This guide explains how you can make your business processes more innovative. It gives you advice on innovation start-ups, planning for innovation and creating the right business environment to develop your ideas. It also outlines the help and support available to you, and the risks and rewards associated with innovation.
“Innovation is too risky right now”.
If your business is experiencing difficult trading conditions, you need to fight. Not just to ‘stay afloat’, but fight to stay ahead – to innovate. Do it right, and you could be in a much stronger position when conditions improve.
“I’m in a good place, I don’t need innovation”.
But even if you’re doing just fine, there’s a strong argument for innovating to push you ahead of the pack. You could introduce new or improved products and services. You could build on an idea to start a new business. Or you could find new ways to increase the efficiency of your business and improve its profitability.
You don’t have to find ‘the next big thing’.
Yes, innovation can mean a single major breakthrough, such as a totally new product or service. But it can also be a series of small, incremental changes, such as:
- improving or replacing business processes to increase efficiency and productivity, or to extend the range or quality of products and/or services
- developing new and improved products and services – often to meet rapidly changing customer or consumer demands or needs
- adding value to products, services or markets to differentiate your business from its competitors
- successfully building on a new idea through an innovation start-up.
Where to find ideas
Keep your eyes and ears open, because ideas can appear when and where you least expect them.
Inside your business
Ideas can come from your employees, managers or in-house research and development work. You can use newsletters and your intranet to help your people share information, set up suggestion boxes around your workplace, or hold workshops or ‘brainstorming’ away days.
Outside your business
Pay attention to suppliers, customers, media reports, market research published by another organisation, universities and other sources of new technologies.
Obviously you’ll need to filter the ideas you see or hear, but there could be something your business could focus on and exploit. And it goes without saying that you shouldn’t penalise people for ideas that don’t work. In fact, you’ll get results from rewarding innovation and celebrating success. Appropriate incentives can play a significant role in encouraging people to think creatively.
Ways to innovate
Adapt your product or service to the way your marketplace is changing.
For example, if you're a specialist hamburger manufacturer, you might consider lowering the fat content in your burgers to appeal to the health- conscious consumer.
Identifying a completely new product.
Your burger company could start producing vegetarian as well as meat burgers, for instance.
If your main competitors' products have a reputation for being cheap and cheerful, you could revamp your marketing to emphasise the quality of your merchandise – and consider charging a premium for them.
Involve your suppliers and other business partners
Pooling your resources with your suppliers or other business partners will help to produce and develop creative ideas. You could also develop potential partnerships through business networking opportunities.
“Will my idea work?”
There are lots of practical ways of assessing whether your ideas have profit potential.
Analyse the marketplace
You can find a lot of information about your industry on the Internet. Business and trade magazines will also feature useful articles.
Assess the competition
Find out who your competitors are and where they operate. Use the Internet and advertising sources such as the Yellow Pages to find out about their products, prices and operating culture. This can give you an overview of their selling points, as well as any areas you might be able to exploit.
Ways to reduce risk
- Seek advice – professional consultants and others in your industry can provide valuable insight into your related markets. A business network could provide you with useful contacts.
- Joint ventures – Sharing the development process with a business partner spreads the risk, and means you can benefit from their expertise and resources.
- Licensing – allow someone else to bear the risks of developing your idea in return for a fee and royalties.
- Grants – these could help to spread financial risk and allow you to develop your system to a higher quality, reducing operational risk.
- Incremental innovations – you should be constantly looking for ways to enhance your existing offering. New ideas for low-cost opportunities may come from customer feedback, employees, or networking with other businesses.
- Ongoing research – stay up-to-date with market research and technological developments that may influence your business.
Banks are often reluctant to lend money to innovation start-up businesses - especially if you have no significant tangible assets such as premises or equipment. But if you're willing to give up some control of your business to external investors, you could consider using equity finance from business angels and venture capital (VC) firms:
- Business angels typically invest from £10,000 up to £2 million in private companies.
- VC firms provide higher levels of investment in return for shares in the business. Companies looking for VC for the first time can raise up to £5 million, although some smaller regional VC firms or VC Trusts will make investments from £50,000.
Investors in start-up ventures will usually expect a return on their investment after between five to seven years after investment. This is often achieved by selling either the entire business or just the investors' shares in it, so they can realise the value of their investment.
Grants will usually only cover part of your project, but you will retain control of the shares in your business and, providing you don’t break any of the conditions, you won’t have to repay the sum awarded. There’s a wide range of grants available, backed by a variety of sources, including the government, the European Union and local authorities.
Other funding options for Scottish businesses
- Scottish Enterprise offers innovation grants
- Highlands and Islands Enterprise (HIE) offers research and development loans.
- Enterprise Europe Scotland offers European innovation funding.
- Seed corn venture funds are locally based funds, often linked with regional strategies.
- Unsecured loans, for example from family or friends.
- Remember, small and medium-sized businesses can claim tax relief and credits on appropriate research and development spending.
Watch our video How I turned a gap in the market into a global business.
And if you have any questions about innovation, we’ll be happy to help. Just contact your local Business Gateway office.