Innovation in Entrepreneurship: 5 Reasons Why its Important
What is Innovation?
The innovation can be in the form of enhanced products or processes, technological advancements, improved supply chain, and distribution, or better marketing. Innovation can create altogether a new market or help penetrate the existing one.
In the olden days, the portrait paintings of ancestors clinging to the wall were fascinating with the artistic presentation of a person. The paintings vividly depicted physical personalities and gave fond reference to the family tree.
As time passed, clicking photos of family members from a film camera became fun. That brought cherishing memories as photos and albums. Today, mobiles made it easy to capture and saving pictures. Well, this transition from the use of portrait paintings to mobile photography, for capturing physical features of people got simplified.
In the very Camera industry, once Kodak’s film roll photography revolutionized the market by eating up competitors and commanding major market share. But, with the emergence of digital photography, Kodak took a back seat. Digital photography became a disruptive innovation. Kodak was wiped out of the market as it failed to think digitally.
In a quest for newness or dominance, innovations take place invariably and transition for betterment happens. Be it any industry, change is inevitable.
Looking at the definition of innovation from Business Dictionary, “the process of translating an idea or invention into a good or service that creates value or for which customers will pay.
To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need.”
But, how is innovation related to entrepreneurship?
What is the relation between Innovation and Entrepreneurs?
Innovation and entrepreneurship are like two sides of the same coin. They are inseparable. An entrepreneur applies the tool of innovation for creating new businesses or improving the existing ones.
While entrepreneurial startups come up with innovative ideas by tapping business opportunities, incumbents innovate to grow over competitors and sustain their businesses.
There are many classic examples of companies globally where innovation forms the heart of their business activities. Apple is considered the most innovative company that introduced game-changing products like Apple iPad, iPhone, iTunes, and so on.
Apple’s innovation approach is not confined to a particular business aspect but the whole company as such. In the words of Tim Cook, CEO, Apple, “Innovation is deeply embedded in Apple’s culture. We approach problems with boldness and ambition, and we believe there are no limits. Innovation is in the DNA of the company.”
Similarly, Google, Tesla Motors, Microsoft, Unilever, Amazon, BMW are a few among the list of innovative companies globally. These companies stood out in their respective industries by clinging to innovation and R&D. They created a profound impact on the lives of people with their ideas.
Innovation and Indian Entrepreneurs
In the Indian Scenario, there are many companies innovating products or services addressing the needs of people or shortcomings in society. As per India Brand Equity Foundation (IBEF), some of the significant innovations of India include Byju’s – the Learning app, Zomato – online food ordering chain, HackerEarth – in the field of recruitment, Smartivity – kids mind and body engagement products, Zuper – B2B software and so on.
Talented engineers and scientists from India are coming up with ideas that have commercial viability. Added to this, an initiative like Make in India is offering a good platform to aspiring entrepreneurs by simplifying the business set-up process, assisting in intellectual property filings, and aiding funding.
Today, India provides a fostering environment for entrepreneurs by holding third place globally for entrepreneurship. There is a significant improvement in new businesses since 2014. The cumulative annual growth rate of new businesses is 12.2% between 2014-18 over 3.8% within 2006-14.
An innovative culture is slowly growing among Indian enterprises. The big game-changing ideas and innovations are yet to come from Indian entrepreneurs.
Nevertheless, why is innovation crucial for entrepreneurs. How does innovation impact business?
Let us understand the importance of Innovation for entrepreneurs with the below points.
- Innovation Helps Meet Customer Expectations
The customer is King. For a long, this has been the mantra for businesses to thrive. Traditionally, the concept was associated with offering good service to customers and making them happy. Later, businesses turned to provide what customers want, to keep their balls rolling. Over time, things changed to creating products/services and making customers want them.
Customer needs and expectations became paramount in designing products and services. Addressing people’s problems with business solutions has become the order of the day.
Companies began following the customer-centric approach. Customer engagement through social media combined with innovations within the organization is enabling businesses to be more customer-oriented. Customers are being involved at every stage of product development to be more customer-driven.
Innovation is taking center stage for customer-oriented businesses. It can be at a product level, process level, or business model one.
Innovation at Product Level
Let us understand the product-level innovation with the help of SmartCane, a social initiative towards the blind.
SmartCane is designed to meet the challenges of visually impaired persons. Visually challenged people usually carry a stick to walk and sense the obstacles on their way within a short range. A white cane mobility support is used by the blind that helps detect obstacles till knee height.
However, the things above knee height can’t be determined easily, often restricting their mobility. Answering this problem, the research group from IIT Delhi conceptualized and developed SmartCane. While, NGO – Saksham Charitable Trust, Phoenix Medical Systems and Wellcome Trust collaborated and brought out SmartCane as an electronic travel aid.
SmartCane device is fixed on the white cane and used to diagnose hurdles in the form of hanging or extending objects. For example, hanging tree branches, bulging air conditioners, hanging cloth wires, vehicle sides, and so on.
The device works with sonic waves to determine obstacles and send vibratory patterns to users. As such, the user can avoid injuries to the upper body and walk independently in any direction.
Innovation at Process Level
Let us understand process-level innovation with Akshaya Patra Foundation, an NGO successfully providing mid-day meals in government schools.
Intending to eliminate hunger and malnutrition among school-going children, Akshaya Patra is providing nutritious food to around 1.8 million children from 19,039 schools every school day. The number of children served by the organization is raising, with more and more rural schools being included.
While the cost of each meal is around Rs. 11-11.5, the food served is hot and fresh. Such a massive scale of food preparation and an efficient delivery system is achieved by innovation at the process front.
Akshaya Patra’s centralized kitchens are fully automated – roti maker machine which can churn out more than 40,000 Rotis an hour, mechanized vegetable cutting, easy grain cleaning, and lentil preparation method and so on.
The technology in the kitchen enabled achieve speed, quality, hygienic and cost-effective meals. Of late six-sigma methodology is also adopted to further minimize cooking time.
As the food is ready, it is quickly delivered to schools in specially designed heat-insulated vehicles. It is ensured that there is minimal spillage on the way. Care is taken to cut down fuel consumption and logistics costs with the help of route simulation and an interactive voice response system (IVRS).
The other cost-reduction effort from Akshaya Patra is the biogas system, which converts organic waste from Kitchen into energy. This enables the organization to save on 3 LPG cylinders per day at each of its Kitchens.
Akshaya Patra embraced technology to answer the most pressing problems of the country, hunger, and illiteracy. In the words of Madhu Pandit Dasa Chairman of Akshaya Patra, “To bring in a culture of innovation, we need to adopt technological ideas from the West but use our own resources to localize innovations to address our local needs.”
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The Innovation of the Business Model
Let us understand how an innovative business model can cater to customer needs with Ola Cabs.
Ola which is into taxi-rental business, initially operated by purchasing cars and running them over call center bookings. Later, realizing the online business opportunity, it shifted to a mobile-application-based model, wherein the customers are connected to cab drivers through the Ola app.
The mobile app enables users to book a cab as per their preference, across a category of cabs and price range. The user receives driver details through a message after the request is accepted by the driver. The user can track the cab status and know the location of the driver as he arrives at the pickup point.
Customers are picked and dropped at a chosen location. The payment can be made in multiple formats – cash, Ola Money, UPI gateway, and so on.
As such, Ola made the entire process of hiring a cab and reaching the destination, smooth and efficient with technology. The business model of Ola simplified the process both for customers and drivers and of course, became a major revenue generator for the company.
- Innovation Offers Competitive Edge
The biggest challenge for any entrepreneur or enterprise is to find a way for gaining a competitive advantage over other players in the market. The competitive advantage is demonstrated in the form of offering more value to customers over competitors through reduced prices or enhanced product features at a high price.
Let us understand how innovation offers a competitive edge with the below points:
- Innovation is one such crucial business strategy that can improve productivity, reduce cost, and sustain competitive advantage for companies.
- Enables market penetration and expands the customer base, thereby selling the products less pricey and creating a competitive advantage over peers.
- Unveils opportunities that are unique from others and creates a niche or new market. It offers a first-mover advantage by building a new product or service.
- Improves efficiency and results in a competitive edge.
Building a Niche with Innovation
Let us understand how innovation creates opportunities for entrepreneurs and build a niche with Milk Mantra, an Odisha-based dairy food startup.
Realizing the opportunity in the Indian dairy sector – especially in Eastern India where the gap exists between milk demand and supply, Srikumar Mishra founded Milk Mantra. At Milk Mantra ethical sourcing of milk from farmers eliminating middlemen forms the core of the business.
Farmers directly get milk to collection points of the company. They receive fair payment based on the amount of fat in the milk. This way farmers know the market value of their produce.
Besides, farmers are also offered extension services like cow health check-ups, cow feed at a fair price, and so on. Such services increase milk production and build trust among farmers. Today, there are over 60,000 farmers in the milk sourcing network and the company has two big milk processing units.
Another key focus of the company is innovative packaging, which can enhance the shelf life of milk. It produces several milk products like curd, buttermilk, yogurt, flavored drinks under Milky Moo and MooShake brands, which are distributed in Odisha and neighboring states including West Bengal, Jharkhand, and Chhattisgarh.
Milk Mantra has a competitive edge with consistent milk supply directly from farmers – that helps in curtailing cost – and innovative packaging for its dairy products – which enhances the quality of the product.
- Innovation Pushes Growth in terms of Revenue and Market Share
Market share refers to the percentage of sales of a company in the total sales of the industry. The higher the market share, the higher is the profit for the enterprise. Businesses strive rigorously to stay at the top and more command market share through product innovation and innovative promotional campaigns.
The unique characteristics of the product set out the company apart and help in gaining more market share. With the product’s USP, a company can penetrate cluttered and well-established markets, and create a robust place in the industry.
For example, Patanjali entered into a highly competitive Indian Fast-Moving Consumer Goods (FMCG) market with its herbal and organic product range and created a strong foothold among deeply rooted players.
In a way, Patanjali disrupted the industry with its innovative product range and low prices. Patanjali with its broad range of nature-based products portrayed itself as an Indian brand and highlighted the low product prices through its advertising campaigns.
The dominant players were forced to rethink their strategies and revisit their product portfolios to compete with Patanjali.
While, attaining a good market share is an achievement, sustaining it is equally important. Sustaining market share is a continuous process. It is always crucial to remain relevant among consumers and frame the right strategies for maintaining market position.
As such, investment in innovation and research and development brings long-term success and retains market position.
- Innovation Nurtures Culture of Creativity, Problem Solving, and Continues Learning
A company emphasizing innovation is encouraging a culture of creativity and problem-solving skills among its employees. Creative culture prepares an enterprise to speedily respond to external challenges and keep up with the changes.
Innovation is crucial to keep pace with the changing trends. A company’s ability to quickly adapt brings long-term success. Innovation triggers technological advancements that give entry into new markets.
Need for Improving Innovation among Indian Entrepreneurs
Indian startups are considered replicating technologies or business models that are existing and proven. There is a dearth of innovative culture for fresh and new ideas here.
In a survey, Entrepreneurial India by Oxford Economics, under IBM Institute for Business Value found that “90% of Indian startups fail within the first five years. And the most common reason for failure is lack of innovation – 77% of venture capitalists surveyed believe that India startups lack new technologies or unique business models.”
However, innovative culture may not give success at first shot. There will be failures as one venture into a different arena that is never tried. In this context, Naveen Tiwari of InMobi, a mobile advertising service provider, said –
“Innovation happens when you fail, fail, fail, and then you succeed. InMobi has created multiple innovations within the company in the past few years. They all have become very large divisions within the company, and we feel that’s the only way in which we can succeed.”
As such, although the risk of failure exists, innovation is essential for the sustainment of business. The danger of wiping off from the markets persists if new ideas are not encouraged and developed.
- Innovation helps Build Strong Brand Equity
Brand equity stands for how significant is one’s brand in the customer’s eyes. It refers to a customer’s perception of a brand. Brand equity signifies the worth of a brand. While building a brand is key for outperforming competitors, the long-term success of the brand depends on brand equity.
Brand equity involves building customer loyalty. Assuring customers of product features and how they benefit from them build customers’ loyalty. A company must be able to influence customer choices and their purchasing behaviors for brand loyalty.
Customers on the other hand are more inclined towards brands or companies that are more innovative. In the findings of 2018 BrandZ data, a brand valuation rankings platform, in the UK, “Brands which people consider to be the most innovative grew their brand value 25% more than their rivals.”
Furthermore, brands that are innovative need to communicate it to the customers through branding strategies. Advertising campaigns and promotional activities should strive to place the brand on top of the customer’s mind. This helps in building strong brand equity and brand value.