There is an ever growing trend for SMEs (Small Medium Enterprise) to demonstrate their innovation credentials. The agility by which an SME is able to drive forward innovative proposals is often envied by multinationals, but the processes which can stifle multinationals are a product of a huge amount of experience and lessons learned. How can the SME integrate this experience without stifling their creativity and agility?
Author: Martin Paver Director at i3Works
Choice: The first challenge is in selecting the right idea. If SMEs have a strong innovation agenda they are likely to have no shortage of ideas to invest in. The key is to select the ideas that complement the business strategy and provide a route for growth. Multinationals tend to have a range of criteria and weightings that rank ideas on merit, with criteria ranging from exploitation (route to market, ease of implementation), originality (is the idea unique) through to level of investment required. There is much that an SME can learn from this, without getting overwhelmed by technical assessment panels and undue governance.
Rationale: SMEs may have a multitude of reasons for investing in an innovation proposal and it is important to ensure that these reasons are clearly articulated, challenged and regularly revisited. Examples include:
- Product/service innovation: Development of the SME’s range of products and services, using innovation as a differentiator. This is typically driven by market analysis which taps into the emerging requirements of the client, but don’t rule out transformational change which can help drive efficiency, productivity and solve problems that couldn’t previously be solved.
- Process innovation: The primary focus is on processes internal to the SME and finding new ways of doing the same thing but more efficiently. The SME may also have an opportunity to drive process innovation on behalf of the client, driving efficiency into the value chain. Significant opportunities can present themselves in the implementation of new tools and systems, but don’t underestimate the challenges with integration, training, support and security. Irrespective of the perceived benefits of a new solution, these issues can often be a significant barrier to change unless they are considered from the outset.
- Access to new sectors: This can be an important driver for SMEs who have a strong focus on growth and want to branch out into new market segments. Innovation can help to differentiate and realign products and services to the specific demands of a new sector.
- Access to new clients: An innovation strategy can be an important business development tool by demonstrating to new clients that the SME can help to challenge the status quo and bring new ideas in a structured and systematic way. The benefit to the client may vary between contracting an SME as an agent for change through to exploiting the SME’s pipeline of products and services.
Gates: Innovation investment gates are critical to ensuring that the SME retains agility and focus, particularly in rapidly evolving markets. The danger for the SME to avoid is being emotionally invested in innovation, which can have a detrimental bias on their innovation portfolio. It can help to plan the investment review gates and define success metrics which trigger future investment; over-ride these with caution.
Successful innovation has the potential to transform an SME, open up new markets and provide a sustainable foundation for growth. But if not managed well, it can become a distraction and a drain on corporate resources. It’s a fine balance that requires careful thought.
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