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‘Innovation’ and SMEs

In our current wave of interviews with our SME panel we are looking at the topic of ‘innovation’.  Firstly whether business owners think it is hype or an important issue in their business … and secondly what they are actually doing about it.
The first point to note is that it is certainly not seen as hype.  SME Operators believe in the importance of innovation. That said, they push back quite hard on the stereotypical perceptions of innovation being a ‘light-bulb-moment’ and tend to view it in a more pragmatic, incremental way …
“I think that innovation is really about incremental steps.   And doing those incremental steps well … I don’t think it’s that great quantum leap that people talk about or that is advertised.  Like a light bulb moment – I actually don’t think that’s innovation, I think innovation is doing small steps well, and trying to improve those steps.” (Entrepreneur - International Business, 4 FTEs) 
“If you think it’s just a light-bulb moment then I think you probably invest too much in Tattslotto.  If you’re hoping for the big game-changing thing, you’re too invested in one event.  Whereas I think the smartest operators will always say that innovation is continual improvement, and at different times you may get a more material, different outcome and it will look like a bigger event – but it has to be continuous.” (IT, 320 FTEs) 
“Innovation to me is a progression from wherever we’re currently sitting to where we’re going.  And it’s about making a difference, actually making something better.  I think it should be incremental, in fact probably the most effective stuff is very incremental.” (Entrepreneur - marketing services, 5 FTEs)
“I wouldn’t use the term ‘innovate’ because I just think it’s too cliché, but we need to do things differently and better – we need to evolve.  I’d rather use the word ‘evolve’ than ‘innovate’, because I’ve got a science background and any organism that doesn’t evolve will become extinct.” (Physio, 45 FTEs) 
“I feel because we’re a really young team, people expect us to be innovative.  I personally don’t like for us to say or be that word.  I think innovation should be an organic thing initially … I don’t think people try to be ‘innovative’, I think they just have these great ideas, they do them well, and then that becomes the innovation.  I don’t really understand how you can be ‘innovative’ … It’s really just a good idea that you’ve made awesome – I think that turns out (in hindsight) to have been ‘innovative’.” (Agency, 8 FTEs)

In speaking with SMEs it is evident that there are two types of business in relation to their perspectives on ‘innovation’ (if we can use that term!) – the first type of business seeks to innovate itself … whereas the second type seeks to change work practices by implementing the innovations of others.  While innovation is no less important to the second group, clearly they are seeing innovation as a way to improve – yet not completely transform – their business.  But those in the first group are looking at a more transformational outcome …
“We’ve tended to look at ‘innovation’ as something that is required to fundamentally shift this business away from its declining core to a completely new field of activity.  That’s why we’ve been investing a huge amount of time, thought and money into new fields of endeavour that hopefully will either extend the life of this business away from the traditional core of simply producing other peoples’ newspapers, or move into electronic publishing.” (Printing/Publishing, 90 FTEs)
“We just saved a client $260,000 with a design that no-one else had built in Australia.  It got us the job and we’ll make really good money out of it and it will change the way we build sportsfields.  Innovation through the whole construction industry is always important.  From the products to the techniques it’s evolving all the time.” (Construction, 12 FTEs)  
“In our case, we’re coming up with a ‘digital inventory’ which is going to excite our advertisers if they get tired of writing a full page ad or banner ad – you need to offer new innovative type of advertising solutions.  So we’re constantly working on new stuff that we can offer clients.  Completely new stuff.” (Media, 110 FTEs)

Some of our mid-market panellists are really pushing the innovation agenda internally to challenge their people to come up with new ideas …
“Internally across the organisation we have a group called the ‘ACTIV’ group and we spend quite a bit of time asking our staff ‘what is innovation, in the context of this business what does it mean?’  One guy came up with the acronym ‘ACTIV’ which stands for ‘Any Change That Increases Value’ – in a positive way.  So we have an ACTIV group across the business … We encourage suggestions from the organisation that get sent to the ACTIV group and they’re then filtered depending on how realistic they are or whether it’s low hanging fruit or whatever.” (Property Development, 250 FTEs)
“We’re all trying to innovate in each of our divisions.  So I’m putting some pressure on the individuals to say ‘what are your new ideas, what are your big hairy audacious goals for the year, how are you going to improve efficiency and how are you going to be better than what you were last year?’  With a specific focus on software.” (Insurance Broking, 60 FTEs)

Some of our panellists are recipients of Government investment in supporting innovation in the SME markets – and of course they are hugely positive …
“I applaud the Government on what it’s doing – the R&D grant scheme is fantastic.  Our business is R&D, 80% of my time would be spent on R&D and then we have one person full-time on it.  We’re spending thousands and thousands of dollars on a system that is unique and no-one else in the world has.  That is our proposition that will help us expand globally … So we get back 50 cents in the dollar and it helps, it really does.” (Entrepreneur - recreation services, 12 FTEs)
“What the Government does – and both sides of politics do this – is to support innovation through a tax-break … We’re a beneficiary of that and we have to be.  We develop new software … We’re self-funded so we run our business out of cash flow so we’re relying on that incentive to fund more development.  So we use the money, pump it back in, and we hire more people … So we have to fight for it each year, we rely on it, we need it.  Without it we’re out of business.” (Intranet/software development, 100 FTEs)


‘Innovation’ is not hype to SME Operators.  Whether they see innovation as a way to improve their existing processes or as a means to transform their business, they are committed to innovation.  Indeed as we have noted previously, SME Operators are always tweaking their business, mixing things up and changing how they operate – more so now than ever before … but some are doing more than simply tweaking and are pushing their organisation to not simply do the same things better but to actually do different things.   The word ‘innovate’ doesn’t appeal to them all, but their realisation that they have to keep developing, moving, changing is not questioned.
Next month : How are SMEs finding the economy as we head into Christmas?

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