Innovation is a word thrown around a lot. But what does it mean? And more importantly, why should you care about innovation for your business?

The only constant is change. You want to ensure that you’re on the winning side of new changes. Otherwise, your business may not be around for long.

Don’t believe me? Let’s talk about Blockbuster.

 

The Fall of Blockbuster

In 2004, Blockbuster generated approximately $5.9 billion in revenue with 84,300 employees worldwide and across 9,094 stores. This was Blockbuster’s peak.

While this was happening, a little-known company you may have heard of was in its first innovation cycle: Netflix. Netflix started as a mail-based rental business between 1997 and 2006.

Mail-based rentals were an innovation, directly competing with Blockbuster’s core business, which focused on offering rentals through brick-and-mortar stores.

Blockbuster tried to retaliate by offering its own DVD-by-mail service, but it was too little too late.

In 2007, Netflix made the innovative leap to streaming services, and the rest is history.

You’ve heard this story before, but I want to hit home the severity. Let’s look at the scorecard for Blockbuster and Netflix.

 

Blockbuster once had 9,094 stores worldwide and now only has 1 in Bend, Oregon, which serves as a nostalgic tourist attraction.

Netflix has roughly 301 million paying subscribers. To put that in perspective, that is nearly the population of the entire United States (roughly 342 million people).

 

And Netflix did not stop with those first two innovations, they also went on to innovate and:

• • Develop their own original programming (you may have heard of Stranger Things)
  • Expand internationally into new markets
  • And expand into live events

The takeaway? Innovate or Lose.

Innovation Defined

A general definition of innovation is the process of introducing new ideas, methods, products, or services that create value and drive growth.

Now, new doesn’t always mean better. Let’s add some parameters around each of these new outputs:

• • Ideas
  • Methods
  • Products/Services

We’ll tackle these in reverse order. 

As a business owner, why should you care about new products/services? Because they give you more to sell to your customers to increase revenue.

Why should you care about new methods? You will find optimized methods and processes that allow your business model to operate more efficiently to decrease costs.

Both increased revenue and decreased costs maximize profitability. Profit is the scoring system we use in the world of business.

 

Now, why should you care about new ideas? Because that is where it all begins. 

You need to have someone think, “Hmm, maybe people would pay a premium to have their DVDs mailed to them so they have one less stop to make on the way home from work?” and “Hmm, what if it was possible to have anything you’d want to watch on your TV on-demand?” to get an innovative company like Netflix.

People say that ideas are worth a dime a dozen. That is a dime overpriced.

In the game of business, innovation needs two essential ingredients: constraints & execution.

Without constraints, we’ll build a solution to a problem that doesn’t exist. Without execution, we won’t build much of anything.

Going back to our definition, innovation is a process. This means that innovation is action.

I’ve worked with hundreds of businesses, from fledgling startups to larger companies, to turn innovation into action through practices. These practices create repeatable habits across your team through Proving Grounds. When I say proving ground, think of this as a hurdle for a leader to jump over to show that they are developing competency in the practice.

 

We will cover 10 example Proving Grounds in the second article in this series.