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Business Innovation

innovation in service firms in a competitive dynamic to clear economic viability in the long term materialized by recurring profits.

The first reason why innovation is the differentiation. Without innovation, the products will eventually look like and customers choose based on price which will tend to fall below a satisfactory level of profitability for the supplier. The differentiation will create value for the customer who in turn will ensure a better return on investment for the supplier. The supplier will then search through innovation to create the largest differential value to make its unique, at least temporarily.

If differentiation is essential, it induces a second reason to innovate, neutralization. The neutralization is to erase the difference in value or exclusivity that another provider has secured a market as the first volume. In this case, the supplier will seek to reduce to more quickly and cost differential value.

Finally, innovation can be used for improving productivity. The supplier does not seek to change the value of its product but will innovate and offer the same value but cost much less. With this new benefit, the provider may increase the viability and attractiveness of their product or create a new market by significantly lowering cost of production or operation.

Paradoxically, the majority of innovation efforts turn into loss. Firstly, because each innovation initiative, it is a gamble and a risk. The failure is therefore included as possible and should be funded. Pae also happens that the nature of innovation is not appropriate for purpose. If we try to differentiate, we must create a substantial increase in value if the desired effect not be achieved. Similarly, if we try to neutralize a differential value, do not overcompensate at the risk of reducing the economic attractiveness of the product. To avoid these faults, innovation requires careful management taking into account the maturity of the markets addressed.

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