In a recent Price Waterhouse survey, CEOs were asked how they intended to grow their companies. More than one-third will do so through a strategy of business innovation.
Reading this, I wasn’t surprised. Since returning to its creative roots Apple, for example, has grown to become one of the world’s largest companies. And Instagram, the popular photo-sharing service, had gained more than 100 million active users in less years, prompting Facebook to buy them out for $1 billion!
Although we admire these and other innovative companies, most have a hard time relating to their success. Personally, we are not very creative. And by definition, even if we were we struggle to find the resources (time, energy and money) needed to bring “an idea or invention into a good service that creates value for which customers will pay” (the definition of innovation as cited in the Business Dictionary).
Despite this, we continue to search for new ways, new ideas and new products to help grow our business or practice. Like the CEOs in the survey, we believe in innovation, even when pursuing it feels like the search for El Dorado; the legendary city of gold.
Fortunately, most of us can still use business innovation to improve our companies. To start, we need to re-define innovation as “bringing into your business a service or product that is not currently offered for which your customers will pay.” In other words, it’s alright to borrow – even steal – from others.
I did this when working with a leading service business. The company had stopped growing and after taking a hard look at its operations, customer base, financials and history, we worked on areas needing attention. We improved our marketing, streamlined operations, changed the culture and increased sales. We then added new services that were a part of our industry but not our company. Services that our customers wanted and are paying for.
In less than two years we increased revenues by fifty-percent!
Were we innovative? Not in an Apple sort of way, but certainly within our broader definition. More importantly, our “innovation” got us growing.
My friend, Jen Goldman had to go back in time and borrow from the construction superintendents of the Great Pyramid to find an innovative solution for her company, My Virtual COO. To manage her growth she started applying formal project management and continuous improvement processes for each project. In her case, adding management controls typically found in construction or manufacturing had a positive impact on both her revenues and profits; allowing her to take on more work while limiting her costs. Though she has yet to find her El Dorado, she is getting closer to where she may not need it.
Before adding a new service, product line or internal process to your business or practice, start with a preliminary consideration of the costs as measured against the expected benefits. Doing so – particularly when you are thinking about several options – will help you plan.
Below is a simple chart, one designed to help you start. On the horizontal axis, measure the benefit you can reasonably expect to receive in the first year of your new initiative. If you are considering new sales (revenue), be sure to include the expected profits that would come to the bottom line. Then on the vertical axis, measure the expected costs, again over the course of the first year. Do your best to include both actual costs and hidden costs (e.g. diverting employees away from their current jobs to guide the growth initiative).
Using this chart to consider a number of different opportunities; both related and unrelated ones. As a general rule, I believe you should start with those that fall solidly in the “green” box first; new products or services or practices that will cost little but return much.
Professional firms may be considering different technologies or software that can save time, effectively impacting the firm’s profit margin without increasing sales. For example, with one client we invested $25,000 in a computer system that eliminated two part-time date entry positions, reduced errors and provided revenue generators more time to … well … generate revenues. The planning tool made it easy to frame the issues we were facing and come to a quick decision.
Planning, however, is just the first step. Once you have selected your innovative strategy, you will need to make a strong commitment to its successful implementation. Otherwise you’ll fail at even the most low-cost attempts.
Recently I worked with a company and recommended a new line of products and services; new to them, but not to others. Since this was a High Cost/High Return strategy we aligned the managers and operations, making certain everyone was on board. As a result, the initial capital costs for new equipment, technology and improvements, were paid back in six months. And now the new division is exceeding our initial (and admittedly conservative) estimates, both in revenue and profits.
Although most of us could never create the next Pinterest, iPad or APP, we can still innovatively improve and grow our business or practice. If we are willing to borrow from others, examine opportunities that have the best chance of succeeding in our business, and are diligent about our execution we can soon find ourselves joining those who are moving closer to their own city of gold.
© Paul R. Brown. 2014 and beyond.Share