The Innovation Game

Photo by Diego PH on Unsplash

This week I attended a work conference where we discussed innovation and growth for SMEs in the post-pandemic context.

SME is a broad term, usually defined as companies with up to 500 employees. However, if we use this term in Canada, it applies to 99.8% of companies! (Statistics Canada, 2020) Setting the bar at 100 employees, what StatsCan explicitly calls “small business”, is still 97% of businesses. Bringing the definition down to 10 employees covers three of four Canadian businesses. 

Innovation means different things for each business profile. For large businesses, innovation is building new products, implementing new processes and seeking new markets. It usually is the province of a dedicated team with a dedicated budget.

Large businesses tend to isolate innovation activities to not disrupt daily core operations. This may make sense from the perspective of not risking profit margins or shareholder returns, but it tends to slow down the diffusion of innovation into everyday operations. This also favours a “big bang” mindset for innovation with payoffs in the medium to long term.

In small businesses, innovation has to look different. There are not enough people or resources to designate a dedicated tiger team. Innovation has to be everyone’s business. It has to lead to a measurable impact in the short term. 

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A Few Unicorns Are No Substitute For A Competitive, Innovative Economy (Gary Hamel, HBR)

So we’ve built this whole system to find the Next Great Unicorn that will save our local economy, sucking up hundreds of millions of dollars of public and private money. Is this strategy realistic or a waste of time, money and effort?

By design, Unicorns can only succeed if they establish a monopoly by being the sole receiver of all transactions in its market. But the moment you become a monopoly, you cease to be entrepreneurial. The game is no longer to add value but rather to defend the monopoly position. We’re seeing now how even the unicorn of all unicorns Facebook is growing out of their geeky teenage mindset and behaving like just another corporate behemoth.

Gary Hamel’s piece in HBR starts off by making a good point about how unicorns don’t contribute to the economy and actually stifle innovation. And that it’s harder and harder for a startup to achieve unicorn status, anyways.

But then he makes a mistake in pointing out how Amazon is diversifying by encouraging lots of little startups (Whole Foods?). Continue reading