24 Jun INNOVATION INOCULATION
A thought for the end of the week. Is your business growing? Are you adopting innovation to achieve long term double digit growth in profitability? If not then read on! This article from Robinson Sewell Partners looks at the role of financial innovation in your new organic growth strategy, aimed at taking your company to the next level of higher production, improved productivity and increased profit.
The first one is the value of exchange, defined by the rareness of a product and the market. For a particular new service, consumers will have to pay a certain amount of money.
The second type of value is the symbolic or perceived value. Through the purchasing process, consumers estimate or imagine in their mind that the innovation purchased will have certain characteristics. Consumers “appropriate” the product or service they buy, and through this process, they humanize it.
The third and last one is the value of use. After having seen the economic value, and attributed to the product a perceived value, they will use it. This process will give birth to a new type of value, said “value of use”, different from the previous ones.
The value of a product or service is the sum of three distinctive sub-ones that are composing it. Regarding the commercialization of an innovation, this means innovators have to match the good mix between the three values. And adapt their ideas to the “contemporary market spirit”…
David Dubois noted that the notion of value knows a perpetual migration movement towards a better fit between the business expectations and the evolution of the economic environment. Innovation, as any new product or service, leads to the creation of three values;
Most people think of innovation from the Research & Development perspective (product innovation) but it is much more than that for many small businesses. Adopting new technologies and techniques can also improve productivity and efficiency in your supply chains (process innovation – particularly important to the agri-sector). Marketing innovations (e.g. design and packaging changes) and organisational innovations (building alliances, supply chain networks and linking supply to buyers) can drive new client bases across business whilst re-enforcing other innovations. Innovation signals an accelerating business to your customers and also to your financial backers.
Access to finance – your gateway to innovation
Finance (and timely access to it) is one of the key enablers of innovation across businesses, and particularly so for the agri-business sector. An injection of finance can be the seeds to sow and drive a process-led innovation, enabling your agri-business or company to harvest a better financial performance. However lack of finance can be a significant barrier to capturing profit enhancing innovation.
A recent EU survey showed that 68% of small businesses cited lack of finance as an impediment to innovation activity – the highest ranking factor in that region. Australian Bureau of Statistics data confirms that here lack of access to funding is the number 1 hampering factor for firms (45.8% of all innovation active firms employing 0-4 staff, and 43.1% of active firms employing 5-19 staff). Other high ranking factors hampering innovation in Australia’s small firms included high costs for implementation, uncertain demand and high regulation.
What do you need to do?
If you are thinking of taking your firm to the next growth level then it is worthwhile to pause and think about how you can overcome the many innovation challenges you will experience on the way. Preparing an innovation-led growth business case to persuade your lender to change from a rolling finance provider to an investor in your firm is just one challenge. Banks need to see a professional growth model with a clear rate of return from the higher expected demand for your products or services in order to take on the additional innovation lending risk.
However getting access to key banking personnel with specific lending and risk assessment skills for small businesses is getting more and more difficult in a lending sector becoming more and more populated with staff working in residential mortgage lending areas.
Thinking of putting some skin in the innovation game? Then speak to Robinson Sewell Partners whose experience in linking lenders with agri-growth firms to deliver better lending outcomes, can help you put some skin in the innovation game and draw that hand of four aces.
Innovators are inevitably controversial.
~ Eva Le Gallienne ~
Have a great weekend