Creating a culture of innovation in business

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Any business that wishes to survive and thrive in today’s constantly changing business environment must continuously evolve its processes, operations, strategies and product/service offerings. Fortunately, many business leaders in America appreciate and value innovation as an essential element of business. Because of this, many businesses across America spend millions of dollars every year trying to cultivate a culture of innovation.

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Investments in Research and Development

American companies collectively spend billions of dollars on research and development projects. For instance, in 2015 alone, the amount of money spent within the US on research and development was about $500 billion, up from $340 billion the previous year. The business industry alone contributed $355 billion, whereas the federal government and other industries contributed $31 billion and $113 billion respectively.

Types of Business Innovation

Disruptive innovation

Introduced by Professor Clayton Christensen in 1997, the term disruption innovation refers to the process by which a startup gains market share from an establish business. Since established businesses tend to focus on their most profitable segments, a startup typically achieves this feat by introducing simple, easy-to-use product/service aimed at the overlooked segments of the market. Disruptive innovation occurs when the startup’s products/services offering gains traction with the incumbent’s most profitable market segments.

According to Professor Christensen, the hallmarks of disruptive innovation are affordability, accessibility, convenience and simplicity. It is worth noting that this process often leverages existing technologies. For instance, Netflix used this strategy successfully in 1997 to gain market share from Blockbuster and eventually dominate them in the movie rental industry. Netflix was able to do this because Blockbuster overlooked certain segments of the market, including the early adopters of the DVD player, movie renters who didn’t care about new releases, and consumers who wished to rent movies online. Netflix targeted these neglected segments and eventually introduced direct streaming online. The video streaming offering proved a game changer since brick-and-mortar stores couldn’t compete with it. Examples of other companies that have used disruptive innovation successfully include Salesforce, Apple and Pandora.

Architectural innovation

This type of innovation occurs when a business introduces new technological and business focus to an existing industry, eventually disrupting the industry. This strategy worked well for Apple Inc. when it launched the iPhone. Prior to the release of the iPhone in 2007, BlackBerry was the dominant player in the smartphone space with an annual profit of about $2 billion. To gain market share from BlackBerry, Apple created an extensive marketing campaign for the iPhone. The campaign focused on the iPhone’s advanced features, including music storage capabilities, beautiful design, GPS services and video-streaming capabilities. Thanks to its advanced features, the iPhone revolutionized the smartphone market so much that BlackBerry took a massive financial hit, moving from about $2 billion in profit to about $6 billion in losses within a few years.

Routine innovation

This relatively low-risk strategy focuses on cost and feature improvements and can apply to product/service offerings or the business model. Routine innovation is especially important in the technology industry because it exploits existing technology. Intel, for instance, revolutionized the computer microprocessor space by continuously improving its microprocessors technology over the years. Because of this, Intel has been able to keep up with the demand for more powerful processors and, more importantly, thrive in the industry. Examples of other technology companies that have mastered this type of innovation include Apple, with its ever-evolving iPhone, and Microsoft, with its multiple versions of the Windows operating system.

Radical innovation

Also known as the blue ocean strategy, radical innovation is a high-risk strategy that focuses on product/service offerings or processes with unprecedented performance features. Because of this, it typically creates a dramatic change that transforms existing industries or creates new ones. One of the key characteristics of radical innovation is that it combines a traditional business approach with new technology. Amazon, for instance, adopted an internet-based approach to selling books in order to provide consumers with access to more books than they could find at a traditional brick-and-mortar bookstore. Ultimately, brick-and-mortar bookstores were unable to compete with Amazon’s online strategy. Because of this, Amazon became one of the largest retailers of books in America. Today, Amazon sells a wide range of products and is arguably the biggest online retailer in America.

Reasons for Business Innovation

Some of the reasons behind business innovation include:

Global competition — The modern business competes on a global scale. While this means increased competition, it also means that greater rewards for companies that are able to offer innovative business solutions. For this reason, companies are constantly innovating in order to lower their operation costs, improve customer service, improve their product offerings, and as retain and increase their market share.

Consumer demands and insights — Consumer demands and insights can inspire business innovation. By listening to consumers, a business can gain insights on its product/service offerings. The business can then use this information to improve its products or services. This means that both internal and external sources can inspire innovation.

Recognition — Innovators challenge the status quo. More importantly, a successful innovation that disrupts the status quo would likely attract the attention of the relevant stakeholders, from investors to potential employees.

Create a culture of innovation — Innovation tends to create a culture of innovation within an organization. This means that innovative companies are likely to offer better products or services. Moreover, such companies are usually able to predict future market trends, meaning they are able to stay ahead of their competitors.

Tech-savvy consumers — To reach the younger, tech-savvy consumers such as millennials and members of Generation Z, companies need innovative technology solutions. For instance, a business without a mobile responsive website with regular updates is unlikely to resonate with this consumer demographic.

How to Establish a Culture of Innovation in a Business

Innovation is more prevalent in companies with a culture of innovation. The secret to creating a culture of innovation is to have a diverse workforce. This is because research shows that 10 percent of US innovators have at least one parent who was born abroad. Additionally, 12 percent of US innovators are women and 35.5 percent of innovations were born outside the US. In fact, immigrants born in Europe and Asia are five times more likely to have innovated something in America compared to native-born American citizens. It is also important to note that innovators are highly educated in STEM fields and the median age for innovators is 47 years.

Successful companies see innovation as an integral part of their corporate culture. Some of the things that such companies do to encourage innovation include providing their employees with challenging tasks and jobs, autonomy to make decisions, opportunities for collaboration, unstructured time, and trust and openness.


History has shown that a business needs to innovate constantly in order to survive. Apple, Amazon and Netflix are examples of companies that have thrived due to their innovation prowess. According to research, diversity is vital to creating a culture of innovation in business. Additionally, successful companies actively encourage innovation.


Learn More:

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