Manage Innovation, It Pays

Whilst controlling costs within your business and providing good value for your customers is important, your competitors over time can replicate your cost base and product offering -  leaving you without a competitive advantage. In other words, you have to find another way to get ahead and stay ahead. According to Professor Lawrence Bellamy, from the Warrington School of Management (University of Chester), innovation holds the answer…

People love Apple. The brand recognition, product sales, status and desirability or their products is global and transcends all levels of society. Apple has enormous research and development capability with hoards of workers on a quest to deliver outstanding products. However, do all of the products have unique features? Absolutely not; Apple products share technical and design features across the range including the’ look and feel’.  The company takes good ideas and use them time and time again to get the most out of them. After all, good ideas are expensive and need to be paid back.

Creativity & Innovation

When thinking about innovation, people sometimes confuse this with creativity. Whilst these areas may be related they have differing fundamental purposes. Creativity is about coming up with new ideas, whilst innovation is often more about taking ideas, which may be pre-existing, and applying them elsewhere.

Creativity may require costly research and development or a dedicated creative staff team to deliver the new ideas. Innovation can be used throughout the organisation by all members of staff to deliver new or improved products, cost savings, better service or greater customer value. Innovation most of the time will be about incremental development, rather than breakthrough creation. It’s not just there for hi-tech companies with huge budgets, but for all organisations. However, to be successful it needs to be managed.

Dyson vacuum cleaners utilise a ‘cyclonic’ extraction system. Dyson did not invent this concept; it had been used within industrial dust-extraction applications for many years previously. Instead, they took the idea and used it in vacuum cleaners - a new product application. Other manufacturers now also produce ‘cyclonic’ or vortex extraction based vacuum cleaners. Dyson however has been so successful in developing and promoting the concept that far fewer people are now calling their vacuum cleaner a ‘Hoover’.

We all see things in our daily working lives which we think could be done better. The challenge for any business should be to ensure that those improvements, whether they are associated with products (which include all the things we sell i.e. physical goods, services or ideas or knowledge) or processes (the things we do) are nurtured, considered and put in place in a cost effective manner. Innovation can work for us not only on the big things but also importantly on the micro level. If we put together many small innovations within an organisation then cumulatively they add up to a large improvement and are difficult for other organisations to copy.

So how do we get our business to be more innovative? Key areas are:

·         Leadership of the innovation agenda

·         ‘Screening’ project proposals

·         Empowering people to act

·         Embedding innovation into the DNA of the organisation

Comparison sites such as Confused.com, GoCompare and Money Supermaket have been instrumental in changing the way we purchase insurance and other finance services. Direct Line pioneered the work which made this approach possible, by moving away from High Street insurance brokers to telephone applications and expert systems to process the data from insurance quotes. Comparison sites are a development of this early work and have been instrumental in helping to make shopping for financial service more visible and convenient. Now though new types of organisations are being formed which get consumers together and negotiate deals from insurance companies on behalf of groups of customers, for better premiums. The industry is gradually changing.

Leadership

Leadership throughout the organisation should recognise and encourage suggestions made for innovation projects, whether product or process focused. Leaders should clarify the most important areas of focus: product, service or cost? Though many projects may be small, any development is a step in the right direction. Whilst not all projects will be given the ’green light’ without a stream of innovation proposals the company will not generate sufficient opportunities for the future. Successes should be widely promoted as the way forward for the company.

Screening

Organisations should not blindly implement all suggestions, but should go through a supportive screening process.‘ Innovation Champions’ should work with employees to help them put together the project proposals. Large projects will need to be considered at a senior level; smaller projects within departments. Try to keep this process to a minimum level of bureaucracy.

Empowering

Some people will put proposals forward which have little or no expenditure and have limited impact outside of their area of working. If what they are proposing appears reasonable after a conversation with their manager then the answer should be ‘yes’. Why put barriers in the way of improvement?  For complex projects then some training may be needed to give people the skills they require in taking proposals forward, this may involve researching, writing and calculating and project management skills.

Embedding

Use staff appraisals, budget setting processes, staff awards and meeting agenda items to reinforce the need for innovation. Arrange for innovation events periodically to encourage employees to focus upon possible projects and make it part of the usual way of working across the organisation. Measure the successes being achieved and report back. Make it part of the culture of the organisation and an expectation that all will contribute at some level.

In summary, innovation should be at the heart of the culture of a company, as it gives the organisation the best chance of long-term success. It should be built-in and not bolted-on and encompass the whole of the organisation. Once the innovation culture develops then success will breed success - accelerating performance improvement. However, management needs to focus efforts to get this moving… innovation won’t just happen, it needs managing.

Professor LawrenceBellamy is Associate Dean at the Warrington School of Management, University ofChester.

www.chester.ac.uk\wsm

@WSofManagement

@ProfLawrenceB

Need help with Innovation?

The University of Chester has up to 15 Business Innovation Vouchers available, to provide a discount on business services. Each voucher entitles businesses to one of the following:

£1000 off a project valued at £5000 or more

£3000 off a project valued at £10000 or more

Vouchers will be allocated to successful applicants, usually for small consultancy or technical services projects; but they could also be used for small research and development contracts.

For more information please contact The Research & Knowledge Transfer (R&KT) Office

innovationvouchers@chester.ac.uk

01244 511481

www.chester.ac.uk/business/innovation-vouchers

Business Pride reflected through the Warrington Business Awards 2013

Prof Lawrence Bellamy presenting the University of Chester Start Up Business of the Year to Culture Warrington

The Warrington Business Awards 2013 represented a brief glimpse into the success which the Warrington effect is breeding. 

Colin Stevens, Better Bathrooms

Outperforming Liverpool and Manchester in a number of economic indicators the area is punching above its weight. One of the Winners, Better Bathrooms has noted a turnover increase of £1m to £42m in seven years, which is astonishing when considered in the context of the financial crisis and recession during this period. Clear leadership and a positive culture were cited as being drivers of success. In addition some of the spin-off council organisations received awards too, including Culture Warrington, showing that releasing organisations to be more enterprising and less bureaucratically constrained can allow them to soar. Some nominations were for companies returning for a second year, such as Totalpost Services (who are developing a successful international profile) showing that success could be maintained. There was also an encouraging line up of new nominees, including Abeti Medical Solutions, indicating the innovative talent coming through. Overall however the most striking aspect of the awards event was that the room was full of people who showed great pride in the business of Warrington. Having pride and passion is important for business as it drives a determination to succeed, a key ingredient in building a great company.

Professor Lawrence Bellamy is Associate Dean at the Warrington School of Management, University of Chester, Warrington (Padgate) Campus. Follow @WSofManagement, @ProfLawrenceB 

7000 Chances to make Warrington Businesses Larger

There are over 7000 businesses in Warrington, the majority of them small, employing fewer than 50 people and the largest proportion employing less than 10. 

Seen as the ‘engine of the economy’ a key objective of consecutive governments has been to get small businesses to grow into being large ones, so that they employ more people and (hopefully) pay more taxes. Sounds easy doesn’t it? However, the majority of small firms, if they survive the more dangerous early years cannot seem to organise for growth. They certainly cite a lack of finance as holding them back, but for many this isn’t the real issue. At the heart of the matter, putting motivation and ‘lifestyle’ businesses aside research reports cite a lack of the management skills required to develop an organisation. There are many organisations that can provide training and education on these skills, with full qualifications or short courses, but despite many of these being free, relatively few businesses pursue this and so are destined to take ‘more of the same’, if they survive that is. In Warrington therefore there are approaching 7000 chances to make larger businesses. The small businesses with ambitions need to get the management skills in place to deliver the growth. Simple. 

Lawrence Bellamy is a Professor at the Warrington School of Management, University of Chester

Business Plan

What is a Business Plan?

1.    Introduction

At a time of constrained resources and  low consumer demand,  it is even more critical than usual  that businesses, and small businesses in particular, have a quantified and detailed plan as to where the business has come from and more importantly, where it intends to go in the future-in essence a Business Plan. As any seasoned watcher of the BBC series Dragons’ Den will realise-without such a plan and a thorough grasp of its content, any appeal for investment is likely to be met with scepticism from business angels or banks. As the owner of the business your credibility will be blown apart!  In any event, regardless of funding requirements, how can a manager run a business of any size effectively without knowing their long term destination or understand the way in which the business will get there? Would you go sailing not knowing the port you are trying to reach and the course you intend to follow?   

2.    Definition

Numerous definitions exist as to what constitutes a Business Plan but one easily understood definition has been provided by Cox and Farndon (1997)[1] which has stood the test of time:-

“A plan presented to a bank or other provider of finance, describing what the business intends to do, explaining what its costs will be, what it expects to earn, how it will repay money it has borrowed and how soon it will make a profit.”

A business will often compile such a plan prior to the start of operations as part of the start-up process but may, sometimes, decide once operations have commenced that the back of the envelope previously employed no longer passes muster. The business plan then becomes a “live” document going through successive rewrites as the business grows and hopefully thrives.

3.    Purpose of the Business Plan

As hinted at above, a Business plan meets a number of purposes which can be boiled down to:-

• To help manage the business-it will chart the future direction of the business and indicate the long term ambitions often expressed in the form of statements concerning corporate strategy. For example top level growth plans by product and market and resources needed to enable the growth to take place over a specified, discrete timescale.
• To measure business progress-as the business grows (hopefully) management can measure actual progress against their original expectations and amend/update the plan accordingly.
• To raise financial resources for the business-the business plan will encourage funders (business angels or banks) to lend to the business in order to facilitate growth. The written plan also becomes a major tool to establish and maintain the credibility of the management of the business-i.e. it provides comfort to lenders that the owners know what they are doing!

4.    Format of a Business Plan

Business Plans come in all shapes and sizes simply because businesses come in all shapes and sizes so the following comments are not intended to prescriptive but more to give a flavour of the content which can then be adapted to meet the specific circumstances of the business.  The terminology employed in business plans also varies from business to business-for example what one organisation calls an “objective” another may refer as a “goal”. In my commercial experience its best not to get too hung up on this as long as the business plan makes clear what meaning is intended. Also the exact ordering of the content is often best left to the preference of the person within the business responsible for coordinating business activity and writing the plan.

5.    Overview of Business and Objectives

This section is often equivalent to an Executive Summary. It will include details of the long term aspirations of the business often encapsulated in its Mission Statement. For larger businesses there may be more explanation of the corporate strategy that has been adopted which will ensure the reader (especially any funder) understands the strategic focus and positioning of the business especially in relation to its competitive environment.

6.    Sales and Marketing Plan

The above section should link easily into further detail concerning the sales and marketing plans of the business. This section can contain details of products on offer or planned, sales volumes and sales budgets over the life of the plan, current and expected market share as well as marketing and distribution plans. This section may also include details of any digital marketing initiatives.  Promotional materials relating to the products on offer are relevant here but often the detail is relegated to an Appendix of the plan. It is important to note that the construction of the Business Plan and the financial budgets that underpin it take as a starting point agreed sales forecasts and that subsequent coordination of the remaining sections regarding production levels, manpower plans and other resourcing requirements especially borrowing are all predicated on these sales forecasts. Hence it is vitally important that these sales forecasts are realistic, achievable and owned by the business as a whole. These forecasts can be abbreviated for the purposes of a published business plan. 

7.    HR Plan

One of the most important resources a business possesses is the people it employs from senior management down through middle management to “shop floor” staff. All have a vital role to play if the business is to achieve its objectives. A manpower plan detailing how the expected sales volumes will be resourced is therefore essential showing both numbers of staff, skill levels required and training to be provided over the term of the business plan. Again, these forecasts can be abbreviated for the purposes of a published business plan. C.Vs of senior management could be included here or relegated to an Appendix. However it’s fair to say lenders will be especially interested in the track record of the senior management running the business.

8.    Production/Operations Plan

Linking into and coordinated with the sales forecasts will be the Production or Operations plan. This will show that the sales forecasts can be met from the physical resources of the business such bas;-

• Factory capacity by geographical location, premises owned or leased.
• Office locations
• Machinery and vehicles required
• Raw material sourcing, costing and stock levels required
• Production methods
• Quality control methodologies employed
• The content of this section is quite flexible depending on whether the business output relates to a product or service or a combination of the two.

9.    Resourcing Plan

This section contains an overview of the resources required to deliver the overall business plan. It will contain details of:-

• Total financing requirements of the business over the term of the plan
• Finance being provided by the owners in cash or kind
• Borrowing requirements
• Assets available for security

This part of the business plan will be of most interest to external providers of finance whether banks or other institutional providers e.g. business angels.

10.  Financial Plan

This section will contain detailed financial forecasts for over the term of the plan. This will include at the very least:-

• Forecast Income Statement (formerly known as the Profit and Loss Account)
• Forecast Balance Sheet
• Cash Flow forecast

An established business will also include, at least three years of historical financial results. For larger business there may also be details of any sensitivity analysis or modelling carried regarding the financial impact of changing levels of demand or other economic factors e.g interest rates, currency exchange rates or inflation levels.

11.  Performance Review process

This section will detail the process to be adopted to ensure the business plan remains an effective planning and control document. It will explain how business performance will be monitored across a number of metrics e.g sales, market share but primarily by financial performance. Larger businesses may adopt a form of “balanced scorecard” reflecting overall performance across the business.

12.  Appendices & detailed financial forecasts

Depending on the size and complexity of the business, this part of the business will include relevant material that is too detailed to be included elsewhere in the Business Plan.

13.  Legal & Constitutional Details, Professional Advisors

This section will include factual data for use by lenders and potential investors and may also include contact details of the person responsible for coordinating the Business Plan.

Summary

The above exposition of the contents of a business plan is not meant to be exhaustive merely indicative as the circumstances of each business will be different. It is intended however to be helpful in terms of pointing out the matters that an effective Business Plan will address in order for a business to grow and attract appropriate investment.

Jim Stockton is a Senior Lecturer of Finance at the Warrington School of Management, University of Chester

Rugby League World Cup in Warrington

October 27^th and November 17^th this year see two of the Rugby League World Cup matches taking place in Warrington. 

Even for those of us who are not fans of the sport it will be difficult not to be drawn into the build-up surrounding the event. Samoa will be using Warrington as a base for the tournament too, so bringing some excitement to the town. So what does this all mean to Warrington businesses? Whilst these two events in isolation will have a relatively small impact outside of their actual occurrence the build-up activities provide a number of opportunities. Media, promotion, merchandising, corporate hospitality, ambassador events, catering, security, transport and accommodation all add up to lots of £££’s throughout the tournament. However it won’t just roll up at your door. Businesses need to carefully monitor the RLWC communications, attend the briefing events and think creatively about how they can benefit from all the surrounding activities. OK, so it’s not London 2012, but in a town of around 200K people it can have a relatively large financial benefit, if businesses actively engage and are innovative. So if you want the business then you need to tackle it head on.

Lawrence Bellamy is a Professor at the Warrington School of Management, University of Chester