The word innovation has become firmly embedded in our vocabulary. Countries from the US to China and firms from Fortune 500s to Startups continue to develop innovation strategies with varying success. Yet we tend to forget innovation’s original meaning and why it’s important to our competitiveness.

Innovation is not just a new technology or an invention. It’s a process beginning with new combinations of knowledge and resources and ending with market entry. Its impact on economic change can be either disruptive or incremental. The key, emphasized by the Austrian economist Alfred Schumpeter and management educator Peter Drucker, among many others, is the discipline required to identify and exploit opportunities resulting from major change. Innovation is important because it raises productivity and creates value, improving a company’s competitiveness and a country’s economic strength.

We’re certainly experiencing rapid, disruptive change today. New technologies and business models, trade wars, currency fluctuations, and the rise of nationalism are paradoxically reacting to and feeding the volatility. Entrepreneurs skilled at innovating look for opportunities within this uncertainty.

Real-World Application

Let’s apply this to a real-world situation. Take, for example, a US-based company with a European supplier. The US Company receives invoices in US dollars, so they discern that the European supplier likely is responsible for then having to convert those US dollars into euros. Given the volatile exchange rates, they also recognize the possibility that the foreign supplier may be padding the invoice to offset potential losses incurred at the time of the currency conversion. Therefore, by requesting invoices be quoted in both US dollar and the foreign currency they can easily perform cost comparisons and ensure they are truly getting the best deal. Even more so, by implementing the capability to offer to pay in a global supplier’s local currency they achieve a competitive advantage over their competition, further distinguishing themselves and making it more attractive to do business with. Innovative entrepreneurs can identify overt and subtle benefits of employing certain practices/tools that subsequently give their business a significant advantage.

Key Considerations

Whether you’re a producer or user of innovative products, services or processes, there are three key considerations you need to think through before leaping into action:

  1. Do I have a framework that enables me to consistently and effectively identify, evaluate, and invest in ideas and opportunities to bring new products, services and technologies to market?
  2. What are the opportunity costs of shifting resources to the creation of disruptive or process-oriented innovations?
  3. How quickly should I adopt new technologies to improve my company’s productivity? Should I adopt several simultaneously or one at a time?

Preparing and applying a framework that facilitates evaluation of opportunities against existing technologies, products or processes helps identify the gap that needs filling. Remembering that resources are scarce, choosing among alternative investments is a critical part of the process. Most entrepreneurs and companies are also users of new technologies; nevertheless, the question of when and how many to adopt quickly becomes a function of your company’s internal capabilities and needs, among other factors. Revisiting innovation during times of fast, massive change can help strategically position your firm to compete in the global marketplace.