Why Innovation Is Crucial To Success In Business

By Lewis Humphries | May 22, 2012 AAA

Although the global economy continues to experience hardship in the face of uncertainty and austerity, entrepreneurship is at least providing a beacon of light among the gathering gloom. According to an annual study conducted by the Kaufmann Foundation last year, 0.32% of U.S. citizens created a business per month in 2011, which despite showing a 5.9% drop from 2010 levels still stood higher than the figures recorded before the great recession.

So with the number of U.S. startups reaching some of the highest levels in 16 years during 2011, the primary challenge facing entrepreneurs is how to create a business that prospers over a significant period of time? It is certainly not an easy one to overcome, as according to the SBA (Small Business Association) an estimated 33% of independent ventures fail during their first two years, while this figures doubles after four years of trading.

Facebook and Apple: Leading the Way for Business Startups
One thing that all aspiring entrepreneurs should pay attention to, is the link between innovation and sustained commercial growth, and not only the way in which successful businesses constantly look to improve their operational processes and IT functionality. While this may be important to maintaining the internal performance of a business, companies that embrace the concept of customer-facing innovation ultimately experience the most pronounced and rapid growth.

Perhaps the best contemporary example of an innovative customer-facing company is Facebook, which recently recorded one of the highest increases in brand value between 2011 and 2012. After reaching 845 million users by the close of last year, and generating a total of $3.7 billion in the process, Facebook's incredible growth can be partially attributed to its willingness to continually improve the experience of its user base. Rival brands Apple and Google also share this passion for customer-focused innovation, and subsequently stand as one of the top leading global brands according to Millward Brown's annual BrandZTop 100 report.

The Flip Side of the Coin: How Brands That Failed to Innovate Have Fared
It is not only the performance of successful brands that highlights the importance of innovation, however, as the experience of companies that failed to embrace change is equally telling. The continued struggles of the once dominant website MySpace is a prominent example of this, and one that also provides a stark contrast to Facebook's steep and unprecedented growth. The recent news that it is to axe nearly half of its workforce is the culmination of a steady decline, and one that has its root in an inability to innovate and adapt to an ever-changing user demand.

Occasionally, even a company that is synonymous with its industry encounters such problems, and this was certainly the case with U.S. imaging giant Kodak. Having recently filed for Chapter 11 protection from the imminent threat of bankruptcy, it is a brand that has fallen far from its dominant market position of the 1970s and 1980s. At the heart of this steady and continued decline has been the company's reluctance to react to the threat of evolving digital technology, which prompted a sluggish and ineffective approach to innovation that ultimately cost them. The irony of this situation is that Kodak itself stood at the forefront of digital technology in the 1970s, which the company hopes to capitalize on by selling several of its digital imaging patents as a way of funding its restructuring.

The Bottom Line
When it comes to embracing customer-facing innovations, brands must show courage and a willingness to make mistakes through the creative process. Google is a case in point, as although it generates a constant stream of innovations that are designed to improve both existing systems and its users' experience, it is not immune to failure or poorly received ideas. For example, while Google Chrome has recently emerged as the world's most popular Internet browser, one of its first forays into social networking ended in failure with the poor reception and ultimate closure of Google Buzz in 2011.

With regards to businesses that have failed due to an unwillingness to innovate, the key lesson that needs to be learned is the importance of implementing new ideas to adapt and meet changing consumer demand. As technological advancement continues to gather pace, businesses are constantly under threat from new product developments and the growing knowledge of the consumer. As failing industry giants such as Kodak and MySpace can testify, even established brands can ill afford to ignore the market around them or the way in which it influences the modern day consumer.

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