Lead through innovation

Innovate, first and foremost. Innovate new products; innovate new services; innovate new delivery systems; innovate new distribution channels; innovate new employee acquisition and retention models; innovate new customer care and retention programs; innovate new marketing opportunities. You don't have to be an innovator in every way—but being a leader in at least one area gives you a great start-smart advantage.

Study the companies that develop a culture of openness and innovation. Now, compare them to the companies that only grew through acquisition, or even worse, rest on their laurels. The innovators develop the habits, the flexibility, the culture—the very DNA of success. Companies that simply buy up other companies or accept past success as a predictor of future success, do not. They may remain stable players, for a while, but the pace of change is a part of our business landscape, and that stability can't last forever. As a start-up, you need the innovation mindset to always grow to the next level. Let's examine some real-world examples.

Take two small advertising agencies, each with a sole owner. Each owner operates his shop on a day-to-day basis, hands on. Each originated as a start-up with the owner at the helm of his ship. Both individuals worked for other people in their chosen field for many years before starting their own enterprises. Both men grew their businesses to a point where they derived a comfortable income for themselves. Both men generated enough business to hire staffs with several employees. Both men reached a level of success that allowed them to buy their own buildings.

Everything looks equal so far, right? The similarity ends here. The first man built his personal wealth by producing high-quality brochures and printed collateral material for large pharmaceutical and health care companies. After many years of doing just that, the landscape changed. His clients began to pull the design work in-house and began to send the printing overseas, mostly to China, all in an effort to save money. Market pressures forced them to return more to the shareholders on their investments. Efficiencies and economics dictated these moves. Unfortunately, our friend didn't see the changes coming. Worse yet, he did not react in time. He failed to redirect his efforts into another sector, to offer new and innovative services, or to prospect a different profile of client that would still want these services at his prices. The result? He had to layoff his entire staff, sell his building, and go back to work for someone else. The good news? It's preventable.

Let's look more closely at the second man. At almost exactly the same time as the above scenario, the second ad agency owner studied the marketplace, noticed that the printing industry in the United States had shrunk in size, and responded to the market with an innovation. Harvey Hirsch received a patent on a nontraditional process that involved die-cutting then printing, instead of the usual procedure. This resulted in the production of short-run, personalized, three-dimensional marketing and promotional pieces. Hirsch developed an entire product line that is changing the paradigm of direct mail marketing. Instead of sending out a huge press run and hoping for a 1 percent response, Hirsch's clients send very few pieces targeted to only the most productive prospects. After a few refinements, a slew of graphic art industry awards, and several very impressive client success stories with extremely high rates of return, he has now begun to franchise his operation and license out his technology. Innovation spells growth, period.

Look at the new generation of solid companies that began as start-ups in recent business history. Take Dell, Apple, Jet Blue, Starbucks, Amazon, FedEx: What common thread runs through all of them? They lead. And they lead the marketplace through innovation. Plain and simple, there is no room in today's competitive environment for me-too companies.

Excerpted with permission from Start-up Smarts: The Thinking Entrepreneur's Guide to Starting and Growing Your Business