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Innovation

Business Innovation: How To Turn Your Start-up into an Ideas Factory

How to become an ideas factory

By Leon Gettler
Tuesday, 11 October 2011

Starting a business involves, as the old saying goes, 10% inspiration and 90% perspiration. But that doesn’t mean that innovation should take a back seat in your start-up. New ideas will keep your business fresh and ahead of the competition.

 

But turning your company into an ideas factory means the business has to encourage ideas, even if some don’t work.

 

Egg company Farm Pride, for example, has a policy not to punish mistakes. Farm Pride's chief executive Zelko Lendich says attacking mistakes discourages innovation.

 

“If an idea doesn't work and you jump on it every time, people are going to become more reticent about giving ideas," Lendich says.

 

He says that if an idea does not work at Farm Pride, the company analyses what happened. It looks at ways to improve it and sort out the problems.

 

Bringing out the inner start-up

 

Another strategy is to encourage entrepreneurialism. At award-winning advertising agency Clemenger BBDO, for example, there are employees who are film directors and artists or who run businesses designing lap top covers, selling bottled water and fashion labels.

 

Clemenger BBDO managing director Peter Biggs says: “If you're going to attract creative people, you have to give them outlets for their creativity. It creates more ideas and more cross fertilisation.”

 

Biggs also has a policy of taking ideas from everyone. He recalls one time when a receptionist provided an idea. All ideas are tested.

 

He freely admits providing ideas that never made the cut. Wesfarmers director Charles Macek says companies can get a lot of innovative ideas from their employees, simply because they interact with customers more and pick up what the market wants.

 

“The best ideas come from the shop floor, they come from the bottom up,'' Macek says.

 

"People who are interacting with customers and dealing with the realities of whatever the business is will always be the source of innovation.”

 

Innovation and growth are terms bandied around a lot these days. But how is it that some companies can grow and prosper and others fail to do it, even under similar circumstances?

 

Innovation process

 

It’s because they have process. Innovation is not just about funky new products. The Chicago-based consultancy the Doblin Group says there are several signs of innovative companies.

 

None of these were about products. They include business models, networking through for example suppliers and alliances, performance of existing products, enabling processes whereby results are achieved, core processes, product systems, new ways of service, channels such as distribution, novel approaches to branding and customer experience.

 

Being an innovative company is hard in a global economy where information is quickly disseminated around the planet, where new inventions are picked up and copied quickly.

 

The innovations in the Doblin model therefore are much more sustainable. No two innovative companies are alike but they do work in similar ways.

 

According to the Brisbane Innovative Scorecard, developed by Deloitte for Brisbane Council, innovative firms have six characteristics.

 

These are organizational, or the kind of systems and processes or marketing methods the company uses for maintenance and purchasing.

 

The second is service process innovation, which looks at whether the company uses new methods to produce and deliver products and services.

 

The next one is service innovation, or how the company changes the services that are sold to customers. Supply chains are also important.

 

Logistics and distribution innovation are critical too.  An obvious one is product and service innovation. How many new products and services does the company actually sell?

 

An equally important measure is product process innovation which looks at what new methods the company uses to manufacture or produce the goods.

 

According to this analysis, companies that have three or more of these criteria are regarded as innovative.

 

This model says there are two types of innovative companies. The first group comprises the novel innovators who bring products and services that are new to the market.

Then there are the non-novel innovators, the companies that introduce innovations that are new to the business but not to the market. These can be picked up from competitors or from other industries.

 

But what sort of processes need to be innovative?  The Advanced Manufacturing Co-operative Research Centre, or AMCRC, has an “innovativity” program where it teaches SMEs how to be innovative.

 

The four day course sets out the kinds of skills companies need for innovation.

 

First, and most obviously, they are taught how to generate ideas and how to select them.

 

Creative learning

 

They are also taught about intellectual property and commercialisation. Other elements include knowing when it is time to patent an idea or when it would be more suitable to keep it a trade secret and how to avoid common pitfalls that allow international competitors to legally steal ideas.

 

They learn how to license technology and develop licence agreements, how to source funding, develop technology transfer arrangements, create confidentiality agreements with employees, conduct rapid prototyping, feed market information into the development work, incorporate innovation into business strategy, develop a business plan around it and break down strategy to prepare for action.

 

They are also taught issues around sustainability and international best practice.

 

In addition, they are shown how to systematically identify market opportunities, how to position the venture to attract interest from VCs and banks, how to fine tune their R&D so that they expedite their most promising products and cut out the less viable ones, how to increase speed to market and reduce the risk of regulatory issues, how to take advantage of university funded research products, how to assemble the right teams and capture global markets.

 

And they will learn how to research and identify market gaps, how to test and enter markets, how to source talent and expertise at low cost and how to plan and execute profitable exit strategies, either through a trade sale or IPO.

 

Getting connected

 

Innovative companies have these skills.

 

Shawn Smith, who runs a start up web design outfit Hypnotic Zoo, says he gets his ideas connecting with people and networking relentlessly.

 

“I would have 500 plus on LinkedIn, more like a 1000 and I use that a lot,’’ he says.

 

He will turn up to all functions and events. It’s not just to get clients but to listen to ideas and take them in. One idea bounces off the other, and new concepts are created.

 

Deloitte chief strategy officer Gerhard Vorster says companies can only really be innovative when it’s made part of their strategy.

 

At Deloitte, there is a very clear directive that 30 per cent of the firm’s revenues must come from new, or substantially new, services and offerings every three years.

 

The reason for that is simple: nothing stays new. Anything novel is picked up quickly by competitors.

 

Vorster says the strategy actually forces people inside the company to think about new and different services and methods of delivery.

 

“We are a billion dollar business and that means we are looking for this rolling $300 million of new and substantially different things that need to come out,’’ Vorster says.

 

“That drives a lot of behaviours.”

 

“In our business, it’s crucial to have that because we need replacement revenue. Some of our services are just becoming commoditised at the speed of light so you have to have replacement revenue. But you also need growth revenue.

 

“Looking for growth and outperforming your competitors in a mature market is difficult. For your people, it’s important that they feel they are part of an organisation where ideas are accepted, where ideas are encouraged,   where ideas are given a chance.”

 

Rush to market

 

Vorster says companies now need to learn how to rapidly scale up ideas. There is a small window of opportunity in today’s market.

 

He says innovation can also come from collaboration. Smaller companies need to target larger companies for collaboration.

 

The smaller company has the agility that the larger company lacks but the company has the resources, market depth, customer base and supply chain.

 

It’s a win-win for both, he says.

 

“What we are starting to see is that small companies that are smart are actually starting to look very early in their life cycle as to what amplifies their value,’’ Vorster says.

 

Other ways of innovating, he says, include working closer with customers and developing funding alliances.

 

Businesses far smaller than Deloitte would do well to implement some of these, not necessarily expensive, spurs to innovation.

 

Five tips to become an ideas factory:

  • Seek ideas from all employees. Be open and assess each idea, it doesn’t matter where it’s from.
  • Encourage people to try different things. Don’t punish mistakes.
  • Give people time at work to develop ideas. It’s one of the strategies used by Google where employees are allowed to allocate 20 per cent of their work time on ideas.
  • Brainstorm ideas frequently.
  • Take ideas down from elsewhere and see how you can build on them.
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Innovation process are so long, most of the times people will just stop in the middle of there researchs or tryout since they don't see in income from it and don't give it the time necessary for the project to show some benefits.
Montreal business innovation , December 17, 2011
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