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.
Innovation, especially in the small business context, should be interpreted according to its complete meaning: a new way of doing things which creates new utility for the end user while lowering the cost of providing this utility. Clayton Christensen describes three categories of innovation: efficiency (doing the same thing faster or cheaper), sustaining (making current solutions better), and disruptive (transforming complicated solutions into simple, accessible, affordable ones).
Real innovation is not just technology related to the product or production processes. When done right, innovation leverages the business model, specifically the value proposition, key activities and resources, and, eventually, the profit proposition (revenue streams).
Innovation is a continuous process. How can we do things better? How can we provide more useful value for the user? How can we do it faster, better, cheaper, and more robust, with better quality, usability and utility? And most of all, how can we anticipate what related problems our customers will face in a way that creates win-win value for all?
In this unpredictable, post-pandemic economy, doing things like they were always done is a non-starter. The most significant advantage that small business has over the big boys is when everyone gets in on the innovation game.