Innovation comes in many forms. Alison McGregor, chief executive at HSBC Scotland, outlines some of the ways in which it can be adopted.
Innovation is a nebulous idea in the context of business. Walt Disney chief executive Bob Iger may have described innovation as “the heart and soul” of his company, but how easily applicable is it to businesses with fewer creative products and services than those available to the world’s largest entertainment conglomerate?
The truth is that innovation has begun to lose meaning for many. Too ubiquitous and too wide-ranging, the word doesn’t help most businesses to get to grips with the process of change. Because that’s what innovation is really about: progress. Every business has to adapt to changing circumstances – the more innovative you are, the more unique the change may be.
One of the most important facets of innovation is not to expect instant results. Vertical farming has been an agricultural revolution some 10 years in the making, but the concept and the commercial reality have yet to converge on a sustainable, mass-market solution. Thinking big may reap rewards, but you may not see returns quickly.
So what makes business innovation successful and how can businesses harness it today?
One of the most common ways to rethink your business strategy is to export. The world is getting smaller and expanding your business into new geographies is an exciting – and, now, realistic – prospect.
Exporting is no longer the preserve of mid-market and large corporates, either. Selling overseas is now the preserve of any business, with many start-ups having the flexibility to export “from birth”. The banking industry is investing heavily in distributed ledger technology – commonly referred to as blockchain – to try and change the way financing international trade happens, too. It will soon be easier, and even safer. Secure and verifiable ways to exchange information will help to break down trust barriers and encourage more businesses to open their eyes to the potential of trading beyond their domestic marketplace.
New product innovation is another common method of change. Diversifying your portfolio, investing in new talent or creating a new service can all widen your revenue streams and improve your bottom line. But many business owners view such a process with trepidation. It can often be expensive and difficult to implement. And the very fact that new products are not yet universally adopted means the risks may outweigh the rewards.
Virtual reality (VR) is a good example. Until fairly recently, VR was the stuff of Hollywood movies. Now, it is being used in commerce as much as it is in entertainment. It can help customers to fully immerse themselves in your products and they don’t even need to be on location. You have to wonder what the lifespan of the PowerPoint presentation is when VR can transport your audience to a fully-immersive world you have created for them. However, VR won’t be right for everyone and it’s clear there is little point investing in the technology for the sake of it.
Another product being adopted across many industries is three-dimensional (3D) printing. Also known as additive layer manufacturing, 3D printing is no longer the preserve of school science classes. Products of the highest specification in some of the world’s most complex industries are being created using this method, including the aerospace and automotive industries – F1, always at the vanguard of innovation, is already on board.
Working with a variety of metals, ceramics and polymers, 3D printing can manufacture to almost any design. It is very popular for new product innovation because it is flexible – you can experiment with a 3D printer before you discover glitches to your new widget on the production line. Such is the uptake of the technology globally that experts estimate the industry will be worth US$10bn by 2021, while the productivity of 3D printing machines will improve a hundred-fold in the next 10 years.
The ultimate innovation for many businesses is adopting artificial intelligence (AI). Finding opportunities to automate processes and improve data analysis are a continual challenge for business, and many view AI as part of the solution. From reconciling invoices to simultaneous, multiple spreadsheet analysis and other “big data” problem solving, AI can offer business a fact-based approach to administrative and time consuming tasks, liberating human resources for more valuable roles.
Indeed, whether you choose to adopt AI or not, understanding the role of data, and creating process efficiency, will transform business in future.
This is particularly true in the professional services industry. To use the legal industry as an example, our research shows that 59% of law firms increased their technology spend by up to 20% last year. Around a quarter of that investment was specifically allocated to new, innovative technology.
Notably, this trend is not exclusive to legal services. All professional industries are facing widespread change driven by data and new technology. The statistics paint a vivid picture of how critical the digital and technology agenda has become and it makes you wonder how sustainable that level of investment really is. That said, new approaches to pricing and billing might help to differentiate one firm from the next – and a competitive advantage could be crucial at a time of great change.
It is also often the case that innovation is conflated with technological change. Yes, technology is integral to many business innovations, but that needn’t be the case. We often encourage businesses to keep their change management processes simple and realistic, and to integrate forward thinking into all aspects of business.
One business leader with experience of almost perpetual innovation is Tom Davies, of the eponymous Tom Davies Bespoke Opticians. Tom Davies is one of very few eyewear brands in the world to manufacture its own product. With the responsibility of doing so also comes great flexibility, and the almost constant internal expectation to innovate.
However, Innovation isn’t limited to eyewear products. Process innovation is just as important. Tom Davies has created its own cloud-based customer relationship management (CRM) system as well as software, which it calls “Supertool”, to integrate the entire frame manufacturing process. Opticians can design frames in-store with customers before sending precise metrics to a production facility, where computerised cutting machines create the frames. The business estimates it has saved around eight hours of programming time and a further six hours of manual labour, though all of its products are eventually finished by hand to give it a skilled end result.
3D printing has also been carefully considered at Tom Davies. The company is working with a Danish supplier to explore a new composite material for use in sportswear, in order to provide a super-strong yet lightweight frame. The interesting thing about the Tom Davies example is how well integrated innovation appears to be – it has decided that creating new ideas is part of its ethos, helping the business to stay ahead.
If the sheer cost of innovation – both in terms of time and money – seems daunting, then financing the process should help to liberate you from those constraints.
And while smaller businesses might enjoy their ability to be nimble, they also feel keenly their constraints on time and resources. HSBC works closely with many businesses to unlock time and cash flow for small and medium-sized enterprises (SMEs) in particular. Term loans, for example, can buy a business valuable time to research an idea and test it in a marketplace before committing to a full production and sales process; receivables finance can help to improve cash flow; and credit protection can guard you against late or bad payers overseas, ensuring you can manage to trade, and innovate.
Whatever your sector and whatever your business need, one thing is certain: progress is vital to business success. Being ready to innovate could be half the battle.
Our BQ Bulletin emails will land in your inbox at 7.30am, Monday to Friday, with a mix of the latest local business news, national news, and features to inspire you. Sign up here!
Click here to read our privacy statement