Innovation

The world around us is always changing – and that’s thanks to innovation. 

We can define innovation as the creation of something new and valuable – "new" being something that’s never been seen or done before and "valuable" meaning that the thing has a useful purpose.

Advances in technology can transform the way we live, how we work, and our investments. Innovation can impact you and your wealth, so it’s important to keep up with what’s new.

Innovation is important in society and in business. 

Big innovations impact the world: the advent of the wheel, the discovery of penicillin, and the creation of the first smart phone are good examples. 

But innovation doesn’t have to be big to be useful. In business, simple improvements to products that already exist are very important – like the latest version of a social media platform, or the most recent computer software update. 

Without new ideas, companies stop growing and can become less competitive. Just think of brick-and-mortar video rental stores: they were quickly overtaken by online, on-demand video providers and their streaming technology. Businesses need to innovate to survive in the long run.

There are two main types of innovation: sustaining and disruptive.

Sustaining innovations are small, incremental improvements to current products for an existing customer base. 

This type of innovation doesn’t create revolutionary change: it optimizes existing processes and technologies instead. Sustaining innovation is typically pursued by existing businesses. When a tech company launches a new model of a current product like a smartphone, that’s innovation of the sustaining kind.

Disruptive innovations typically happen when companies develop new inventions for markets that don’t exist yet – or when companies expand into new parts of existing markets. Most of the time, this kind of innovation comes in the form of smaller companies that challenge and take on larger, more established ones. 

According to Boston Consulting Group, the pandemic has made innovation more important than ever. Three-quarters of companies now consider it one of their top three priorities.¹ But if that innovation is to happen, it has to be fostered: you need an environment that encourages new ideas and a corporate culture that supports change. 

Businesses that successfully innovate have some things in common: they encourage constant experimentation, for one, and they accept failure as a part of growth. Innovative businesses give employees the freedom – and the resources – to try out new ideas.

Innovation and entrepreneurship often go hand in hand: entrepreneurs innovate to take advantage of new business opportunities. And that often results in new products or services that shake up existing markets. 

Innovation is key to entrepreneurial success. In the end, it's creative new ideas that’ll set your business apart and lead to long-term success.