The ever-evolving global environment creates demand for new products, services and business models. It also presents opportunities for business innovation.
The best examples of innovative businesses leverage such opportunities to use existing resources in new ways to reach new customers and transform in line with changing customer expectations. According to Cameron Turner, innovation expert, Entrepreneur in Residence and Industry Professor at UQ Business School, the rate of disruption is getting faster and faster.
“In the 1970s, the lifespan of S&P 500 companies was 35 years," he says.
"Now, it's expected to hit 15 years this decade and it's accelerating downwards quickly with every new multibillion IPO.”
Why business innovation is more important than ever
Business innovation is vital to address the significant problems being faced by our global community.
“We have an extra 2 billion people we need to feed with less water, less land and less carbon,” says Cameron.
“At the same time, we've got climate change happening, ocean levels are increasing, and digital technology is disrupting almost every industry, especially healthcare, retail and entertainment, as well as how humans socialise.”
Customer-centric innovation will increasingly become an essential tool to help organisations develop sustainable, scalable solutions to rapidly emerging consumer, business, environmental and societal challenges. But with the percentage of startups that fail within the first year sitting at 90%, it’s clear we need to get better at converting ideas into game-changing business innovations (Startup Genome report).
Why 90% of startups fail
There are 2 common reasons so many innovations and startups fail, and it’s not because the idea or innovation doesn’t work. According to Cameron, they usually fail because:
- they solve the wrong problem
- no one cares (no customers or users).
How to focus on solving the right problem
Cameron says a common reason innovations fail is that we think we know what the problem is, so we spend most of our time coming up with solutions to that problem. But most of the time, we're solving the wrong problem.
“If you create something that doesn’t solve a problem faster, better or cheaper than the status quo (your competitors), it will fail, because there will be a lack of customers,” Cameron says.
To ensure your innovation succeeds, your strategy needs to focus on solving problems that people really care about in different ways than current solutions in the marketplace.
Innovation in business examples
“For example, the Australian and New Zealand governments spent tens of millions of dollars over a decade trying to increase vegetable consumption by creating vegetables that were extra nutritious. They thought that if they made vegetables extra healthy, people would eat them more often and pay more for them.
“The project was successful, technically, with the creation of a range of extra nutritious vegetables. But what they failed to realise was that people weren't eating vegetables not because they weren't healthy enough. This was an incorrect assumption. People weren’t eating enough vegetables because of their taste, lack of convenience, or a total lack of excitement.
"So, ultimately, they solved the wrong problem. The problem they should have focused on was if consumers aren’t cooking as much anymore, what different products, services and business models could be developed to get vegetables into consumers’ diets?"
“On the flip side, when an HR executive in the US was sick of eating gluten-free pizza bases that tasted disgusting, she created a cauliflower-based pizza,” Cameron says.
“The first issue launched $45 million worth of sales and the company is now worth $500 million. The difference is that she solved a problem people cared about better than anyone else.”
“Her reward? A spot on Forbes’ 7th annual ranking of America’s Richest Self-Made Women with a net worth of $245 million. Solving the right problem pays.”
How to focus on business innovations people will care about
Cameron believes the secret to ensuring your innovation strategy solves problems people genuinely care about is through ethnography: observing complexity and nuance in human behaviour to identify problems where people are dissatisfied with the current solutions.
“It’s not enough to ask people what they want,” he says.
“Because people don’t know what they want. But if we spend enough time listening, observing and trying to work out what’s important to them, their “why”, we can identify their hopes, fears and aspirations. And, more importantly, we can identify what’s getting in the way of them achieving or removing them. Life is so uncertain and busy these days; most people yearn for less complexity and stress and more time with the people they love.”
“To work out how to achieve this, we need to conduct anthropological expeditions into people's worlds to understand the problems or pains to solve and the benefits or gains they would love to achieve.”
Cameron suggests observing customers and asking them these questions:
- What’s keeping you awake at night?
- What’s the most frustrating thing about (the area you’re trying to innovate in)?
- If I could give you back one day a week, how would you spend it?
- What do you love about (the product or service you think you can disrupt)?
- Tell me about a time when you were trying to get a job done and you were dissatisfied with the options you had available.
“Most high-value problems that motivate consumers to invest in a new solution usually are rooted in solving emotional or social problems rather than functional ones,” he says.
“This is because getting humans to try something new is difficult, as we’re asking them to take a risk on something they have no confidence in. Humans have learned to only take risks (change their behaviour) when the advantage or “gain” offered exceeds the pain of staying with the status quo.
“This is another common reason startups fail. Because they can’t convince enough consumers it’s worth changing, or the change is too large. Clever companies take an intimate understanding of existing human behaviour (rituals) and slip their innovation seamlessly into a format that consumers are familiar with. No risk!”
“This phenomenon is perhaps why the biggest employers of design anthropologists (people who study human behaviour) are the largest tech companies like FANG (Facebook, Apple, Netflix and Google). These companies are experts in human behaviour, which is why they are the largest companies on the planet today.”
How businesses can leverage change and not get overrun by it
Associate Professor Frederik Von Briel is a strategy and entrepreneurship expert at UQ.
“Not all change is created equal or offers the same opportunities, so it is important to understand its characteristics,” he says.
Frederik believes that to successfully leverage change, organisations need to identify:
- the scope of change occurring (e.g. local or global, within one or across several industries, affecting only a few or almost all socio-economic groups)
- the onset of change (how fast do you need to act, and how long is your window of opportunity likely to stay open?)
- the relevant change mechanism (learn more about change mechanisms).
This information will inform an organisation’s innovation strategy and the business innovations they pursue, including:
- adapting existing products and services or introducing entirely new ones
- adjusting the organisation by reshaping behaviours, structures, and assets
- modifying existing processes or introducing new ones.
These are just some of the things you need to consider to ensure your idea or business innovation is successful.
For more expert insights to help you unlock the value of your ideas, discover UQ’s Master of Entrepreneurship and Innovation.
