Innovation is one of the drivers of the economy. It is also one of the factors that play a critical role in determining whether your organization will thrive or will fail. In this blogpost, I give you 5 tips for a business strategy of innovation.

This is Why Innovation is Mandatory

I don’t want you to be innovative just because it is inspiring, though that would be reason enough. I recommend being innovative because the success of your business will partly depend on it.

Let’s take a look at some numbers;

• According to McKinsey, 80% of the CEOs of Dutch companies indicate that innovation is increasingly crucial for growth and that the current earnings model is under pressure.
• Only 6% of the CEOs state that they are satisfied with the current innovative strength of their company.
• In 10 years, 50% of the S&P 500 companies will not remain on the list.
• According to a survey from PricewaterhouseCoopers, insufficient innovation is one of the main reasons for low growth, and companies that do innovate successfully grow three times faster than the market.

There is not one magic formula to assure innovation. Sometimes a moment of creativity or a shrewdly taken opportunity is enough to be a winner in your industry. It is possible to create the right conditions, though. In my assessment, there are 5 important conditions for building an innovative organization:

1. Even the Legacy Companies Do It: Form a Growth Team

Innovation is 25% technology and R&D, and 75% organization, culture, leadership, and – this is the most important – the right skilled employees. They are the change agents of the organization. Changing direction is not possible for an organization without employees who understand the way ahead. So, if you want to embrace growth and innovation, you should search for people with up-to-date digital competencies. In particular, search for people who are curious, flexible, and want to learn new things.

Another step is to form a growth team: a set of employees who constantly look for ways to innovate. The poster children of innovation (LinkedIn, Yelp, Facebook, Evernote, Hubspot, etc.) all deploy teams such as these. Legacy companies, like Walmart and IBM, also didn’t want to miss the boat and formed teams as well.

Growth teams really work. Take for example Canva. Their terrific growth team created a process by which they improved the user activation rate by 10% on a recurring basis. This resulted in tens of thousands of new active users every month.

So, ask yourself: do your employees have what it takes to grow? Or do you have to find them elsewhere? If you have identified the right people, create a growth team!

2. Data is the New Oil, So Dig It!

The many possibilities of data and analytics are the drivers of innovation. Sometimes christened “the new oil,” data has many possibilities. For example, analyze machine-generated data to predict when an action is needed — for example, the replacement of a machine part.

Data really can save costs in a huge way. Take this case study: supermarket chain Tesco collaborated with IBM and analyzed gigabytes of refrigeration data. The conclusion was crystal clear, Tesco’s stores in Ireland were running their refrigerators at lower temperatures than needed. The win: the cooling costs were cut by 20% across 3,000 stores which generated a savings equivalent to €20 million.

So, you have to ask yourself: “what kind of data does my organization have in its possession?” Do you have machines that generate data? What about the insights and value this data can bring with the help of analytic solutions?

3. Do the Googly Thing: Embrace Scalability

Most innovative companies start small; sometimes, just with a great idea. Of course, they don’t want to remain a small business. That’s why they should code the ability to grow right into their DNA. This will be accomplished through scalability: the ability for a business to accept increased volume without impacting the contribution margin (in other words, revenue minus variable costs).

Eric Ries, the author of the inspiring bestseller The Lean Startup, has great ideas about scalability. He popularized the concept of a minimum viable product (MVP). An MVP is a product with just enough features to satisfy early customers while also providing feedback for future product development. Gathering insights from an MVP is often less expensive than developing a product with more features.

Even before the “MVP” concept was coined, an MVP mindset was one aspect of what made Google great. “The Googly thing is to launch early on Google Labs and then iterate — learning what the market wants — and then making that great. The beauty of experimenting in this way is that you never get too far from what the market wants. The market pulls you back,” as former Google VP Marissa Mayer once said.

4. Know Your Strength, Outsource the Rest

Don’t get distracted by non-critical processes. The business of the future is lean and agile. The platform economy will help you accomplish this. Use online workplaces like Upwork to hire freelance writers and designers. It is a great way to save on hiring costs, avoid administrative hassles, and give great workers from around the world a chance!

This approach seems risky but is becoming an established alternative more and more. Take the company that produces one of my favorite collaboration tools, Slack. They hired design firm Metalab to redesign their logo and improve their website and app. Founder Stewart Butterfield and his team then had the freedom to concentrate on their own strengths: Slack’s core development and usability.

Of course, every step in your work process is important and should be respected, but try to focus on your critical processes and hire outside help to do the rest.

5. New Ideas Cannot be Centralized: Reduce Hierarchy

The daily demands of running a company are huge. Traditional hierarchies know how to accomplish this. But are they able to identify the most important hazards and opportunities early enough? Do they know how to formulate new initiatives and implement them in time?

To really innovate, you need a less hierarchical workplace where everyone is allowed to speak out. This will fuel more diverse opinions that will reduce the risk of missing the boat.

Some successful organizations have even chosen an all-out, flat management model. Automattic, the company behind WordPress, is a flat organization where individuals can start initiatives on their own. Likewise, Google stimulates creativity by allowing employees to work on their own ideas.

The most important thing is to create an environment in which knowledge is shared, and managers receive workplace feedback. New ideas cannot be centralized, so innovative organizations cannot be hierarchical.

What Will the Future Bring? You Decide!

As Apple taught us, “the people who are crazy enough to think they can change the world are the ones who do.” That is why the future belongs to those who dare — those who dare to innovate, who dare to think differently.

At RevelX, we know how to capture new market opportunities and develop innovative business models. We develop and implement winning growth hacking strategies which are insightful, innovative, and practical. Do you want to innovate your business model? Let’s talk!