The deputy director of the Innovation SuperNetwork, Estelle Blanks, explains just what innovation really is, and how it can be used in businesses which are growing and scaling.

What is innovation?

The North East’s own Professor Roy Sandbach sums up innovation by describing it as “matching what is possible with what is needed, to create economic or social value”.

Innovation is not invention, because invention is anything that’s possible. But when that invention solves an existing problem, or creates a new need, and is of economic or social value, it’s innovation.

By those standards, the humble windscreen wiper, which the Innovation SuperNetwork’s Simon Green points out could be considered a North-Eastern invention itself, was a true innovation. It solved visibility problems on vehicle windscreens, and sold by the billion.

Google Glass, a wearable, voice-controlled Android device that resembles a pair of eyeglasses and displays information directly in the user’s field of vision, is an invention… but not an innovation. It didn’t solve a problem, nor has it – at the time of writing, at least – created a need for itself.

Innovation doesn’t need to be creating something that’s never existed before – and in established businesses, it often isn’t. Instead, innovation in growing firms can be more about problem solving… modifying, adapting or combining existing solutions to create something new overall.

So why innovate?

Put simply, innovation is a survival skill. Successful companies not only respond to the current needs of their organisation and customer base, but they also anticipate future trends or demands and design processes, tools, products and services to meet these.

Statistics from Innobarometer show that those companies that prioritise innovation are also those who experience the highest increase in turnover.

Competition is not the only driver for innovation, however. It is central to organisations aiming to do social or environmental good. Eco innovation has ‘reduce, reuse, recycle’ at its heart, versus the typical ‘take, make, dispose’ model of consumerism. Warp-it, for example, have built a business around the innovation of helping organisations find, give away, or borrow resources including office furniture and equipment.

Versions of innovation

Innovation can follow ‘technology push’ (coming up with an idea and then trying to find a market for it) or ‘market pull’ (designing something to meet the needs of users). For a good example of user-led innovation satisfying a social need we can look to Newcastle University’s Open Lab project. Researchers there stepped in to help Newcastle mothers find local places that are breastfeeding- friendly by creating an app which is like TripAdvisor, but for breastfeeding.

Innovation can take place within different areas of a business or market:

Business model: The way something is done stays the same, but the business operation behind it changes to create a new need. If you took a flight in the 1980s, luggage was always included in the cost of your flight, as was a much-maligned airplane meal, pre-booked seats, and a physical person to check you in.

‘Budget’ airlines like EasyJet innovated the model, stripping out everything that wasn’t essential to your transportation and allowing you to choose to pay for it separately. Same planes, different pricing structure, and a very different marketplace.

Technology: The pharmaceutical industry offers a good example of this, where drug discovery or new diagnostics are developed to target particular issues. Locally, the work of Biosignatures is creating innovation in the field of disease diagnostics where current tools are expensive, invasive or both.

System: Innovation does not have to change the components of a system to have a major impact. For example, the iPod was not the first digital music player and iTunes was not the first digital music store. However, the combination of these two elements in an integrated package was new and allowed Apple to take a large share of a billion-dollar market that the company had not previously been competing in.

Innovation can have different levels of impact on the market:

Disruptive: A new way of doing something, or creating a brand-new need that didn’t exist before.

Think of Uber, a giant of transportation that doesn’t own a single vehicle. Or , here in the North East, Atom Bank is innovating banking by offering a huge range of services on a digital-only platform.

Incremental: As products and services evolve, sometimes just over time but commonly when firms diversify, they incrementally innovate – it’s not a drastic reinvention, but rather a series of smaller changes, improvements, ways to solve different problems.

North Eastern firm Kromek began with an airport security scanner, and by incrementally innovating now provide a version of this product into the medical sector for imaging.

Can you measure innovation?

The business world has moved on considerably since the amount a firm spent on research and development, or the number of patents it held, were considered the only measures of how much they innovated.

But the wider business benefits were neglected: how will this innovation benefit the business overall?

It’s worth considering how much of your innovation generates intellectual property (IP) in the business. IP can be formal (designs, patents, copyright and trademarks) or informal (software codes, trade secrets, brand and reputation, market intelligence, know-how) – both kinds can be formally valued by specialists, can be insured and can even be used to aid in financing.

But more simply, a firm can measure innovation by looking for direct, measurable correlations between their growth, in terms of wealth, employment, and asset development like the IP assets mentioned above, and the value of the innovation they’ve undertaken.

How do you manage innovation?

Innovation is essential to a business looking to grow organically.

Some firms are built around their ability to innovate – Apple is a good example of this, products like the original iPod created a new need in the marketplace that hadn’t existed before. Other firms don’t find innovation happens as naturally, and they manage the process to improve their competitiveness. This includes:

• Encouraging internal innovation, from talent within the organisation or ideas from outside
• Allocating resource
• Gaining and applying new knowledge
• Building partnerships, and/or collaborating with others.

Establishing a company culture that is conducive to innovation is essential, as is investment in the development and recruitment of employees who will embrace change and new ideas. For some companies the spirit of innovation is its DNA, others need to make a concerted effort to get everyone on board to make innovations a reality.

In a world of widely distributed knowledge, companies cannot afford to rely entirely on their own resources to innovate and instead use open innovation to tap into the intellectual property, people, research, business models and technology that exist outside the boundaries of the organisation.

If you want to do more, sign up for VentureFest North East to explore opportunities to use innovation to impact on the bottom line.

VentureFest is part of the Innovation SuperNetwork, an organisation which creates competitive advantage for North East businesses though innovation and delivers inspiring events and projects including VentureFest North East, Innovation Challenge and FinanceCamp.