Innovation is an important factor in the growth and success of your start-up – developing new products and services or improving business processes can play a role in achieving a competitive advantage.
In turn, being innovative when running your new business can help you increase productivity opens in new window and boost sales opens in new window.
If your business fails to be agile, adapt to market changes opens in new window, or try new things, you might miss out on valuable opportunities.
But what exactly does innovation mean in practice for your start-up?
What is innovation?
In business, innovation often means the development and launch of new products or services opens in new window, but it’s not just limited to that – it can also be the development of a new business process or the improvement of an existing one.
One description of innovation used by The Department for Science, Innovation and Technology opens in new window is ‘ideas, successfully applied’, while the UK Innovation Strategy opens in new windowhas described it as ‘the creation and application of new knowledge to improve the world’.
Examples of ways your start-up can be innovative could include:
- launching entirely new products and services
- using new technology to create and launch a new product or service
- improving a business model opens in new window by adding complementary products or services
- improving the design of a product
- adapting an existing product for a new use
- introducing new technology to improve business processes
- improving business processes to reduce costs
- improving customer service opens in new window or customer experience processes opens in new window
- improving a marketing strategy opens in new window to reach new customers.
Why is innovation important for start-ups?
A culture of innovation has lots of benefits for a new small business, including:
Increased productivity
Innovation helps you streamline business processes, which can lead to improved productivity opens in new window.
You can spot ways to make processes more efficient by monitoring how you do things.
Taking steps, such as adopting new technology opens in new window, can lead to increased productivity by speeding up tasks.
Reduced costs
Business innovation can help to cut costs.
Examples include using automation to reduce labour costs opens in new window, introducing energy efficiency measures opens in new window, and using new digital technologies to save time.
A competitive advantage
An innovation mindset can help you spot market changes quickly, take advantage of new opportunities, and stand out from competitors opens in new window.
In addition to benefiting from the creation of new products or services, regularly improving the experience of customers buying from your business can also lead to more sales.
A survey by Salesforce in 2022 opens in new window found that 88% of buyers believe the experience a company provides to its customers is as important as its products or services.
Improved turnover and profitability
Innovation can lead to increased sales and profit as a result of generating new revenue streams and cutting costs.
Improved employee retention
A business that encourages new ideas and tries new things is an exciting, stimulating, and rewarding place to work.
With a culture like that, you may be more likely to retain employees opens in new window for longer than you would without an innovative approach to business.
A business that is attractive to new talent
An innovative business can help to attract talented new employees opens in new window who want to work in a dynamic workplace.
How to encourage a culture of innovation and experimentation
Having a culture of innovation in the workplace will encourage your employees to think differently, develop new ideas, and seek out untapped opportunities.
All this is beneficial to overall business growth opens in new window.
Ways to encourage an innovative working environment could include:
Having a process for capturing ideas
Ensure a system is in place for recording feedback and ideas from across the business.
You could have physical suggestion boxes, use online collaboration tools, or organise regular team away days to brainstorm ideas opens in new window.
Keeping your meetings varied
Running staff meetings in different styles can help to encourage new ideas.
For example, holding stand-up meetings can make them more action-focused, while walking outdoors has been shown to improve creative thinking opens in new window.
Giving staff a change of scene by using locations away from their usual workplace opens in new window, such as co-working spaces, can also help to foster innovation.
Rewarding staff for their ideas
Rewarding staff for their ideas opens in new window, even if they aren’t taken forward, can help to encourage further creativity and innovation.
Encouraging collaboration
Encourage employees to work together opens in new window to come up with innovative ideas.
This can be done by teams within the same department or by bringing together staff from different business areas who don’t usually work together.
Collaboration among people from varied backgrounds and departments can often help to encourage innovation and provide a broader range of perspectives.
Providing training
Offering employees training opens in new window helps them learn new skills, which can lead to new ideas and improved business practices.
Embracing new technologies
Taking advantage of the latest technology helps to drive innovation.
For example, artificial intelligence (AI) tools opens in new window can help with creativity and data analysis.
AI services can also take on more mundane tasks, freeing up employees to work on innovative ideas.
Innovation and R&D funding
Businesses carrying out innovation activities may be able to access grants from the UK government opens in new window, regional bodies, local councils, and other organisations.
This is known as research and development (R&D) funding.
Subject to the terms of the grant, the money could be used to research, develop, and commercialise a process, product or service, test innovation ideas, and collaborate with other organisations.
The UK government delivers R&D grants via UK Research and Innovation (UKRI) opens in new window.
Alternatively, you may be able to access regional funding, and local councils could also help.
Find out more about R&D funding opens in new window to see if you might be eligible.
Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.
Our free Learn with Start Up Loans courses opens in new window include:
- Entrepreneurship – from ideas to reality opens in new window
- First steps in innovation and entrepreneurship opens in new window
- Entrepreneurial behaviour opens in new window
Plus free courses on finance and accounting, project management, and leadership.
Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.
