This article originally appeared on Adweek.
Innovation, whether homegrown or acquired by a merger or acquisition, can power the growth, positive change and value creation that companies covet to give them a competitive edge. Yet few understand innovation. It is both overhyped and often misused. Approaching it the wrong way can lead to disappointment. That’s why brand is so important in the innovation process, no matter the route to achieving it.
According to a recent Gartner study, growth is the single most important business priority for CEOs. It’s difficult for any company—mature companies in particular—to grow organically or otherwise without innovating in some way, shape or form.
Simply put, innovation means introducing something new. Here are four myths about innovation, how it works and what makes it effective.
Innovation is only about new products
Business history is littered with forgotten products that were the first of their kind or created a new category. The allure of a new revenue stream drives many companies to treat innovation as synonymous with product R&D, which misses the point because innovation can occur in other ways.
Glossier, a makeup startup, did not reinvent makeup. However, it is the first cosmetic company born from social media and has cultivated a huge following. Glossier uses its blog, Into the Gloss, and Instagram to engage with customers and determine what they want from a beauty product.
At the same time, smaller companies who have innovative products or approaches may not have the reach to tap all potential markets. IBM is an example of a large company that has been successful at spotting smaller companies, buying them for their innovations and ramping up sales through its global sales force. Between 2010 and 2013, IBM acquired 43 companies. By using its global sales force, IBM accelerated the acquired companies’ revenues.
Both examples underscore that it’s not always a product or service that requires innovation but the things that surround and support the offering that does. A brand-led innovation process provides focus and clarity on where innovation is needed.
Innovation means leaps forward
The best innovations improve, enhance and extend an existing product or service. These innovations add functionality, reduce costs or turn niche markets into mass markets.
In identifying 15 of the best mergers of 2017, Nasdaq highlighted Apple’s planned purchase of Shazam. The estimated $400 million deal will enable Apple to use Shazam to strengthen its existing music streaming service.
Using brand as a filter can help companies identify what innovations are truly necessary. Historically, Apple has not been a big acquirer compared to other tech giants, but Shazam’s technology, price and user base met the bar.
Innovation requires disruptive technology
Disruption is a buzzword that’s almost as misused as innovation. The two are often used interchangeably even though, at times, they don’t have anything to do with each other. Can an innovation disrupt the status quo? Absolutely. But it is not a requirement for success. Instead, meaningful innovations often come from approaching a specific customer problem or need in a novel fashion, adopting and adapting processes and methods from adjacent industries or removing painful steps from existing service experiences.
Dollar Shave Club, for instance, simplified the process of buying razors by creating simple customized experiences. Instead of running to stores to buy blades, customers get them delivered monthly. By reducing steps in product delivery, Dollar Shave Club transformed an age-old shopping experience.
A proper brand-led innovation process fosters evaluation of options for creating more meaningful and valuable experiences. Most importantly, it may curtail impulses to invest in expensive technology-driven solutions that don’t add to the customer experience.
Innovation is only delivered by the genius inventor
The word innovation may inspire images of scientists or engineers working in top-secret locations. In reality, innovation can come from anyone within an organization. Too often, these resources go untapped.
To encourage innovation, Adobe’s Kickbox program gives employees a $1,000 prepaid credit card, an innovation guide, permission to create an idea and the ability to take that idea straight to consumers for testing. At LinkedIn, any employee can come up with an idea, put together a team and pitch their project to the executive staff. If approved, the team gets to spend up to three months turning their ideas into reality.
As these internal programs suggest, innovations can arise from anyone at any time, especially when people from across an organization come together to share unique perspectives and ideas.
Large or small, built or bought, innovations help brands drive growth and maintain their differentiated place in the market. M&A activity is expected to heat up this year, according to Deloitte’s M&A trends 2018 report. Companies will be looking for new technology and ways to build out digital strategies. As always, the most successful innovations and implementations of innovative ideas will be brand-centric.
Dan Golden is Group Director, Strategy.