     
    • Radical innovation – or disruptive innovation, involves longer-term, strategic improvements intended to create a profound transformation of a business or industry, enabling new ways of working or creating entire new markets.
    • Incremental innovation – involves smaller and distinct improvements to existing processes, improving efficiency or effectiveness within a current market or industry. Despite being framed as incremental, such innovations can generate dramatic business improvements.
    • Transactional innovation – involves ad hoc needs based improvements to lower transaction costs or enabling new forms of transactions. Generally, these innovations are specific in nature and not distributed widely.
     
    Innovation contribution can vary greatly from sector to sector and across countries and time periods, which can impact on your business innovation process.
  • When to innovate

    Innovation can occur in both planned and accidental ways and is often affected by moments of random chance and good or bad fortune.

    Knowing when to innovate will depend on factors unique to your situation. Some of the things to consider might include:
     
    • If a new problem occurs or a window of opportunity opens.
    • If existing approaches are failing to meet requirements or not capturing enough value.
    • If the right circumstances and expertise are present.
    • If the right funds are available to cover the cost of research, development and distribution.
  • How to innovate

    Moving your ideas to reality is not always a straight forward process. It may require several different attempts before it succeeds. Some attempts to innovate might never get past the early phases, while others may be discarded and later revived only after a chance event or for a different application.

    Despite its uncertainty, the process of innovation usually includes some or all the following elements:
     
    • Recognition of a specific problem, challenge, or opportunity to be seized for a market environment, your customers’ wants and needs and your competitors.
    • Invention of a creative solution, or novel idea, which helps address a problem or seize an opportunity.
    • Development of an innovation by creating practical, actionable plans, guidelines and prototypes.
    • Implementation of an innovation to produce real examples of changed practice, testing the innovation to see how it compares to existing solutions.
    • Diffusion of successful innovations, or taking them to scale and leading to wider adoption outside the original setting, either within the business or commercially.
     
    It’s important to consider how innovation fits with your business plan, core competence, and finances. To ensure your cashflow is not strained, it can be more valuable to consider the lowest cost innovations first.
  • Testing innovative ideas

    It's important to test your innovation ideas before making it available to the market (commercialisation stage). The ‚ÄčAustralian Government has developed eight tests of an innovative idea.

    1. Benefits
      • Does the innovation provide benefits that are clearly better than existing alternatives?
      • Can you explain the 'value proposition' of what is new and innovative to your customers?
    2. Increase production
      • Can the innovation be mass produced with consistent quality to satisfy an increase in market demand?
    3. Strategic market planning and marketing research
      • Have you considered the components of marketing your innovation? Including design, branding, pricing, distribution, sales, demand, channels and other factors.
      • Have you reviewed and updated your Marketing Plan to include the innovation?
    4. Leadership team
      • Do the key people involved in this innovation have the knowledge, skills, experience and courage to deliver it to the commercialisation stage?
    5. Intellectual property
      • Have you registered your IP rights or secured them through a licence arrangement? 
    6. Return on investment
      • Will the innovation generate enough profit to make the production and change worthwhile? Consider risks and the time it will take to implement the innovation.
    7. Corporate social responsibility
      • Will the innovation have financial, environmental and social benefits?
    8. Strategic fit
      • Is the innovation consistent with your business's overall business strategy?
  • Business model innovation

    A business model represents how your business operates.

    Even if it’s not documented, every business has a business model that can be defined by answering the following key questions:
     
    • Who’s your target customer?
    • What customer problem or challenge do you solve?
    • What value do you deliver?
    • How will you reach, acquire, and keep customers?
    • How will you define and differentiate your offering?
    • Who will you partner with?
    • What channels will you use?
    • How will you generate revenue?
    • What’s your cost structure?
    • What’s your profit margin?
     
    Business model innovation is where you revise your business model as part of a business planning process to increase your competitiveness.
     
    This type of innovation can disrupt the very structure that is currently paying your bills. This suggests that finding the right time to change your business model is important to consider. Some timing indicators include:
     
    • Evidence of declining metrics in sales and profit margins
    • Indications of over served customers
    • Inability to keep pace with changes in an industry
    • Base industry technology being used in outside industry products
    • Opportunities to serve new customers from current product/service portfolio
     
    To help the process of designing or revising your business model, Alex Osterwalder and Yves Pigneur have developed the Business Model Canvas, a one page template to systematically understand, design, and implement a new business model - or analyse and renovate an old one. Along the way, you'll understand at a much deeper level about your customers, distribution channels, partners, revenue streams, costs, and your core value proposition.
  • Collaborate to innovate

    A business collaboration is an agreement between firms to do business together in ways that go beyond normal company-to-company dealings, but fall short of a merger or a full partnership.  Or, more simply put, collaborations are agreements to work together in some fashion toward a common goal, project and organisational objectives.

    These collaborations range from informal verbal agreements to formal written agreements with lengthy contracts in which the parties may also exchange equity, or contribute capital to form a joint venture.
     
    Business collaboration is a way for your small business to expand your client base and tap into new markets by partnering with other organisations to address skill or resource gaps, allowing you to bid for a wider range of work or on larger innovative projects.
     
    You can download the Collaborative Contracting PDF to guide through the steps of identifying, forming and leading a collaborative activity.

Innovation Success Story: Accent Wine Packaging

Accent Wine Packaging, a wholly owned and operated South Australian business, always look for innovative solutions to solve client's problems. They successfully implemented an innovative process that reduced errors and waste. With the aid the Small Business Development Fund, they are able to expand their current operations to meet growing demand.

Learn More

Planning templates

Use these free planning templates and guides to help you better plan, prepare, manage, and exit a business. Investing time into proper research and planning can help turn your ideas into reality, and prepare you for what’s to come.

Business plan

A business plan works as a guide when your business is operating; how you operate, planning the future and preparing for risks. It is also often a required document for finance applications.

Marketing plan

An effective marketing plan can help you set clear, realistic and measurable marketing objectives for your business. It can boost your customer base increasing your bottom line.

Emergency plan

Your business is critical to your financial wellbeing, so you’ll want to protect it as much as you can against emergencies and disasters.

Succession plan

Planning for the day you leave your business is a valuable investment.

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