Why Is Innovation Important in Business? New, Not Just Improved

This article is an excerpt from the Shortform book guide to "The Innovator’s DNA" by Jeff Dyer, Hal Gregersen, and Clayton Christensen. Shortform has the world's best summaries and analyses of books you should be reading.

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Why is innovation important in business? What kind of innovation makes the most difference?

Innovative businesses change the world. In The Innovator’s DNA, Hal Gregersen, Jeff Dyer, and Clayton Christensen explain how to drive meaningful change by embedding into your organizations and teams the key skills that are shared by the world’s most innovative business leaders.

Read on to learn about the importance of innovation in business.

The Importance of Innovation in Business

The authors write that innovation is the key to success in today’s business environment. So, why is innovation important in business? The authors focus on what they call disruptive innovation, which creates entirely new markets by radically diverging from established products, services, and processes (as opposed to innovation that only improves upon current ones). Disruptive innovation drives significant growth and creates value by transforming entire industries and bringing breakthrough solutions to customers.

The lightbulb is one example of the importance of innovation in business, especially disruptive innovation. The lightbulb itself was a disruptive innovation technology, while the LED light bulb, although valuable, was merely an innovative improvement on the current product.

Disruptive Innovation for Startups vs. Established Companies

The authors emphasize the power of disruptive innovation to drive growth, but in The Innovator’s Dilemma, Christensen argues that investing in disruptive innovation is much easier to pursue for start-up companies than established companies. He explains that startups are more likely to pursue disruptive innovations because they aren’t constrained by existing products or business models, which allows them to create something new more easily, and they can pivot quickly if an innovative idea doesn’t work out. 

In contrast, pursuing disruptive innovations can cause problems for established companies, making them less likely to invest in breakthrough innovation projects. For example, disruptive innovations may require different business models, processes, and skills than the established company is accustomed to, making it difficult for them to adapt and compete. This makes it difficult to invest in the risk disruptive innovations pose to their current revenue streams. Therefore, they often focus on innovations that improve existing products or processes and remain constrained by existing customers and business models.  

The authors assert that innovation and creativity should be strategic priorities for success in your business. Today’s business environment is uncertain and volatile—fifty million new businesses are started worldwide each year, which means there’s more competition. As a business leader, you must develop the capacity for disruptive innovation in your processes, products, or services if you want your company to survive and thrive. And as an employee, you must develop and use innovation skills to stand out and rise through the ranks. 

(Shortform note: Business experts widely acknowledge innovation capabilities are crucial for business success, but some experts argue that becoming a top innovator does not necessarily translate to long-term success for all companies. In Great By Choice, Jim Collins and Morten T. Hasen outline research that shows that your company’s approach to innovation is more important than the number of innovative ideas you launch. In line with Gregersen, Dyer, and Christensen, they caution business leaders to gather data about their innovative ideas through experimentation and observation before committing to them.)

The key to innovation, the authors write, is creative thinking. Successful innovators don’t possess an inherent creative power that most others lack. The authors’ research found no significant difference in the psychological traits of innovative versus non-innovative thinkers. This means that creative thinking emerges from how you behave. Therefore, you can learn to think more creatively by learning to act differently.

(Shortform note: In The Magic of Thinking Big, David J. Schwartz agrees that creative thinking can be developed through behaviors (like asking questions), but he adds that your beliefs about what is possible can shut down any creative thinking before it has a chance to flourish. Beliefs unconsciously drive our behavior, therefore, if you believe something is impossible or that you’re incapable, you will shut down any creative thinking before it has a chance to lead to good ideas. To think more creatively, he recommends you examine and shift your beliefs about what is possible by removing limiting words like “impossible” from your vocabulary.)

Why Is Innovation Important in Business? New, Not Just Improved

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  • The five key skills that are shared by the world's innovation leaders
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Elizabeth Whitworth

Elizabeth has a lifelong love of books. She devours nonfiction, especially in the areas of history, theology, and philosophy. A switch to audiobooks has kindled her enjoyment of well-narrated fiction, particularly Victorian and early 20th-century works. She appreciates idea-driven books—and a classic murder mystery now and then. Elizabeth has a blog and is writing a book about the beginning and the end of suffering.

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