SME owners are constantly advised to “innovate, innovate and innovate or die”. An implicit assumption exists that innovation is always good. No wonder most entrepreneurs feel overwhelmed as they search for the next game-changing innovation whilst faced with the practical costs and risks associated with innovation, competitive pressure and daily management tasks. Our research provides guidance with this dilemma.
Innovation is about implementing new ideas to create value. These new ideas do not have to be breakthrough products or services but rather novel combinations of new or even existing ideas applied to different business activities.
Research overwhelmingly suggests that innovation matters for SME growth and performance. Past innovators tend to have higher growth aspirations, invest more on future innovations and perform better than non-innovators. However, SME innovation is risky business and the assumption that every innovation is advantageous is misleading:
Building and maintaining strong network ties with diverse links provide social capital that improves SME performance. However, the network – performance link is not a direct relationship; having strong diverse network relations improves innovation output which in turn lead to improved SME performance. Think innovation in all your networking behaviour; new ideas happen at the intersection of diverse knowledge fields, and trusting relationships provide valuable access to tangible and intangible resources for making these new ideas real.
Information, knowledge and learning are tacit, intangible resources that have been found to have the greatest strategic potential in developing competitive advantages for SMEs. Physical resource strapped SMEs should rely more on the acquisition, development and leveraging of their intangible resources to become more innovative. Business owners should develop a culture that enables experimental learning as well as the generation, acquisition, sharing and implementation of new knowledge.
The challenge is to maintain operational efficiency while also incentivising calculated risk taking and tolerance of failure within an organic organisational structure; start by experimenting to create a game changing value proposition and business model for a small segment
Communicate in everything you do a clear vision for growth that is underpinned by a strong belief in your ability to succeed. Innovation is about people with an experimental mindset, networked teams and culture!
Dr Sarel Gronum, Lecturer, Bachelor of Business Management Program Leader, UQ Business School