Innovation needs to be the key ingredient in the arsenal of every entrepreneur. Business survival depends on it. Canadian companies need to view themselves as global players. Even if they operate locally, a global firm with innovative systems can launch a franchised business next to yours.

Being more innovative does not necessarily mean you need rush headlong into technology. As much as anything innovation is a mind-set and you can start the innovative process from where you are now.

In the second of a three-part series Rick Spence will address innovation in a way entrepreneurs may not think of. Rick is a nationally recognized speaker on entrepreneurship and business issues. He is the long-time former editor and publisher of PROFIT, The Magazine for Canadian Entrepreneurs. His weblog is Canadian Entrepreneur (canentrepreneur.blogspot.com).

1. Recognize that innovation is a mind-set

Success, like failure, is often a combination of many small actions or inactions, claims Spence.

“Innovation is a mind-set. It affects everything an entrepreneur does and thinks,” says Spence. It’s easy to pass the buck and determine that innovation is too expensive or only for the big guys. What companies should be doing to innovate is focus on a combination of their growth, personnel, communication and product strategies.

Many entrepreneurs link innovation with images of engineering drawings or white-coated technologists working in laboratories or test facilities.

Innovation definitely includes the use of technology, which needs to be viewed as a tool to push the business or product concept further, says Spence.

Innovation can be a mat-cutting machine for a picture framer or a computer program that outlines delivery logistics. You don’t need to be a technology business to harness the benefits of technology. You need to harness technology to deliver your product or service better and cheaper.

Advice: You may want to avoid the pain inflicted by the School of Hard Knocks. In the seemingly endless struggle to figure out how to make your business work it might be a good idea to check out the people and programs that can link entrepreneurs to innovation. There are over 100 federally-funded IRAP offices across Canada. There are local technology associations and even your local college can put you in touch with someone who understands what your business does and can give you insight into how to do what you do better, faster or cheaper.

2. Human resources: Harness the spark of your people

Sadly, entrepreneurs often keep the wrong mix of people around too long and fail to bring in people who will take the company to the next level.

One of the toughest things for an entrepreneur to do is hire on much needed expertise when it is necessary. It takes a leap of faith. “The new hire may often command a higher salary than the salary the entrepreneur takes home, but it may be necessary to hire that person for the business,” says Spence.

Another factor to recognize is that not all employees who started with the firm grow with the firm, says Spence. This can be a tough realization the entrepreneur. It requires the owner to wear two hats. The sentimental hat or the hat you wore five years ago may not match your needs today.

Advice: Employees need to recognize that the company is not necessarily a second home and that jobs must evolve to meet demands external to the company. The company is a place to develop job-critical skills that help the company succeed in a competitive environment.

3. The innovative approach to growth: Focus on the Customer

“Most successful companies grow on two axes,” says Spence. He explains: an average entrepreneur might view his widget-making operation in a very linear or narrow way: just keep grinding out widgets and you’ll be successful.These entrepreneurs think of their business in terms of widgets, just as the early rail barons thought of their business in terms of trains.

Savvy entrepreneurs in the 19th century didn’t think in terms of trains. They thought in terms of transportation. Entrepreneurs in the 21st century think outcome. “They have a keen sense of ‘audience development’, says Spence. These entrepreneurs focus on the customer. They will ask penetrating questions such as, “how can we make a better widget and how can we make our widget more useful for our customers in the health care field or the education market,” says Spence.

Entrepreneurs who seek a deep understanding as to how their customers use the product or require the service are on the right track, says Spence. The insights from their deep understanding helps foster the innovation that provides growth and momentum to their company.

Advice: Invest time and/or money into customer insights that lead to innovation. Even for a solo entrepreneur innovation may include offering a service with the product or acquiring a product to complement a service or licensing know-how to better serve the customer, says Spence. Insight develop the vision for the next steps you need to take to improve your product or service.

4. Ignore innovation at your peril

“Unfortunately, once a company starts to fall behind in its competitive position, there is little likelihood that it can re-gain its position,” says Spence.

Whether the company’s Achilles heel is outdated technology, complacent personnel, ancient marketing or the rigid mind-set of its owners, the message from Spence is that it is an unforgiving world for companies that fail to innovate.

If your firm was selected for an “Innovation Audit” how would it rank?

Entrepreneurs may not believe it, but there are worse things than a CRA audit. At least CRA will not hesitate to point out any errors in your accounting methods.

Unfortunately, there were “innovation watchdogs” to keep companies in check. Nor are there interest and penalties charged for companies that fail to innovate – that is, until it is too late.

To see how innovation-friendly your firm is, check your firm against these points:

• Communicate and listen to all of your employees. Ask them questions on how they think the company is fulfilling its role. Unobvious insights can come from unobvious sources.
• Short-sighted attitudes need to be examined. Whose point of view are you concerned with? Is it your own or the customer’s perspective.
• Keep your antennae alert. You don’t necessarily have to be first to market with a new product, or the first to offer a new service. But you had better be alert enough to know the direction of innovation in your market – and be flexible enough to move in that direction.
• Innovators are aware of the image and messaging they send out to the world, says Spence. This calls for taking action such as regularly up-dating your website, product brochures and corporate information. Spence still remembers with shocked amazement visiting a company that provided him with a company brochure that was decades old.
• Innovative entrepreneurs maintain a forward-looking focus. They know innovation will lead them to a successful future.
• Entrepreneurs need to take a lesson from Edison’s notebook: if you’re not sweating about something, you’re not innovating.