Relationship between business growth and innovation

Growth & Innovation | Strategy & Corporate Finance | McKinsey & Company

relationship between business growth and innovation

This paper explores the relationship between innovation performance (in terms of product and process) and business performance (sales growth, market share. the business model can lead to a completely new one that succeeds to meet the The relationship between innovation and economic growth has been. Convincing empirical evidence has emphasized the relationship between . as ingredients of the innovation process, on business performance using cross.

But his way of operation could never found a business, let alone perpetuate it. In fact, he would have been forced out of business within a few years, as all the many people before him had been who operated on a similar basis. This governance disaster created a gap that was filled by the first corporate entrepreneur Julius Rosenwald.

First phase Corporate Entrepreneur: Julius Rosenwald Julius Rosenwald made an analysis of the market. It was this corporate entrepreneur who made a business enterprise out of Sears in the ten years between when he took control and when the Chicago mail-order plant was opened. Only this basic contribution to the early history was not made by Rosewald.

The Chicago mail-order plant was designed by Otto Doering in The issue of the isolation of the farmer was still evident. Rosenwald released series of innovation as a knowledgeable business professional.

As an expert well oriented in tenable economic theory of business enterprise, he made creative responses or innovations in the following areas: Systematic development of Merchandise Sources: This was an improvement from the earlier systemic merchandising of Sears, the entrepreneur.

Business growth and innovation

The systematic merchandising only requires finding and developing sources of supply for the particular goods required. But the systematic Development of merchandise sources implies an undertaking and control by the company to systematically develop the merchandise sources: Regular factual mail-order catalogue: He invented the regular factual mail-order catalogues. The other aspect was the assurance that what the catalogue contained was available for delivery on payment to a customer.

Its contents are verifiable and available as well as accessible to any willing buyer. Productive Human Organization 4. Human organization under Sears lacked the basic human skills leaving the entrepreneur to perform multiple roles: The word-productive gave focus, recognition and defined scope of the utilization of the people within the organization. This productive human organization was basically in the interest and for the benefit of the company only.

He expertly achieved this productive efficiency and corporate entrepreneurial effectiveness of the human organization by: This gave business the principle of co-equal authority and responsibility. This is motivation in practice which induced employees to release their full potentials at work to achieve outstanding performance in their joint contribution to joint attainment of organizational objectives.

The employee is both a worker on salary and a shareholder receiving appropriate dividends. Second phase Second corporate entrepreneur: Wood The Second phase in the Sears story begins in the mid-twenties. Just as the first phase was dominated by the first corporate entrepreneur — Julius Rosenwald, the second chapter was dominated by another corporate Entrepreneur: Robert-Wood joined Sears by the mid-twenties. The original Sears market was changing rapidly.

relationship between business growth and innovation

Now, the farmer was no more isolated; the automobile had enabled him to go to town and to shop there. He was no longer a distinct market but was, largely thanks to Sears, rapidly assimilating his way of life and his standard of living to those of the Urban middle classes. One big homogeneous market: At the same time a vast urban market had come into being that was in its way, as isolated and as badly supplied as the farmer had been twenty-five years earlier.

They were fast acquiring both the money and the desire to buy the same goods as the middle and upper classes. In other words, the country was rapidly becoming one big homogeneous market-but the distribution systems was still one of separate and distinct markets.

relationship between business growth and innovation

Sound preparation and decision: General Robert E Wood had made an analysis of the Sears company even before he joined it. The major findings of the analysis are: This decision implementation demanded for a whole series of innovation to be undertaken to make it practically possible. Series of Innovation are: Merchandizing had to add two new major functions 1 the design of products and 2 the development of manufacturers capable of producing these products in large quantities. Merchandise planning and research and the systematic building of hundreds of small suppliers capable of producing for a mass market had to be invented-largely by T.

They are as basic to mass distribution in Sears second phase as mail-order house and catalogues were in its first. And they are as distinct a contribution to the American economy. Shortage of Retail-Store Managers: The actualization of retail-selling also meant getting store manager.

It is like a re-engineering process that inevitably must displace some staff members. For example mail-order selling did not prepare a man for the management of a retail store. The most systematic innovations had to be in the field of manager development and the Sears policies of the thirties became the starting point for all the work in manager development now going on in American industry.

Expansion into retail selling also meant radical innovations in organization structure. This is because mail-order selling is a highly centralized operation-or at least it has always been so in Sears. But retail stores cannot be run from headquarters two thousand miles away. They must be managed locally. And only a few mail-order plants were needed to supply the country but Sears today has seven hundred stores, each with its own market and its own locality.

A decentralized organization structure, methods of managing a decentralized company, measuring the performance of store managers and maintaining corporate unity with maximum local autonomy-all these had to be created to make possible retail-selling. And new compensation policies had to be found to reward store managers for performance.

The Role of Creativity and Innovation in Business Growth and Sustainability: An Ideal Model

Location, Architecture and Physical Arrangement: Sears had to turn innovator in respect of location, architecture and physical arrangement of the stores. The traditional retail store was unsuited for the Sears market. It was not just a matter of putting the Sears store on the out skirts of the cities and of providing it with an adequate parking lot.

The whole concept of the retail store had to be changed. In fact, few people even at Sears realize how far this innovation has gone and how deeply it has influenced the shopping habits of the American people as well as the physical appearance of towns.

relationship between business growth and innovation

The suburban shopping centre, touted today as a radical innovation in retail-selling is really nothing but an initiation of concepts and methods developed by Sears during the thirties. Profits grew right through Depression, Second World War and post war boom: The basic decision underlying the expansion into retail stores were taken in the early thirties, the basic innovations had been made by the early thirties.

Third Phase Third Corporate Entrepreneur: Houser General Wood retired from the chairmanship of Sears in the spring of and T. Houser took his place. This well symbolizes the end of an era for Sears which now faces new problems and new opportunities.

In most of American cities driving has become so unpleasant and parking so difficult that the automobile is rapidly ceasing to be an aid to the shopper and is becoming its own worst enemy. At the same time, the typical Sears customer the housewife tend more and more to be employed and at work during shopping hours. Or else she has small children and nobody to leave them with when she goes shopping. Sears may have to think through what its business is, where its markets are and what innovations are needed.

Entrepreneurs endeavour to set for themselves high apparently unachievable challenges and in practice trying to rise above the challenges from the perspective of wanting to live life in full or preserving in the super-fulfillment of their uncommon objective. Governments of advanced market economies orient that policies and programmes towards fostering entrepreneurship and they are mounting specialized services and action plans to address these needs.

Britain humbled itself under William-the-conqueror who developed the British common law legal system. The entrepreneurs were philanthropists and invested in corporate social responsibility and environmental responsibility. Conclusion Britain began the technological modernization of the world through its creative and innovative industrial revolution as well as its common law or rule of law that made all individuals to be equal under the law.

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  • The Relationship between Innovation and Economic Growth

The long-term crisis of Feudalism gave way to technological innovation and the rise of market institution. Communication involves not only listening to their needs but also actively observing their behaviour around current products and services and generating ideas on how you can make improvements.

Innovation and Business Growth

Involve your suppliers and other business partners Pooling your resources with your suppliers or other business partners will help to produce and develop creative ideas. Potential partnerships can also be developed through business networking opportunities. Next, consider what taking a particular innovative step could mean for your business. Suppliers, business partners and business network contacts can all make valuable contributions to the creative process, as well as providing support and encouragement.

Your employees are also a vital asset in generating innovative ideas. To get the most from them, you need to create an innovative environment and encourage creative thinking. Steps to promote innovation Make sure you have processes and events to capture ideas. For example, you could set up suggestion boxes around the workplace or hold regular workshops or occasional company away days to brainstorm ideas. Create a supportive atmosphere in which people feel free to express their ideas without the risk of criticism or ridicule.

Encourage risk taking and experimentation - don't penalise people who try new ideas that fail. Promote openness between individuals and teams.

Good ideas and knowledge in one part of your business should be shared with others. Teamwork, newsletters and intranets can all help your people share information and encourage innovation. Stress that people at all levels of the business share responsibility for innovation, so everybody feels involved in taking the business forward.

The fewer the layers of management or decision making in your organisation, the more people feel their ideas matter.

Reward innovation and celebrate success. Appropriate incentives can play a significant role in encouraging staff to think creatively. Look for imagination and creativity when recruiting new employees.

Remember that innovative thinkers aren't always those with the most impressive list of qualifications. Funding innovation There are a number of ways you can fund your growth through innovation, either by using your own funds or tapping into external funding such as loans or equity finance.

However, any route to external funding will need a high-quality business plan that describes your business and sets out detailed forecasts of where it's going. Businesses often turn to their banks for a line of credit or loans for additional finance, depending on their borrowing needs. If you're willing to relinquish some control of your business to external investors, you could consider using equity finance.

The two main routes for this are investment from business angels and venture capital firms: Venture capital firms provide higher levels of investment in return for shares in the business.

Government programs You may also wish to consider applying for a government program. This will only usually cover part of your project, but you will retain control of the shares in your business. Other sources of help Small and medium-sized businesses can claim tax refunds and credits on appropriate research and development spending. Because of its general nature the information cannot be taken as comprehensive and should never be used as a substitute for legal or professional advice.

We cannot guarantee that the information applies to the individual circumstances of your business.