Managing uncertainty through innovation
The disruptions of recent years have affected many companies. Their predictable response was to shield themselves from the impact and wait for the return to normal.
But structural changes in supply chains, rising inflation, adjusting credit interest rates, the energy crisis and remote working have had implications for the business environment.
Under these conditions, cost management and productivity growth are not solid approaches for sustainable growth. If you sit with your cash and don’t invest it in new products, new business models or new partnerships, you’re missing out on growth opportunities.
What do companies need to grow? The answer is as predictable as it is rare. To grow, companies need innovation.
Cash protection is a defensive but losing approach if it stops there. Yes, we protect cash but diversify sources of growth and make revenue growth the number one priority. How can we do this? As I said, through innovation.
To capture growth opportunities while generating more strategic options in a rapidly changing environment, innovation is essential.
Innovation is not really easy to achieve if you don’t have a structured approach to generating it. That is why these essential practices are relevant:
1. Calibrating between focus and resources
Short-term innovation usually refers to incremental improvements or updates to existing products, services, or processes. These enhancements are designed to address immediate needs, solve specific problems, or capitalize on emerging opportunities.
Short-term innovation often involves making small changes or modifications to existing products, services or processes rather than creating completely new ones.
Long-term innovation, on the other hand, refers to transformative, disruptive and forward-looking developments. These innovations are designed to create entirely new markets, products or services, or fundamentally change the way we live, work and interact with the world.
Long-term innovation often involves taking big risks, investing significant resources, and pursuing new and untested ideas.
In practice, the line between short-term and long-term innovation is not always clear, and the two often overlap. Short-term innovations can lay the foundation for long-term breakthroughs, while long-term innovations can inspire and inform short-term improvements.
2. Creating new business models
Adopting new business models can leverage more of a company’s core competencies than investment, while making the organization more adaptable and generating new growth.
Such innovations may include developments in value propositions, economic models, production models, routes to market, use of assets and capabilities. For example, a manufacturer of children’s sandals now offers sandals that can be exchanged for new ones for a monthly subscription.
Creating new business models through requires companies to experiment with different approaches, such as new pricing models, distribution channels or revenue streams. The purpose of experimentation is to test new ideas and concepts in a controlled environment on a small scale before scaling them up.
3. Building strong partnerships
Partnerships can play a key role in driving innovation. By engaging different organizations to pool complementary resources and skills, partnerships can help stimulate creativity, share knowledge and insights, and accelerate the development of new ideas and solutions.
Partnerships can bring organizations together to collaborate on joint research and development projects, sharing costs and resources to accelerate the development of new products, services or technologies.
They enable co-creation, where two or more organizations work together to create a new product, service or business model that combines their respective organizations’ strengths and capabilities. But partnerships can also help companies tap into new markets or customer segments by leveraging the networks that other partners have.
In conclusion
Today’s context of deep transformation forces companies to be resilient and innovative to have sustained growth cycles. In order to be competitive and to be able to access growth potential, companies must have a phased approach to innovation, discover emerging markets, create new business models and build partnerships.
Alina Făniță este CEO și Partener al PKF Finconta. A lucrat cu companii multinaționale sau firme antreprenoriale din domenii diverse de activitate, pentru a le oferi servicii de audit financiar, due diligence, restructurări de grupuri, audit intern și alte servicii conexe activității de control intern. Este membră a celor mai prestigioase asociații profesionale din domeniu: ACCA (Association of Chartered Certified Accountants), CECCAR (Corpul Experților Contabili și Contabililior Autorizați din România), CAFR (Camera Auditorilor Financiari) și IIA (Institute of Internal Auditors). A absolvit EMBA Asebuss la Kennesaw State University, a fost trainer pentru cursuri IFRS și este invitată ca expert la numeroase conferințe de business. alina.fanita@pkffinconta.ro
