In 2004 Walker and Brown conducted a study of 290 small businesses. They found that most businesses are measured by financial criteria only.
However, other scholars such as Ritter and Gemünden contend that other issues - such as technological abilities, strategic planning, and innovation - are as important. As far back as 1990, El-Namaki identified reasons for business failure as a lack of professional management skills, lack of competence in the entrepreneurial process, lack of strategic planning and lack of innovation.
There is the general consensus amongst entrepreneurial scholars that entrepreneurial talent is the major contributing factor to business success.
Characteristics of successful entrepreneurs are identified as alertness, vision, risk-taking propensity, knowledge, creativity, ambition, decisiveness, determination, dedication, strong values, adaptability, and innovation.
Successful entrepreneurs also have sufficient capital and resources.
But what is the role of innovation in business really?
Innovation is often misunderstood to apply to technological and scientific developments only, but the truth is that innovation should apply to all areas of business. In the lifecycle of a business, the only way to avoid decline is through remaining innovative. It is also through being innovative that business owners and managers can differentiate their business from the competition.
The first innovative step in business is to develop a solution to a need in the market according to customer requirements and then add some component that is unique in order to attract clients. New companies need to change human behavior or draw clients away from existing clients by being innovative in business. When Frances Wright started Trinitas Consulting, the unique angle - combining marketing, communications, and operational management into a consulting model under the new term “business component integration” (BCI) - led to 100% growth year-on-year and earned them the “marketing company of the year” award for 2011. Business component integration is based on years of research, literary study and innovative thinking. Empirical studies proved that when marketing and communications are not aligned with operations, it could negatively affect net profit. A solution had to be found and business component integration was developed to solve the existing problem. Like with body, soul, and spirit, when business component integration is implemented the communications, marketing and operations of the company are in sync, decreasing the cost while increasing turnover.
Marketing and production strategies are aligned so that when marketing talks about the quality of delivery, production and logistics will deliver on the promises made. Revolutionary thinking is not just the development of new technologies. It is also being informed and knowledgeable on a wide range of topics and researching works done by predecessors.
In a study done by Ko and Butler in 2007, it was found that entrepreneurs who build their work on experience and education while using family, friends, and acquaintances to attain information about trends, and who remained alert whilst actively searching for new opportunities, were more successful.
Such research would lead to a unique way of doing things, especially when linked to strategic planning.
Business innovation is a process of creating value to a target market. In business, it should result in an improvement in the efficiency, productivity and economic viability of the organization. The increased knowledge gained from innovation should lead to an improvement in the financial performance of the firm. Scholars such as Beugelsdijck, Cornet, Roper, Du, and Love contend that innovation has to remain a focus in order to remain globally competitive.
It is a recursive process of gaining the knowledge to undertake innovation and then to transform this knowledge into new products, services, processes or technologies.
This process is termed ‘the innovation value chain’, a process of which the various steps are bound together with knowledge. In the GEM report of 2006, a lack of entrepreneurial training was cited as the main reason for the poor entrepreneurial success rates in South Africa.
A true entrepreneur or business owner would not wait upon formal training but find readily available sources of information, such as customer requirements, employee input, and literary research.
Customer involvement is the most valuable input when developing new products. Management involvement in the continuous development of innovative alternatives to service customer needs enhances the organization’s chances of success. No longer can research be left to scientists and developers. Innovation should be used to create on-going revenue opportunities, no matter what area of business you are in.
Financial investment in research and development and new product development will ensure that businesses stay relevant in the market. In order to capitalize on this, it is important to stay non-conventional and think out of the box. There are many case studies of company failures due to business managers and owners allowing technology and new developments to pass them by. Developments such as the cell phone and digital imaging created business opportunities but left a string of existing businesses without a product offering.
Even big corporates that did not analyze their macro environment trends, such as new developments, failed. To be successful as an entrepreneur or a business manager there has to be a certain amount of discomfort with current situations and a need to develop and change through continuous improvement. An innovative manager will have a bird’s eye view of how the innovation will be taken to market and how the business will be established and grown into a successful enterprise. Top management support and commitment is the most crucial factor contributing towards success.
When innovation brings radical change the role of leadership in innovation will increase. Innovation in business includes the generation of new product, new processes to produce such products, the development of new markets and new relationships with suppliers. It often requires the restructuring of the company as well as managing change and the resistance thereto. Innovation is not a once off invention out of which a company will make money; it is a continuous process of lateral thinking and action. Innovation should, however, be well timed wisely applied. The objective is not to change product offerings completely. Wright contends that, although Trinitas has been going for five years, the innovativeness of the product combination has not been exploited. To change it now will be too soon.
Innovative thinking is applied to take different variations of the service to market and to improve continuously.