Use innovation to grow

GROWTH PLANNING

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Introduction 1. What does innovation mean? 2. Different ways to innovate 3. Practising innovation techniques

Using different innovation techniques can be a great way to evolve your product and services and grow your business.

In this lesson, we'll cover different approaches like product development, diversification and integration. You'll also learn how to apply these as part of your overall growth plan.

KEY LEARNINGS

  • Be aware of different ways to innovate your products and services
  • Practise and generate ideas for innovation
  • Understand how innovation could help you achieve your growth goals

Read time:

8 mins

Chapter 1 - What does innovation mean?

Chapter 1

What does innovation mean?

Read time:

2 mins

What do we mean by innovation?

Innovation is a term we use to mean the introduction of new ideas or ways of doing things. This means there is no one way to innovate.  At the same time, there are techniques you can use to help generate innovation for your business. Before we look at the techniques, check out these real-life examples:

Oatly

The original oat milk innovators of the 90s, their product range has grown globally since then

Rolls Royce

They switched from single-purchase to rental business model to attract airlines who couldn’t afford to buy their engines

Zara

They used what is known as vertical integration. We’ll cover that later, but basically it means they control their whole supply chain. This allows them to quickly pick up on and replicate market trends

Netflix

They started as a ‘no bricks and mortar’ alternative to Blockbuster. Their streaming service means we’re buying far fewer DVDs now – an interesting pivot!

Peloton

They provide a subscription service for their fitness classes and use technology to change ideas about ‘at home’ fitness with their high-spec equipment and AI-powered personal training sessions

Samsung

This tech giant isn’t afraid to work with others to generate new ideas – we call this ‘open innovation’. They collaborate with research centres and universities as well as suppliers and large consortium

Introduction - Using innovation to grow
Chapter 2 - Different ways to innovate

Chapter 2

Different ways to innovate

Read time:

4 mins

Facts about innovation

43%

Of UK businesses are innovating

Government (PDF, 2.3Mb) Link will open in a new tab

2.4x

Economic profit for businesses who have mastered the essentials of innovation

McKinsey Link will open in a new tab

13%

Extra productivity for businesses that consistently invest in research and development

Government (PDF, 3.3 Mb) Link will open in a new tab

Types of innovation

In this lesson, we'll focus on 3 main types of innovation to get you started. We also encourage you to research and explore your own as you go along.

Open each section to learn more.

  • Product and service development is probably the first thing you'd think about when someone asks how you could innovate your business. It's the innovation of your product or services. There are three types of product development you should be aware of. 

    Types of product and service development
    Incremental innovation
    Breakthrough innovation
    Radical innovation

    Incremental innovation
    Definition

    Breakthrough innovation

    This means you're improving what came before. Making a series of small improvements to an existing product or service over time, to enhance its functionality, usability or efficiency

    Radical innovation

    This is where a new technology or business model allows for a new product/service. This is a large improvement or innovation that leads to a significant advance in performance, functionality or quality

    Here, new technology and business models combine into something completely new. It's a fundamental change in a product, service or technology that disrupts and transforms existing markets or creates entirely new ones

    Incremental innovation
    Example

    Breakthrough innovation

    Apple's introduction of the iPhone 12 with a better camera and faster processor compared to the iPhone 11

    Radical innovation

    Tesla's development of the Model S, the world's first long-range electric car with a 265-mile range per charge

    Netflix took the model of video rental, then used the internet to make it more convenient by sending DVDs directly to customers. They then created the streaming service, changing how we consume media

    Successful product development starts by identifying a need people have or an existing product that can be improved. For example, MP3 players existed before the iPod, but copyright was a continuous problem. Apple brought out the iPod – an MP3 player with an associated store (iTunes) so people could buy high-quality music for their portable devices.

  • Diversification means moving into new industries. It can also cover the launching of different products/services within the same industry to capture new markets.

    Here’s some examples:

    • Disney started as a film studio before moving into theme parks
    • McDonald’s started as a restaurant before becoming a franchise and making more money from rent

     

    Types of diversification

    Related diversification

    Unrelated diversification

    Concentric diversification

    Definition

    Related diversification

    When your business moves into a new industry that has similarities with your existing industry or industries 

    Unrelated diversification

    When your business enters an industry that doesn't have similarities

    Concentric diversification

    When you aim to grow and develop by adding new products to existing product lines to attact new customers

    Example

    Related diversification

    Disney's expansion into theme parks and media

    Unrelated diversification

    Virgin Group's diversification from music to travel, telecommunications and financial services

    Concentric diversification

    Samsung's diversification from electronics to shipbuilding, insurance and construction

  • Vertical integration means taking control of an element of your supply chain – this could be anything from sourcing materials, manufacturing products, through to distributing and selling your goods and services.

    Types of vertical integration

    Forward integration

    Backward integration

    Balanced integration

    Definition

    Forward integration

    When your company controls the distribution or sales channels of its products or services

    Backward integration

    When your company controls the production or supply chain of its products or services

    Balanced integration

    When your company controls both the upstream and downstream aspects of its business

    Example

    Forward integration

    Apple went from just making their products and services to opening stores to showcase and sell them

    Backward integration

    Netflix now creates its own media as well as distributing other people's

    Balanced integration

    Zara controls everything from design and production right through to distribution and retail
Chapter 1 - What does innovation mean?
Chapter 3 - Practising innovation techniques

Chapter 3

Practising innovation techniques

Read time:

2 mins

Why practise innovation

There's no one formula for innovating your business. It's much more about the ability to use innovation techniques in different scenarios to develop and grow. Practice is key. We've put together some scenarios to help you to begin using the techniques we've outlined in a safe setting. Try testing your skills before you apply them to your business.

Scenario 1 - Coffee shop

You run a coffee shop, with a great reputation for your variety of coffee blends.

A disease has affected coffee bushes worldwide. The sudden shortage of coffee beans has led to prices increasing tenfold (and they’re still rising).

Faced with the prospect of a coffee-less world, what can your business do to innovate, survive and thrive?

Think:  Which technique/s would you apply? How would you approach this?

Scenario 2 - Taxi service

You run a local taxi service.

The number of road traffic accidents in the area has hit an all-time high so the council have made it a car-free zone.

What can you do to adapt and thrive here?

Apply to your growth plan

Now you understand the range of innovation techniques open to you, think about how you might use these in your growth plan. Ask yourself: how could these techniques help me achieve my growth goals? How do they compare to other options? Remember, innovation might be right for other businesses, but not for yours - or it could be your perfect fit. It's all about properly understanding and assessing all the options in the context of your business.

Chapter 2 - Different ways to innovate

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Lloyds Bank Academy is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Lloyds Bank does not endorse the services they provide. The information in this module was last updated on 21st April 2023.

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