“Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.” – Peter Drucker
Entrepreneurship without Innovation is incomplete; they both go hand in hand that succeeds in getting good results in terms of the product or services one is providing and a positive profit figure. But unfortunately, many business houses have gone bankrupt as they failed to acknowledge the importance of Innovation and continued doing the business in the way they thought is the full proof.
What is Innovation?
In a very simple term, Innovation already exists, but you find a new and better way to put it together and implement the same successfully in your business. Innovation also means coming up with unique solutions or ideas and applying the same to your business, which brings these solutions or ideas to life.
We are fortunate to live in the age of Innovation, wherewith the use of ever-evolving technology, people are finding solutions to the problems or finding a better way to do things without us realising that we need them. Due to Innovation, we have changed how we do our day-to-day activities to complex things through the years.
How are Innovations, Entrepreneurship and Profit Tied Together?
In Entrepreneurship, Innovation is the whole process of initiating something new to the business; it can be in the form of the latest product, new strategy or new ideas for diversifying the business and many other things; the objective is to boost the growth and profit of the company. Then, the company’s decision-makers come together either come up with their ideas or listen to the suggestions they receive, brainstorms the ideas and do strategic planning in enforcing these new ideas into their business.
What is the relationship between profit incentives and entrepreneurship?
Every business is profit-driven entrepreneurship and Innovation gives an extra push in increasing the company’s bottom line. In addition, Innovation helps the company improve in many ways; below are some of the positive effects of Innovation in the business.
- Innovation Boosts the Market Position Leading to Profit
Through Innovation, one can intercept the changes that are likely to occur in the market and give you a competitive advantage, giving you ample time to get accustomed to the changes. By doing so, while others are still finding a way to cope with the change, you are already settled and confident.
Samsung Paved its way due to its Innovative Approach.
Samsung is an excellent example where they helped gain a powerful market position for themselves through timely Innovation. Samsung started as a grocery trader; in the present times, it is one of the most profitable companies in the world, where they have diversified into electronics, insurance, shipbuilding and construction. Samsung has proved that by proper innovation management, one can boost their market position considerably in terms of revenue or profit and reputation.
- Innovation helps in Improving Products and Sales.
Timely Innovation is crucial that will aid in upgrading or launching new products or services. Implementing appropriate innovation management strategies helps the business in increasing its sales and profit. Failing to innovate will lead the consumers to your competition that are innovative with their products and services.
Nokia’s Misstep Cost Its Relevance
The best way to understand the relevance of innovating your products is through Nokia. By 2007, Nokia had a 50% share in the mobile phone market. However, the rapid advancement in mobile technology and the lack of Innovation from Nokia’s side led to its downfall, and by 2013, Nokia’s market share was less than 5%. Nokia failed to innovate and kept producing the old traditional models, whereas the world embraced advanced smartphones; this nearly led the company into bankruptcy. Hence it is imperative for the business to innovate their products and services that will help the business stay relevant and enjoy profits.
- Customers are Ready to Pay for Innovative Products.
Time and again, it is seen that innovative companies grow faster in terms of both revenue and brand compared to non-innovative companies. The reason being innovative companies have a good blend of product mixes, new ideas and categories with the potential to get higher profit margins. In addition, profit margins are usually high in innovative companies as consumers are willing to pay high prices for their product innovation.
Apple’s Constant Innovation made them the Market Leader.
At present, Apple Inc. is one of the most innovative companies that exist in the world. Apple Inc, during the late 90s, especially during 95-96, was on the brink of bankruptcy; this situation was attributed due to lack of Innovation, poor sales and management issues. Post the year 1997, Apple started recovering from this financial crisis with the help of Microsoft and focussed its attention on the Innovation of their product. Today, the iPad, iPhone, MacBook are some of those ground-breaking innovations that Apple has given to their customers. To date, they keep on coming up with something new in their products, and the customers are loyal to the brand and are keen to buy the product irrespective of its price. That’s how Innovation helps the company. It creates a loyal customer base willing to pay for your product no matter the price; this is because the customer trusts your brand and believes you will deliver a quality product to them.
Conclusion
To sum it up, Innovation, Entrepreneurship and Profit go together, creating excellent opportunities to grow, both in terms of the brand and revenue. A non-innovative business will have limited to no growth, and if they continue to be non-innovative, everything will go south. Even country like South Korea has progressed quick as they have done innovation management correctly and successfully. Furthermore, innovative companies with good profit margins and substantial revenue help the price of their share to go up. A rising price of shares will help to increase their market capitalisation. Over the period, innovative companies have a strong chance of becoming the dominant player in their sector and will get copious opportunities to grow further through various acquisitions.
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