Role of Innovation in Organizations

Innovation involves commercialization of inventions by producing and selling a new product or service and is the ‘’heart of entrepreneurship’’. Leaders develop innovative ideas either within the organization or source for new ideas outside the organization. Entrepreneurial organizations seek innovation opportunities to meet needs identified in the market, build wealth and meet stakeholder objectives. Innovation leads to growth in profits, increased market share and maximization of return on investment. Entrepreneurial organizations innovate to cope with external challenges, build human resource competencies, develop technological resources and manage competitive forces in the industry.

Entrepreneurial organizations acquire incremental profits by innovation. Through innovation a business maintains a competitive edge in technology, product and cost leadership. For businesses that focus on niche markets innovation enables a business to maintain existing customer base through cutting edge technologies and products. Innovation may also involve discontinuation of existing products, developing new customer segments or making price changes.

Organizations with declining profitability innovate to turn around reduced demand for products and services; by churning out new products or services as an addition or enhancement to its existing portfolio. Turnaround could be through in-house innovations within the organization or acquisition and mergers with other innovative organizations. Managers implement innovation through activities such as acquiring venture capital, changing existing business models, moving to new industries and updating existing technologies.

Entrepreneurial organizations innovate to retain their human resource base, which is a critical component for wealth creation. Employees feel more empowered and motivated to work for technology leaders as this enhances their feeling of belonging in the organization and makes work fun and enjoyable. Innovative companies compete better for talent as compared to less innovative companies and attract highly qualified employees. Innovation in an organization results to a creative culture and constant generation of new ideas.

Innovation helps entrepreneurial organizations to manage risks through introduction of new products that are quicker to sell , more profitable and with a predictable demand and supply. Through innovation business operations and processes become safer and more efficient. Organizations that do not innovate risk losing market share to competitors, key staff turnover, falling productivity, reduced profit margins and eventually going out of business.

Quality of existing products and services is enhanced through innovation in organizations. Process efficiency is achieved in manufacturing organizations through innovation. Customer service is also improved through innovation by developing new processes that enhance the experience of customers. Innovation enables an organization to build and strengthen its brands.

Finally, innovation acts a planning tool for organizations. Developing new ideas forces managers to plan in order to implement the idea (s). Managers organize the relevant resources to meet the set goals.

References

1.Business Link UK (now GOV.UK/Business). (2009). Use innovation to grow your business. Retrieved from Info Entreprenuers : https://www.infoentrepreneurs.org/en/guides/use-innovation-to-grow-your-business/

2.Deloitte. (2017, October 9). 8 Reasons Why Innovation Is Critical To Businesses Today. Retrieved from Hashedin: https://www.infoentrepreneurs.org/en/guides/use-innovation-to-grow-your-business/

3.MasterClass. (2021, September 2). Why Innovation Is Essential for Business Success. Retrieved from MasterClass: https://www.masterclass.com/articles/why-innovation-is-essential-for-business-success

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