The nature of innovation

It is highly important to understand the nature of innovations from the company’s perspective, for the fact that innovations are risky and the potential of failure is relatively high. In order to prevent the innovations failure, there is need to have a good microclimate. (Encyclopaedia of Small Business, 2008).

According to the encyclopaedia of Small Business (2008), innovations are often the first step to success. But it should be noted that not only is it required to have a good microclimate, but also a good network within the company that is meant to make the company have a long run success.

Effective innovation is also an issue that companies or organizations should keep in mind for the fact that without such effective innovations, companies destroy them-selves because they do not pay enough attention to the importance of the issue. (Encyclopaedia of Small Business, 2008). Innovations are a necessary factor in the business world, hence being important for all companies since the global economy needs innovations, new technologies, new services etc. in order to have a competitive edge.

In particular, it is so important to have innovations because of the customers, who play a very important role in the company’s choices. If the customers are not satisfied with the old product, there is need for the companies to replace them with their new ones. For example the electronic industry is a fast changing industry and has new products appearing on the market, hence leaving the customers with a lot of choices. Customers are more likely to buy the latest product in order to be up-to date with the changing technology. Another crucial aspect that is playing an important role is the changing environment and the advancing technology. Technologies develop from day to day and therefore it is important for companies to be open for them and to apply them as soon as possible.

However, if the companies are not able to offer new products or services to the customer, there will be many consequences such as a drop in shareholder’s returns, drop in stock prices, anxiety in key employees, sales drop, etc. All these repercussions may not be a problem in the short run, but the long run effects may be felt through unavoidable problems, up to an extent of completely closing down their business.

References


Encyclopedia of Small Business. "Small Business Encyclopedia: IRS Audits to Investor Relations and from Answers.com." Encyclopedia of Small Business by the Gale Group Inc. Web site. http://www.answers.com/library/Small%20Business%20Encyclopedia-cid-41646, accessed September 2008