The Importance of Innovation and its Need for Businesses

Remember Blockbuster? It was the most significant movie rental service of the 1990s. Yet it is no longer around. This is because it did not pay heed to the importance of innovation.

Netflix began as a small business, and today’s Netflix market value now stands at $32.9 billion.

 Even regulated industries, such as taxis and banks, are not immune to change. See what Uber has done to the traditional taxi industry. It can be seen how innovation affects financial services. 

84% of executives say that innovation will decide their future success. Innovation may sound like a buzzword for some. But there are many reasons why companies put much emphasis on it.

Innovation helps businesses to stay relevant in the competitive market. So, it also plays an essential role in economic growth. The ability to resolve critical problems depends on innovations.

This is especially when developing countries need it more than ever.

We have written quite a few posts about innovation management. This time, we have decided to take a closer look at the reasons that define the importance of innovation.

Why do we need innovation?

Innovation is the introduction of something new. Let’s go through the importance of innovation. Without innovation, there is nothing new. There will be no progress without anything new.

If an organization is not making any progress, it cannot stay relevant. Organizations are often working with other individual organizations.

So, it can sometimes be challenging to understand the impacts of innovation. There is a lot more to innovation than just firms looking to achieve a competitive advantage.

Innovation is the core reason for modern existence. Hence, innovation can have undesirable consequences. But, change is inevitable, and in most cases, innovation creates positive change.

The fundamental outcomes of innovation

Innovation impacts so many different parts of our society. So it would be almost impossible to go through everything in one post. Thus, we have decided to focus on the most significant aspects.

Innovation’s result should always be an improvement.

Societal outcomes are economic growth and increased well-being and communication. So, it also includes educational accessibility and environmental sustainability.

Now we will take a look at the impact of innovation on organizations.

• Innovation and the future of jobs 

Technological advancement and increased productivity mean significant changes for careers today as well. By 2050, the global economy could more than double in size. This is due to continued technology-driven product improvements.

By 2022, nearly 133 million new jobs may be created. AI, automation, and robotics will displace 75 million jobs. Hence, this is according to a new World Economic Forum report.

• Competitive advantage

Successful, innovative businesses can keep their operations, services, and products relevant. They can adapt according to their customers’ needs and changing market conditions.

Among the Fortune 500, only 12% of firms from 1955 are still in business. This is according to Deloitte. In the next ten years, Half of the S&P 500 companies will be replaced. 

So, this is why it is a must to be able to respond to external challenges quickly.

• Maximize ROI

Increased competitive advantage and continuous innovation often have a direct impact. They affect the performance and profitability.

There is a clear difference in EBITDA (22%) and revenue (11%) growth in favor of the more innovative organizations. This is according to  Global Innovation 1000.

Therefore, this shows that innovative companies not only grow faster. They are more profitable than the rest.

Measuring the ROI of innovation might be challenging. This is especially true at the beginning or when talking about disruptive innovations. But investing in innovation is often a surer way to improve your numbers than not innovating at all.

Conclusion

Generally speaking, the primary purpose of innovation is to improve people’s lives. However, when it comes to managing a business, innovation is the key to making any progress.

Your innovation activities may not be powerful enough to save the world. But, it would help if you strived to improve the things you can affect.