Understanding the importance of innovation life-cycle for firms and how it can help to sustain growth in the long run.
Written by Matteo Marica in his Column "What drives successful start-ups?" for The Young Economist.
Starting a new business can be a risky endeavor and without any guarantee of success. Start-ups play an vital role in driving innovation. Firms, and particularly start-ups, must be able to adapt to the rapid changes in the market and be flexible to maintain competitiveness and succeed. By paying attention to the life-cycle model, businesses can predict changes in demand and adapt, accordingly, their strategies.
A start-up is a small firm in the initial stages of business, which has still to grow operations, is willing to take risks and has not commercialised its product(s) yet. However, the potential rewards of building a successful and scalable start-up is attractive for many entrepreneurs.
The relationship between start-ups and the innovation life cycle is a complex and dynamic one. In order to bring new ideas to market, start-ups are deeply involved in the innovation life cycle, which refers to the process by which an innovation moves from the idea to the stage of widespread adoption or decline in the market. The concept is vital for start-ups but also for already established firms, as it helps them identify wether their products or services are in the cycle and plan startegies that move with the time.
The most recognised model that describe the innovation life cycle includes six stages:
1) idea generation - enterprises generate and consider new ideas for further development.
2) development - the idea is developed into a more concrete form, such as a prototype or a business plan. This may involve testing and refining the idea to ensure it is viable and meets the needs of the target market.
3) launch stage - when the product or service is introduced to the market, which may involve marketing and advertising efforts to promote the product and attract customers.
If the product or service is successful and is adopted by a significant number of customers, it will enter a growth phase.
4) Growth - expanding the product line or increasing production to meet demand.
As the product or service becomes more established in the market, it will enter a mature phase.
5) Maturity - slowing growth and focusing on maintaining market share and profitability.
Eventually, all products and services will reach a point in which they are no longer in demand or are replaced by newer, more innovative products.
6) decline - the product or service is phased out or discontinued.
To conclude, firms and start-ups often operate in highly competitive and rapidly changing environments.
In order to remain competitive and innovate, start-ups must be able to adapt quickly and continuously bring new ideas, which require a strong focus on innovation and willingness to take risks, as well as a deep understanding of the market and of the needs of the customers.