Your business needs to keep moving forward if it is to grow in today's business environment of increased competition, global marketplaces and fast technological change. To do this it needs to innovate.
Innovation is essential for all businesses - whether it's modifications and updates to existing products, services or processes or coming up with completely new ideas.
This guide explains how innovation can help your business grow and outlines the different forms it can take. It also gives advice on planning for innovation and creating a business environment that nurtures innovative ideas.
It outlines the Government help and support available to innovative businesses.

 At its most basic, innovation means introducing something new to your business. That could mean:

• creating new processes that might allow you to manufacture your products or supply your services more efficiently
• developing new products or services - perhaps to meet changing customer demands

Innovations can be major breakthroughs, perhaps giving rise to a completely new product, such as a videophone.
But they can also be small, incremental changes - producing a sharper picture on a videophone, for instance.
Regardless of the form it takes, innovation is a creative process. It involves the exploitation of knowledge, ideas, research and development, training or management techniques.
Introducing innovation can help you to:

• increase productivity
• reduce costs
• be more competitive
• find new markets
• exploit new partnerships
• increase turnover

Businesses that fail to innovate run the risk of:

• losing market share to rivals
• seeing efficiency drop losing staff
• stagnating
• going out of business

Innovation in your business can mean introducing new or improved products, services or processes.
Analyse the marketplace
There's no point, however, in considering innovation in a vacuum. To move your business forward, you need to study your marketplace and understand how innovation can benefit your customers. For more information on analysing your marketplace see the page in this guide on planning innovation.
Identify opportunities for innovation
You can identify opportunities for innovation by adapting your product or service to the way your marketplace is changing. For example, if you're a specialist hamburger manufacturer, you might consider lowering the fat content in your burgers to appeal to the increasingly health-conscious consumer.
You can also innovate in your business by identifying a completely new product. For example, as a burger manufacturer you could start producing a vegetarian burger as well as a meat one.
You could innovate by introducing new technology, techniques or working practices - perhaps using better manufacturing processes to give a more consistent quality of product.
If research shows people have less time to go to the shops, you might find it helpful to innovate your distribution processes, offering customers a home-delivery service, possibly tied in with online and telephone ordering.
And if your main competitor's products have a reputation as cheap and cheerful, you could innovate by revamping your marketing to emphasise your quality - and perhaps take the chance to review your pricing.
The competitive edge
The important point at all times is to consider how innovation can give your business a competitive edge and help your business grow.

If innovation is to help your business grow, you need to plan carefully. Though some ideas may just come out of the blue, you also need to have a strategic vision of how you want your business to develop. You can then focus your innovative efforts on the most important areas.
Start by considering all aspects of your marketplace. You should:

• look closely at your competition
• study trends reports
• seek customer feedback
• listen to your suppliers and other business partners
• follow news in your sector, including reports in trade and professional magazines

Think carefully about what you could do to improve your position in your market. You need to consider how you can offer your customers added value and how you can better exploit your strengths.
Next, you should consider what any particular innovative step could mean for your business. Ask yourself:

• what the impact on your business processes and practices will be
• what extra training your staff may require
• what extra resources you may need
• how you'll finance the innovative work
• whether you'll be creating any intellectual property that will need protecting.

You could finance innovation using your own funds or external funding such as loans or equity finance. Some government grants are also available for innovative businesses.
Finally, you should include your vision in your business plan. Put down your goals, both long-term and short-term, and detail how you intend to achieve them. Link them to financial targets, such as achieving a specific turnover by a set date. Review your plan regularly.

Your people are your most vital asset and can be the source of many innovative ideas.
But to get the most from them you need to foster an innovative environment and nurture creative thinking.

• Make sure you have processes and events to capture ideas. For example, you could put suggestion boxes around the workplace or hold regular ideas workshops or occasional company awaydays to brainstorm ideas. 
• Create a supportive atmosphere in which people feel free to express their ideas without the risk of criticism or ridicule. Read more about creating the right environment for innovation on the London innovation website.
• 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. Teamworking, 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: innovative thinkers aren't always those with the most impressive list of qualifications.