A Guide to Innovation in Management (With Ways to Improve)

By Indeed Editorial Team

Published June 4, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Businesses that innovate can adapt to changing market conditions and gain an advantage over their competition. An organization's management that prioritizes innovation can encourage creativity at all levels of the business and help discover new ideas for future projects. Learning about innovation management can help you understand the importance of this concept and how organizations focus on cultivating innovative ideas. In this article, we define innovation in management, explain why it's important, describe different areas for innovation, and share methods for improvement.

What is innovation in management?

Innovation in management is the process of encouraging an innovative and creative culture within an organization. Innovative management recognizes that businesses can adapt to changing consumer requirements and market conditions to expand operations and grow their market share. There are many aspects of innovation management, including considering the overall state of a business, areas for improvement, the impact of potential changes, and implementing new initiatives within an organization.

Managers might encourage team members to provide input and encourage new ideas and creative problem solving. A business that values innovation strives to create an atmosphere where team members can share ideas and support one another.

Why is innovation management important?

Innovation management is important for almost any business. Here are some key reasons this is such a critical concept:

Avoiding disruption

If a business doesn't value innovation, it can suffer disruption by new technologies and experience a significant drop in revenue. There are many examples of successful companies that might have benefit from inviting more innovation. For example, you can consider video rental services before the rise of online streaming.

Business that stay up to date on important industry developments and new technologies can remain more competitive in the market. Innovation management helps organizations stay aware of new technologies and helps encourage adaptation.

Encouraging development

Innovation management can create a culture of self-development and creativity throughout an organization. Team members who understand the value of new ideas and innovation might be more likely to try creative solutions to complex problems and suggest new ideas to management. When team members feel like their input is valuable, they might make greater efforts to improve business processes and help increase productivity. When the entire organization focuses on innovation, it can prepare for the future and respond effectively to new challenges.

Related: How to Be Innovative and Creative at Work (12 Easy Steps)

Expanding operations

Innovations can help businesses create new products, enter new markets, and expand operations. Organizations that invest in innovation might be more likely to discover new products or methods for production that can generate more revenue or lower expenses. By encouraging employees to innovate, a business can help cultivate new ideas that transform operations.

Even successful companies can benefit from creative new concepts or expansion plans. These kinds of breakthroughs aren't always frequent, but a single great idea can have a massive impact on the future of a business.

Areas for innovation management

There are several areas of a business that innovation management can focus on. Here are four areas for innovation within a business:

Capabilities

The capabilities of a business encompass all the factors that influence what is possible for the organization, including the abilities of individual employees, existing materials and equipment, and company finances. Innovation management involves considering the organization's capabilities before introducing possible changes. It can also involve increasing those capabilities to encourage creativity.

For example, training programs can help team members improve their skills and develop a framework for introducing new ideas. Businesses with significant reserves might take more risks because it might be challenging to proceed with considerable innovations when their finances aren't healthy.

Structures

The structure of a business involves existing infrastructure, policies, processes, and operational procedures. Innovation management can help consider how company structures encourage or stifle new ideas and adjust them accordingly. For example, businesses with many restrictions and guidelines for modifying operations might find it challenging to innovate. The structure of an organization can also restrict or encourage interaction between different departments, which can be a significant contributor to innovation. Adjusting company structure can be an effective way to begin transforming a business and encourage further change.

Related: Functional Organization Structure: Pros and Cons

Culture

The culture of a business emerges from its organizational philosophy, policies, and interactions between team members and management. An organization can encourage innovation by creating a culture that prioritizes change, new ideas, and calculated risk taking.

Because the overall culture of a business can be challenging to define, it might take time to change the culture of a business with a long history and conservative philosophy. Because every team member can contribute to the company culture, organizations that prioritize innovation strive to empower each individual and promote a culture of cooperation and creativity.

Related: What Is Corporate Culture?

Strategy

The strategy of a business refers to long-term organizational goals and plans for achieving them. A company that develops innovative long-term strategies can expect changes in market conditions or consumer behavior and stay ahead of its competition. At the strategic level, a business can develop strategies for encouraging innovation and enabling rapid pivoting to new markets or producing new products. A management team that develops an effective strategy and communicates its vision to every team member can allow the company to transform and create an environment for operational and revenue growth.

Methods for innovation management

There are several methods an organization can use to encourage innovation. Here are some different methods for innovation:

Incremental

Incremental innovation means making small changes that may eventually result in a significant organizational shift. By starting with minor changes, a business can observe which changes are effective and avoid making large gambles on unproven processes. Incremental innovation might work best for companies with established procedures and successful products. With this approach, the business can prepare for the future while continuing the practices that make it successful, which makes this an approach that requires patience.

Effective incremental innovation might involve adjusting a product to improve it over time. For example, a phone manufacturer might release a new product each year with several new features while retaining old features that are popular with consumers. An incremental approach might work well for businesses with a loyal customer base. This allows customers to become familiar with the new technology at a reasonable pace and continues making the products accessible for a broad audience.

Breakthrough

Breakthrough innovations can help a business significantly improve a product or service and might help separate it from competitors. These innovations can help a company attract new customers and differentiate itself from the competition, strengthening its brand. An example of a breakthrough innovation is wireless headphones, which allow consumers more freedom than wired headphones and help separate the product from previous versions. When a business makes a breakthrough innovation, other organizations might attempt to copy their design, so the business can move quickly to secure more market share.

A business can foster breakthrough innovations by spending more on product research, encouraging a culture of creativity, and listening to feedback from consumers. Because breakthrough innovations might involve taking risks by significantly changing existing products, there might be an initial drop in sales or other setbacks. Breakthroughs might not occur frequently, but they can have a sizeable impact on a business.

Disruptive

Disruptive innovations involve creating a novel product or a whole new product category, radically transforming an existing market, or creating a new one. These innovations occur even less frequently than breakthrough innovations, but they can transform a business and revitalize a company. The smartphone is an example of breakthrough innovation because it created an entirely new product category and gave consumers constant access to a powerful computer. Disruptive innovations can often lead to further opportunities for innovation, such as smartphone apps.

Businesses that focus on disruptive innovation might spend significant money on research and seek to hire highly qualified employees with the ability to conceive and create new products. A company may take a significant risk to introduce disruptive innovation to the market and experience losses if marketing efforts are ineffective. The disruptive innovation method might require visionary leadership and the patience to develop and test new products.

Open

The open innovation method involves transforming an organization to make it receptive to new ideas from external sources. This might mean connecting with consultants or experts in a specific field to develop a new product or monitoring recent research to gain inspiration for product development. A business can foster an environment of openness to innovation by sponsoring research initiatives, liaising with other companies, or developing partnerships with academics.

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