How important is innovation to an entrepreneur? There are many traits that successful entrepreneurs seem to share – leadership abilities, confidence, and risk tolerance for instance – but is innovation one of them? Famous management consultant and author Peter Drucker thought so, calling innovation the “specific instrument of entrepreneurship; the act that endows resources with a new capacity to create wealth.” Here are a few reasons why we think Drucker may be right.
Innovation isn’t only about products
When we think of innovation, images of Steve Jobs introducing the iPhone to the world back in 2007 come to mind. We think of Dropbox’s free file hosting platform, Pebble’s smartwatch, or Skype’s free videoconferencing and voice-over-IP service. However, we tend to overlook other ways in which business can be innovative. McDonald’s revolutionized the restaurant industry with its service model, while Walmart’s innovative logistics management approach changed its respective industry as well. And today, the internet and social media is making it easier for small businesses to launch creative and novel marketing campaigns.
In short, you don’t need to have an ingenious high-tech gadget idea to be innovative. You can be innovative in a number of ways – in your marketing efforts, in your recruitment practices, in your approach to stakeholder engagement, or even in the use of spices in your restaurant’s new inspired dishes. As long as you, as Drucker put it, employ resources in new and exciting ways, you’ll be wielding the specific instrument of entrepreneurship – innovation.
Investors look for it
Venture capitalists and angel investors are always on the lookout for individuals that have a passion for innovation. It’s one of the most in-demand traits among investors. This is especially true for venture capitalists who are usually looking to pump large amounts of money into startups in the hopes of earning huge profits within a few short years. Innovative companies have a better chance of generating outlandish returns, which is what makes VCs tick.
Lenders, on the other hand, are less concerned with innovation. Of course, it’s an asset in their eyes, but lenders are more interested in safe bets and responsible borrowers. Therefore, innovation isn’t a must if you’re looking for a loan from the bank. But if you plan to sit down with venture capitalists, you’d better be armed with a professional business plan that shows off your business’s innovative qualities. Consider working with an experienced business plan writers for help on building a business roadmap that accentuates your innovative qualities in order to better your chances at receiving funding from investors.
It gives you a competitive advantage
In today’s marketplace, it seems that just about every industry and niche has been exploited and little opportunity is left for new businesses. Innovation, however, gives entrepreneurs the ability to carve out a space for themselves in the marketplace, no matter the industry. It gives them a competitive advantage by having something unique that the competition doesn’t have. Sure, there might be dozens of grocery stores in your city, but are there any that offer PayPal-integrated online shopping and delivery services?
Striving for innovation will make you a better entrepreneur. It will create opportunity and make you more appealing to investors. So always keep your mind open towards exciting, new notions. Create an environment that enhances the generation of ideas for yourself and your staff and include your strategy for innovation in your business roadmap. Innovation is, after all, the specific instrument of entrepreneurship.