Comstock Images/Comstock/Getty Images
One of the advantages small businesses and start-ups have is the freedom to innovate. Large, successful companies are risk-averse because they have a lot to lose; a start-up takes a gamble just by existing. Offering innovative products or marketing strategies can give your company an edge. However, there are advantages and disadvantages of innovation.
The Power of Change
Innovative companies have changed the world and made millions doing it. Desktop computers. Airplanes. The organic food industry. Internet search engines. Even if you're not Microsoft or Google, there are business benefits to being an innovator:
- It can accelerate your growth. Even a small start-up with the right project can become a major player.
- You stand out from the competition by offering something nobody else does.
- Offering new products or services makes it easier to satisfy your customers, not just now but in the future.
- Innovative companies attract innovative talent.
Innovations don't have to transform society to be profitable. Simply innovating your company procedures to make you more efficient can bring benefits:
- You become more productive.
- Your costs go down.
- Your company's more competitive with your rivals.
- Your brand becomes more valuable.
- As a result of all these, you become more profitable.
Why Innovating Is Hard
One of the disadvantages of innovation in the workplace is that it takes effort. Pressures in the business world often push companies to play it safe and not innovate, particularly if the business is established and profitable:
- When businesses plan for the future, they strive to build a consensus among the stakeholders. That's easier with small, cautious steps than innovative visionary ideas.
- Companies that promote from within end up with management teams who are used to and comfortable with the status quo.
- HR departments prefer to hire people who fit the current corporate culture, not those who want to shake it up and transform it.
- Stockholders and big investors hate to see any change that lowers returns even slightly. They look at the advantages and disadvantages of innovation and only see the negative side.
It takes work to overcome the inertia that discourages innovation. It's often necessary work because the business environment keeps changing. Failure to innovate has disadvantages, too:
- You could lose market share to nimbler competitors.
- Productivity and efficiency go down.
- Key staff get frustrated their ideas aren't wanted and quit.
- Your profits dwindle.
Revenue and Innovation
Some of the advantages and disadvantages of innovation are about how change affects the bottom line:
- If you're the first with a new, popular product, you can charge a high price until your competitors catch up.
- An established successful innovation creates interest in buying your future products.
- Innovation can add value to existing products, making them more profitable. The first cell phones did nothing but call people; now they can search the Web, take photos, record memories and map our routes.
Change can also hurt your bottom line, though:
- Investing in an innovative product that doesn't work or doesn't sell flushes money down the drain.
- Even successful innovation takes time and money you could invest in other things.
- If you spend too much and don't get the product out fast enough, that can seriously choke off your cash flow.
Disadvantages of Creativity
Innovation isn't just something business leaders do. Many companies have excited, creative employees with ideas to change processes, develop new products or innovate the way things are done. Adopting some of their ideas may be good for the company but there are also disadvantages of innovation in the workplace:
- You hire employees to do a job. It's often more important to have them deliver what they were hired for than come up with something completely new.
- You may already have innovative ideas of your own. The challenge, in that case, isn't finding more ideas, it's putting the ones you have into action.
- Novel, innovative ideas aren't always useful.
- Sometimes it's better to be cautious and not take risks.
Choosing between the advantages and disadvantages of innovation isn't easy, but it's part of what makes a good leader.
Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com