Innovation and digital disruption have become popular topics for political discourse lately as the need to create growth opportunities is on the rise for Australian small businesses. It requires a genuine understanding of your customers to successfully innovate and small-business owners, with their intimate knowledge of their customers, are well-positioned to do this. This close customer connection provides them with a great opportunity. Connecting with your customers to truly understand them, and by paying close attention to the problems they actually have, rather than the problems you think your current products or services solve for them, is the way that innovative ideas emerge.
Small businesses need to be open to experimentation and developing new business models. They need to learn to embrace the idea of disruption, because innovation isn’t what it used to be. Fifty years ago a business could be market leader for decades by just focusing on their core products. Any product improvement was incremental and achieved through process innovation. This meant better, cheaper materials or product line extensions. Any ‘disruptive innovation’ back then would have been thought of as a risky distraction from their core offering. Today businesses that succeed are the ones that master continuous innovation and aren’t afraid to embrace change. We hear a lot about ‘digital disruption’ these days where a new idea comes in and changes the way things have traditionally been done. The taxi app Uber, for example, is seriously disrupting the monopoly that taxis have had for many years. And the camera and film business Kodak never embraced the digital-camera technology it actually helped create, or the new ways consumers wanted to interact with their photos. For Kodak, these missed opportunity to innovate meant the demise of their business. These examples highlight the importance of businesses constantly asking, what are our competitors doing? What can we do to stay ahead, knowing that digital disruption has impacted and transformed other industries?
For some businesses successfully innovating is a major challenge. First you have to recognise there is a problem and that your operating environment has changed. What made you successful in the past is likely not enough to sustain you for the future. Here the key to successful innovation is to develop new repeatable processes that will benefit your business. That means you constantly run small experiments or tests to find out what works. You continuously introduce new products or services or tweak existing ones knowing that most of these small experiments won’t work. These changes need to be done cheaply and quickly to minimise their impact. But maybe one in ten of these ‘innovative experiments’ will be successful and yield significant results. You can then focus on and fully develop these successful ideas into something that is sustainable, profitable and beneficial to both your customers and your business.
There are things you can do to capitalise on the opportunities created by disruption to your industry. There are some sectors that will be affected more quickly than others. But you can’t ignore innovation and disruption but rather should embrace it and plan for the future. Businesses need to remember that innovation is not limited to your products, services, technology or creative thinking. Rather, focus on understanding why the customer can’t adequately solve important problems and try to develop a solution that does the job in a new and novel way. Innovation is not a one-off thing; you need to always be looking for better ways of operating because businesses that are most successful and survive are the ones that master continuous innovation and disruption.