Tech and Business Innovation: A Match Made in the Digital Era
Updated: Sep 2
We love to talk about innovation. We all understand it is critical for organizations to grow in today's rapidly changing business environment. Innovation is our key to staying competitive.
However, not all innovation is the same: you can either invent something or invent a better way to do something. It is important for companies to distinguish between Tech Innovation and Business Innovation. Understanding the difference can help them make strategic decisions about where to invest.
Tech vs Business Innovation
Tech innovation refers to developing new technologies and implementing them. Anything from developing new software or hardware to creating new materials or manufacturing processes can be included in this category. Science and engineering advances are often the driving force behind tech innovation, which typically focuses on improving performance, efficiency, or functionality.
The concept of business innovation, on the other hand, is the introduction of new ideas, methods, or products into a business setting. This can include anything from creating new business models to developing new products and services. Innovation in business is usually driven by changes in the market, and it typically focuses on generating new products and services, new opportunities, or solving business problems.
Using Airbnb as an example, we can see how business innovation can be successful. Technology is not the key to the company's success, but rather a unique business model that allows for near-zero marginal costs. Airbnb can expand its inventory easily by allowing individuals to share their homes without incurring significant costs, while a traditional hotel chain would have to build more physical space to increase capacity. Airbnb has a competitive advantage because of this innovative business model, and traditional hotel chains cannot replicate it.
Understanding the Connection
Tech innovation and business innovation are distinct concepts, but they are also closely related:
Tech innovation can drive business innovation by enabling new products or services. A new business model like e-commerce and mobile banking has been enabled by the development of the internet and mobile devices, allowing companies to reach customers and generate revenue. In addition, the advancements in AI, Machine Learning, and Big Data have enabled insurance companies to analyze huge amounts of data and predict customer behavior, claims, and fraud, helping them develop new products, services, and pricing strategies.
Alternatively, business innovation can drive tech innovation by creating new markets or applications for existing technologies.
An excellent example of how business innovation can be just as important as technical innovation is Open Source software. In addition to producing superior technical software, Open Source is also known for its business model innovation: co-creation. By allowing thousands of contributors to develop and enhance the software, the whole community benefits. The result is a much higher volume of software than a proprietary competitor can produce. Although established companies can copy key technical innovations, switching to an Open Source business model is challenging.
Innovating Outside of Tech
The following are examples of business innovation that does not involve technology in the insurance and banking industries. Increasing customer base and revenue can be achieved by doing this:
Offering bundled packages: bundling multiple insurance types into one package, such as home, auto, and life insurance, so that customers can manage their insurance more easily.
Establishing new distribution channels: reaching out to customers in new ways, such as partnering with other organizations. Banks and retail chains may partner to offer financial services in their stores, for example.
Developing new products to meet emerging needs: Insurance companies can innovate by identifying new customer needs, like cyber risk insurance, and developing products to meet those needs.
Utilization-based insurance: An insurance company may innovate by offering customers the option to pay for insurance based on their actual usage, rather than paying a fixed premium. In this way, insurance costs can be reduced for customers who use their cars infrequently.
Financial education and coaching programs: Programs like these are designed to help customers improve their financial literacy and make better financial decisions. One-on-one coaching, workshops, and online resources can all be offered. Banks can build long-term relationships with customers by educating them on how to manage their finances effectively. Additionally, this can help customers identify and achieve their financial goals, which will result in more business for the bank.
Both technological innovation and business innovation are crucial for driving growth and competitiveness. Companies that are able to effectively balance their investments in tech
innovation and business innovation are better positioned to capitalize on emerging trends and stay ahead of the curve in today's rapidly changing business landscape.
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