Let me start with a confession: sometimes, thinking about innovation creates a dilemma in my mind. On the one hand, we can look at companies like Apple, Google, or Intel to see how innovation can drive significant societal changes. It is also presented as an elixir for growth, profitability and competitive advantage.
On the other hand, there are no guarantees that innovating will pay off. Examples of businesses that failed to transform their creations into economic or market advantage abound in business history. I remember Hydrox Cookie Company, which invented a vanilla filled chocolate chip cookie, but Nabisco bought out Oreo cookies and Hydrox Cookie Company disappeared. Netscape may have been the first commercially viable browser, but Microsoft managed to grab the biggest market share. Search engine innovators saw their market share decline first to Yahoo and then to Google, and there are countless other examples from different industries: Nokia, Kodak, Blockbuster…
From the freemium business model to the aggregation business model, the 21st-century digital economy has shown that serving customers well does not necessarily make a business sustainable – unless it actively finds ways to capture value in the market. It seems obvious, but many media and e-commerce companies have gone bankrupt, despite improving customer experience through digital channels simply because they forgot to capture value. Being “more innovative” has become a mantra of management gurus, but this advice alone is clearly not enough. The challenge is not only to create value from innovation but also to capture that value.
Let’s consider some examples.
The toy manufacturer LEGO collects proposals for new product concepts through its ‘LEGO Ideas’ portal, thus ensuring that when a new product reaches the market, there is market demand and at least a certain number of buyers will buy it.
Similarly, Alain Afflelou is a French eyewear manufacturer who created IDEAS4AFFLELOU to propose challenges, receive new ideas and build customer loyalty. Through free, open and democratic participatory processes, anyone could share their ideas to improve the manufacturer’s offering as a video selfie, which would later be voted on by experts and the general public.
But don’t think that value is only captured from customers. In 2010, Banco de Sabadell (Spain) used its intranet to host BS Idea, a community created by employees to offer ideas for improvement to the bank regardless of their position or seniority. More than 21,000 ideas contributed to process evolution, product transformation and new lines of business.
Have you ever wondered what makes the difference between a sustainability program that creates business value and one that is not capable of doing so? According to McKinsey & Company, leading companies embrace sustainability as an ethical principle and as potential incremental business opportunities. They firmly believe that sustainability programmes generate additional income, cost savings, and other benefits that create value for shareholders, stakeholders, and most importantly, society. Did you throw away the bread you didn’t eat this morning? It is estimated that 44% of bread is wasted in the UK. Toast is a Yorkshire-based brewery that uses unsold pieces of bread and crusts from sandwich makers and bakeries to make its award-winning beer. Toast also donates 100% of its profits to charities campaigning to address this issue.
Creating and capturing value from new ideas needn’t only be for large and consolidated companies. On the contrary, SMEs have great opportunities because, in a panorama of rapid consumption and advertising bombardment, they may stand out through their potential for change, flexibility and optimistic projection. The only way to win the market is to offer something unique, and that is where SMEs have an inbuilt advantage.
Creating and capturing value is one of the most commonly overlooked facets of the innovation process. You can hear expert insights and learn from growing businesses who’ve developed their own approaches to value capture, by signing up for our free web series. Sussex Pioneers features 12 inspiring stories from some of the most innovative companies in East Sussex, as well as roundtable discussion and practical tools delivered by the Sussex Innovation team.