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BUSINESS INNOVATION

Business & InnovationAccording to Paretto’s 80/20 rule, out of several thousands of new products introduced into the market every year, most of which we do not ever get to know about, 80% fail while 20% break even. This means 20% of new products ever generate enough sales revenue to pay off their cost of research, development, production, advertising and commissions with some net profit left over, and 1% (out of this remaining 20%) becomes a star or hit product. One may then ask why anyone would venture into researching and releasing new products into the market anyway. However, looking at it the other way, logically though, this also suggests that you must work hard to release as many products & services as possible to increase your chances of having a star product in the market. The reasons you must introduce new products into the market are obvious

1.                 CUSTOMER DISLOYALTY: Customers are often shopping around for better deals and free deals. Better Deals simply mean higher quality, cheaper prices, faster or instant delivery, efficient after sales services, speed, convenience, portability, etc. Many times a combination of these are available at competitive prices. No company can grow in this 21^st century without consistent product and services innovation. Most startup firms that became extremely successful in their early years accomplished that by founding their business on new innovative products & services at competitive prices. For instance, about a decade ago in our country telephone was an exclusive reserve of the rich due to costs. Also, installation time was another problem even when you have paid. Those who held mobile phones (090) were the superrich ones. But not too long after 2001 when telephony was democratized and people discover they can have instant connectivity and at better prices, NITEL became history. Also, up until 1992, email and browsing was previously exclusive reserve of programming engineers. But now, alongside the invention of scanners, fax machines are becoming obsolete in today’s business world. Postal agencies have also been affected to some extent. The fact is that no serious entrepreneur can build a successful business on old technology or outdated way of doing things because customers are always looking out for the best deals around.

2.                 PRODUCT LIFE SPAN: The second reason for business innovation is the expiry of existing product’s lifespan. Many times producers falsely assume their products will keep selling at high rate of return almost forever. Successful business people have discovered this long ago and today most companies already decide for how long a product is going to be in the market before they even resume its production. When a product life cycle reaches maturity or stability in the market, it is important to introduce its replacement before it reaches the stage of its decline. Companies, and even individuals, that do not understand this succession rule find themselves fully equipped for a market that no longer exists. I met someone who brought his laptop for repairs in one of my clients’ computer workshop. He had uninstalled and replaced the original operating system with an older version because he felt he was more comfortable with the old one, but only to discover there were no drivers for the old version in the new system. This customer was simply ignorant to the fact that the new operating system offers more and better features than the older version. He was also yet to realize that the manufacturer has discontinued production support for the older version and decided to move ahead with the new product because he adjudged that the old product has completed its market lifespan and that he would end up losing customers to competitors if he fails to innovate.

3.                 VALUE-ADDED PRODUCTS/SERVICES: Another reason for business innovation is to shore up revenues by adding value. Innovation is one of the best known ways companies gain increased sales from existing customers and at the same create new customers. It is important that a firm retain customers’ interest in its products and this is achieved primarily by reinventing existing products and services (e.g. Omo was repackaged with better washing formula, Cowbell Milk enriched with more vitamins) or introducing new products into the market (e.g. UTC’s cake, etc). Renewed interest in the company and its products due to increased utility value is key to sustaining its growth in a highly competitive market. There are many cases where good but non-performing products were repackaged and as a result, sales were boosted generally. The question to answer in adding value is what benefits are enjoyed by those using this product or service and how can we add to it in order to increase utility with minimum or no extra cost

QUALITY ENHANCEMENT & COST REDUCTION is another reason for innovation. Most of the manufactured equipment for machines we use today would have been priced at least about five times more if they were manually produced. They would have had more errors and defects too. However, innovation has brought about automation and speed in various processes with precision, which has led to lower cost of production and lower selling prices. Today, someone can stay in Nigeria and school in the UK without physically going there. This is done via online programmes and it saves time of going there. Innovation is ultimately aimed at providing better ways of solving existing problems.

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