5 Essential Rules of Business Innovation

5 Essential Rules of Business Innovation

Business innovation drives success. It always has and always will, because it takes a great idea and gets the most of it by expanding on something to make it better.

To understand this, we only have to look at the history of Amazon.

The history of Amazon actually starts in 1945, when Tiffany’s created the Blue Book, which was the first mail-order catalogue of its kind in the U.S. Consumers could use the Blue Book and place an order for a variety of goods that would be mailed to them wherever they were.

The most successful mail-order catalogues were from Montgomery Ward and Sears. Using these catalogues, consumers from all over the country could order just about anything they needed – including pioneers settling the West, who depending on affordable machinery that could be purchased through a catalogue.

These companies even sold vehicles and home kits. Some of these home kits resulted in houses that are still lived in today.

Fast forward to 1994. That’s when Wall Street exec Jeff Bezos founded what would soon be known as Amazon, in order to take advantage of the Internet boom that was in its infancy. Amazon (or Amazon.com as it was known then) started with just one main product type: books. (Yes, for younger entrepreneurs out there, Amazon started as an online bookstore.)

Over the years, Amazon added more and more products until it reached its current form: the largest retailer in North America and one of the largest in the world that ships billions of products every year.

Amazon, at its most basic, is an online form of a traditional print mail-order catalogue from the 19th century.

Amazon is one of the most valuable companies in the world because Jeff Bezos understands the rules of innovation. There are many, but the most important can be boiled down into five essential rules.

Rule #1: Innovation Is Never a Single Event

Innovation never happens as a “Eureka!” moment. It’s a gradual series of events that may take months, years, or even decades to see to fruition.

Many people miss out on innovating because they try so hard to find that single flash of inspiration, instead of doing what innovators do: take an existing good idea and find some way to make it better, even by a single percent.

If you can steadily improve upon a good idea, soon you’ll find yourself far from where you started – and hopefully with an even better idea.

Rule #2: No Innovator Is on an Island

The best outcomes are a result of collaborative processes that combine two or more skills into one powerful approach

Amazon combined the proven success of the mail-order retail system and combined it with the Internet. Bezos needed people to work for him who understood both very well; without that combination of skills, Amazon would’ve floundered.

Another example: Penicillin didn’t become a miracle drug until over a decade after it was first discovered, because the person who discovered it – Alexander Fleming – couldn’t synthesize it. Howard Florey and Ernst Boris Chain, chemists, had to step in and use their skills to bring penicillin to market.

Rule #3: Every Great Innovation Solves a Problem

In order to innovate off an idea, you have to ask the right questions. In order to ask the right questions, you have to know what problem you are trying to solve.

Bezos knew that selling books over the Internet would solve a problem of readers trying to find more books besides the ones they found at their bookstore. It would also solve a problem of books being more expensive than they should be by offering them for sale at discounts.

Identifying a problem is the root of innovation because it makes you focus on something practical. You can innovate with abstract ideas all you want, but until they can be converted into something useful and practical, they won’t be as successful. No one will really care, either, until it fixes some kind of problem that people have.

Rule #4: You May Need a New Business Model

If your innovation proves to be particularly disruptive, you may need to create a new business model to handle the paradigm shift.

In the mid-20th century, the rush to the suburbs coincided with the Baby Boom right after World War II. This created a need for everything to be relocated outside of a major metro area, to the suburbs where growing middle-class families were now living. This included fast-food restaurants.

The rapid growth created a need for fast-food restaurants to expand just as quickly. But that would cost more than a company could afford. So, restaurateurs changed their business model from the traditional “own every store we open” model to the franchise model, which is why you now see national chains on every street corner. Franchising was more affordable and, ultimately, more lucrative for fast-food restaurants who needed to quickly establish a presence in an increasingly-large area to fulfill the suburban/Baby Boom demand.

The traditional business model just may not work for a product or service that has been innovated and brought forward. It could create a strange new world in which the old rules don’t apply anymore.

Rule #5: Expand from the Core of Your Business

Many innovators fail because they neglect what made their businesses successful (or what made an idea great) in the first place. In other words, they seek success outside of their current success, thinking that innovation lies outside of the traditional core of the business.

But what they don’t realize is that the core is the foundation of your business that will actually drive more successful innovation.

Google, for example, has a lot of irons in the fire when it comes to new innovation, with things like driverless cars and a myriad of other ventures. But the vast majority of its profits and success come from its search engine core. That’s what fuels the bulk of Google’s revenue. So, Google spends much of its time innovating in that space and spending less time outside of the core.

They still try to innovate with products that complement search, like Gmail, and some time should be spent trying to branch out that way. But most of your time should focus on what you already do best, and trying to make it better.

These rules are not exhaustive. A lot of factors go into a successful innovation. But they provide a solid foundation from which you can start innovating on good ideas and making them even better than before. In entrepreneurship, that’s what innovation is all about.

At EO Birmingham, we help entrepreneurs sort good from bad. We supply our members with advice through learning and through peer-to-peer relationships, learning how to innovate through practical, battle-tested guidance. Learn more about our organization or inquire about becoming a member.

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