Preparing for the future has never been more crucial. In this changing landscape, could innovation be the way forward?
In the latest episode of our In Business with BDO podcast, Head of Strategic Innovation Tanya Titman and National Leader, Business Services Matt Laming discussed this issue.
Here are some of their key insights.
Fostering innovation in your business
This is a deeply challenging environment - business as usual is just not an option for most companies. But, it puts people in a different mindset and it's that mindset that can foster really great innovation.
One of the key questions to think about is: How can we do more with less? Because when organisations have fewer resources, they must consider how they can produce more, or a better result, using fewer resources. That starts the thinking around innovation.
COVID-19 is the ultimate burning platform
The coronavirus has been the ultimate burning platform (an issue in a business that needs an immediate fix) which has forced change in business, rightly or wrongly. The thing now is to embrace it, understand it, and use it to make your company better.
Shareholders, directors, customers and more or less everyone involved in the business pipeline are in a kind of survival mode. Thanks to the pandemic, the barriers to change have come down; there’s less resistance now to building a bubbling innovation culture. This has led a multitude of organisations to quite startling revolutions. Consider the gyms now offering online fitness classes, the gin distilleries now making hand sanitiser, or the event managers hosting large-scale events wholly online.
Is it realistic for businesses to think they can rebuild and go back to the way they were?
The longer Australia is in this holding pattern, the less likely it is that businesses will be able to return to their pre-COVID selves. But the real question is: Would you actually want to?
It’s more likely that we’re going to see businesses evolve. COVID-19 has been an opportunity for most companies to go lean, to become more resilient, and all of those factors that lead to a stronger business.
We’ve seen some great opportunities as a result of the pandemic where organisations have been able to start projects that were stuck on the backburner. It’s given leaders the space to think a little more strategically, to take a step back, breathe, and get into the right headspace for innovation.
What is best practice when it comes to innovation?
Understand your finances
For innovation to take place, leaders must understand their break-even point. What are the costs in your business, fixed and variable? What revenue is required to cover those costs?
Additionally, you must understand your budget. What does it look like? What are your KPIs to survive that budget? What drives those costs and revenues?
You’ll need a 12-month outlook on profit and cashflow, and also a 90-day cash flow that you can push and pull quickly. That way you’ll know if you have a cash shortage next week, and what you can do within the model to ensure you can cover your costs (i.e. wages).
Getting a handle on what is behind your business will allow you to drive the innovation required to evolve.
Talk to your customers
Don’t forget to talk to your customers as well - especially if you’re considering pivoting, or making a serious change. This is a great opportunity to ask customers what they need, because your current plans may not be what they want.
We often forget to ask the questions of the people who have all the answers. So, looking for information from your customers, looking at your marketing and engagement data, your financial data, bringing that all together and stepping back to get a clear look at it - those will help you put a realistic plan in place that is designed to succeed from the first step. As a side benefit, it will also assist in taking the emotion out of the decision, because data is far more reliable for making decisions in these unsettled times than emotion.
What about the risks involved with innovating?
The easiest way to mitigate risk is to fail fast. Whether you’re testing something or trying a level of disruption you’re simply not used to, you want to get to whether it’s going to succeed or fail reasonably quickly.
There are many businesses out there that spend a considerable amount of money implementing initiatives that do not work out. The organisations that do this well - that innovate successfully - are the ones that come up with an idea, foster it, but get to a critical decision point quickly and then move forward or do not.