In a recent study, researchers looked at different businesses and saw that the more the employees generated innovative ideas that management was likely to adopt, the higher the probability was that said company would grow its profits annually.
At the other end of the spectrum, companies with little to no new ideas generated by employees were likely not to experience any growth at all.
But, what is it about innovation that helps companies grow and increases both their revenues and their margins?
Four ways that innovation can increase your business’s revenues:
#1 It increases employee retention:
There are several strategies to try and increase employee retention, one of which is creating the right corporate culture.
When a company has an innovative culture that welcomes new ideas from anyone, this motivates employees, makes them feel listened to by management, and gives meaning to their work.
It also helps them collaborate more closely as most ideas are never workable in their preliminary form and require input from several different individuals before they become actionable.
This is not to mention how such a workplace mentally stimulates employees who keep looking for different ways to improve current processes. More importantly, employees feel more connected to the final product and enjoy a stronger association with the company as a whole.
Now, employee retention increases your revenues in several ways:
For starters, reducing turnover means reducing the expenses associated with finding and hiring new people. Additionally, it decreases, if not eliminates, the costs that come with onboarding and training new recruits.
When people stay at a company longer, this increases the overall morale within the company, making everyone more productive at their job. It cements a familial bond between employees, making them care about the company and its bottom line all the more.
When a company has certain star players, people who have shown immense potential and have been critical to its success so far, the last thing this company wants is to lose them to one of its competitors.
More importantly, upon losing a good employee, a company also loses all the investment and effort put into bettering said employee and helping them grow.
#2 It improves existing products:
One of the best ways companies can win market share from their competitors is through innovation and improving their current product line. For instance, Ulbrich Steel, a steel manufacturing company based in North Haven, Connecticut, is well-known for its innovative culture.
Not so long ago, the company launched a new product that increased the output of solar cells by two percent each, making Ulbrich Steel the darling of the solar industry and increasing its revenues.
Another excellent case study is that of Boeing. Almost a decade and a half ago, the aerospace company was losing its footing in the market to Airbus, their European rival.
However, Boeing managed to turn things around by 2007 when it tweaked its designs and developed the 787, a new type of commercial airplane that benefited from composite materials. There were several other innovations in the design of the 787, all of which catapulted Boeing back to the top of their industry.
#3 It improves operational management:
Innovation doesn’t only have to be about improving a company’s products; it can also be about improving its operations.
Employees are the best people suited to identify pipeline or workflow issues, and they are also the most likely ones to come up with the best solutions for these problems, cutting costs, and reducing waste.
Nevertheless, management can and should get in on the action; after all, even though employees are the ones on the ground, management tends to be the one with the long-term vision.
So, with the proper web-based asset management software, executives can keep a close eye on their company’s workflow and spot any problems or bottlenecks quickly.
Accordingly, not only will management be seeing the same picture the employees are looking at, but it will also provide both parties a common basis for addressing the problems within a company.
And, by keeping an eye on future trends, management can work with its employees to find innovative solutions today for the likely challenges of tomorrow.
#4 It keeps the company in the game:
Innovation helps companies stand out from the rest of the competition. You can immediately tell a Tesla apart from a Ford, and a big reason for that stems from Tesla’s innovations over the past few years. And, this differentiation can be the basis for demanding a higher price than the competition, increasing both the revenue and net profits.
Yet, for most businesses, innovation is not only a way of increasing profits, but it can also be a life or death matter; ask Nokia or Kodak, both of whom failed to keep up with the times.
So, even though you should look for different innovative ideas when trying to boost your bottom line, the fact of the matter is that you can’t afford not to innovate consistently. Otherwise, you risk losing your entire bottom line to one of your competitors.
In fact, innovation is how small startups can take on large incumbents. In the entrepreneurial community, the effect startups can have on entire industries is known as disruptive innovation.
Ergo, innovation doesn’t just keep companies alive; it changes entire industries. And, if a company fails to spot the changing tide, they will be swept by the current.
Innovation can increase a company’s revenues in numerous ways: From reducing employee turnover and cutting costs to differentiating the product and keeping the company alive, innovation is a cornerstone of any company that wants to be great.
Yet, this is easier said than done, and implementing a culture of innovation is no mean feat, especially if this wasn’t the culture before. The good news is that there are numerous guides and ideas out there on how companies can inject innovation into their system.
With a little trial and error, and a pinch of innovation, companies should be able to establish a new order where ideas are welcome, growth is encouraged, and the future is limitless.
Heather Redding is a part-time assistant manager, solopreneur and writer based in Aurora, Illinois. She is also an avid reader and a tech enthusiast. When Heather is not working or writing, she enjoys her Kindle library and a hot coffee. Reach out to her on Twitter