Chartered Management Institute: In my opinion

Chartered Management Institute Companion Paul Freeston, CEO of apetito, argues that innovation is the key to sustainable business success.

Last Updated: 31 Aug 2010

My favourite word in business is 'sustainable'. A management team's ability to deliver sustainable growth in sales and profits is a true test of its mettle. The short term is easy, but the long term is really tough.

And, of course, few companies can produce long-term sustainable growth without a substantial degree of innovation.

Innovation helps to distinguish a business in the eyes of the customer and keeps the competition in their place - breathless, trying to catch up. A failure to innovate leads to a sameness about the company's offer and, sure as night follows day, you end up competing mainly on price.

The ability to innovate says a lot about a company. To be the best, the entire team must have an expectation and determination that the company will continuously innovate, and that innovation will be key to everybody's job. An obsession with creating competitive advantage is a good starting point, preferably combined with a heartfelt paranoia about complacency. Everybody should be asking (and answering) the question: 'How will we create competitive advantage to stay ahead next year and in the years after that?'

New products and services play a crucial part, but creating competitive advantage involves more than these alone. Competitive advantage through innovation can be generated across the whole of a company's business platform, in manufacturing, service, distribution, IT, marketing and sales, too.

Innovation can be split into two broad categories - big and small. The latter is the bread- and-butter of innovation and is crucial to keeping your existing products and services ahead of the game. A continuous flow of smaller innovations can create a constantly improving offer that demonstrates to the customer that you are their supplier of choice. For us at apetito, this is key to ensuring competitive advantage.

A crucial first step is to make everybody understand that every part of the business needs its own programme of innovations. We tend to work on a 12-month cycle, constantly asking what innovations will be launched this time next year.

We hold quarterly reviews with each business unit where business divisions present their plans and new ideas. That way, we can see if the well of ideas is healthy.

Where will the ideas come from? Customers and staff, of course - provided you create the environment. When it comes to innovation, there's no substitute for getting out and about and talking to people. My new car has satellite navigation and it's great; but I have realised that I now have no idea where I am going - I just follow the computer's automaton instructions and have no understanding of the route. In the same way, you cannot simply 'drive' from your desk or your PC, as you risk destroying your understanding of the market. Innovation is all about making improvements for the customer. How can you do that without looking through their eyes?

Time and again, we find that we cannot quite work out who thought of our best innovations. This is because ideas are bounced around and get built on by different members of the team. Innovation is an evolutionary process, and many of our best innovations are now in their third, fourth or fifth iteration. We do not al-ways try and implement the ultimate solution. Sometimes, phase one is just getting the show on the road. After that, we can innovate around the innovation, making it even better. This is where we can particularly benefit from cus-tomer feedback.

Of course, businesses need big new ideas as well, and I see two key obstructions that often stop that happening. The first is a lack of resource - the person leading a new project has a busy day job and never quite gets round to the project. And, of course, the same happens the next month. It is crucial to allocate some quality resource and give them time.

The second is the fear of failure. A new products manager is appointed.

The failure rate is quite high, the failures are pretty public and it becomes popular to criticise. The new products manager begins to feel like a victim and eventually leaves. Nobody who is any good will want the job now, because they have seen what happened to the previous person.

To be successful with big projects, you have to create an entrepreneurial environment, where good attempts are praised and there is an understanding that only some of the projects will see it through to commercial success. Of course, there needs to be a process where projects go through the various stages of concept evaluation, market testing and so on. However, you have little chance of creating an innovative environment if the business leadership are critics in the jeering crowd.

To create a sustainable business, it is crucial that leaders are seen to be key advocates of the innovation process. Monitoring the health of this part of the business is just as important as looking at the profit-and-loss accounts or the balance sheet.

CV: Paul Freeston is chief executive of apetito, one of the UK's fastest-growing frozen food producers. Apetito specialises in product, system and service solutions in markets such as healthcare and Meals on Wheels. He is a vice-president of the Food & Drink Federation and a member of the British Frozen Food Federation Council. Apetito won the Queen's Award for Enterprise for Innovation in 2005.

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