Myth: Innovation is all about new products
The truth: redesigning the business model is also an innovation
When we get the word innovation Listen, we immediately conjure up the image of a new product that will change the way things are done.
Companies, especially inexperienced ones, tend to devote most of their resources to developing a new product or adding to it. However, product innovation rarely brings success. In most cases - 95.5%, according to research by Doblin - product innovation projects don't even bring in the capital outlay.
The exclusive or extensive concentration of all resources on the innovation of products or product extensions can lead to colossal losses for a company. Instead, focusing on innovating internal business processes, models and infrastructure can deliver significantly higher ROI.
Innovations of this kind are more likely to result in higher profits or a better customer experience. For example, when several delivery services were hit by the pandemic, they expanded their scope of activity to improve the customer experience by simply revising their business model.
Apple Inc., on the other hand, is a prime example of innovating the business model to increase net profit. They revised their business strategy with regard to tax breaks and set up subsidiaries and offices in low-tax regions.
However, it is not to say that companies should stop all product innovation projects and focus all of their resources on realigning the business model. Instead, companies should strike a balance between the two, allocating resources proportionally and using both engineers and CFOs as innovators.