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Practical innovation approach for Small and Medium Enterprises (SMEs)

Author: Andreas Rülke, London
What can SMEs do to become more innovative and learn and apply routines to innovate better on a permeant basis?
What can SMEs do to become more innovative and learn and apply routines to innovate better on a permeant basis?

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Innovation can create competitive advantages for small start-ups as well as global firms and any companies in-between. While small and medium enterprises make up by far most of the number companies, as well as employ most of the people, they seem to be less innovative than larger companies*. Focus and effort on innovation increases with company's size. Even though SMEs are more flexible and tend to interact closer with customers, they battle with resource restrictions and need to struggle harder to produce innovations. What can SMEs do to become more innovative and learn and apply routines to innovate better on a permeant basis?

Here are specific and practical suggestions that could help to address SMEs’ challenges to become better at delivering innovations for their business.

1. Think big, start small! A simple question to beging with: what do you want to achieve with innovation?

SMEs do not tend to spend much effort or structure on business strategy or longer term planning that could guide their innovation work. This is initially a leadership topic. Someone in the organisation, most often senior management, needs to provide the leadership to define what innovation for the company means and how it will deliver business results. It is important to define specific problems that the SME wants to address through innovation. Use these problem statements to determine how innovation can help and which the “vital few” innovation objectives are. This work to develop an innovation vision and focus should fit on one or a few written pages to be able to start the innovation journey. And don’t forget to establish an innovation budget for next year.

2. Rely on your most experienced employees, but free up thier time from the work others can do. 

Small and Medium Enterprises often rely on the know-how and work of few key individuals. The expertise to address and solve the most difficult innovation challenges usually lies with these very experienced employees who are already overworked and overstretched because they are needed for many other tasks. Since they are some important to the company, it makes sense to off-load any work that other resource can be doing to free up their time. This is a good personal development challenge for newer employees and should be done in any case. Then, these few key individuals should be surrounded by additional resources whom they can delegate work. This will free up time and allow then to focus on the unique tasks only they can perform. Once the key individuals have gained some degree of freedom and time, it is important to integrate them into an interactive innovation networks to facilitate the creative work on innovation.

3. Use the potential within your own company rather then rely on consultants: talk to your clients and suppliers and activate your network.

SMEs do not have much experience how to manage innovation in a structured way and are missing innovation competencies, methods and tools. Start with exploring new ways to be more creative. One starting points is to apply “think outside of the box” techniques. A next step is to continue to conduct structured interviews, discussions, workshops and innovation approaches like Design Thinking. Consider to establish an idea room where facilitated collaboration can take place. Depending on your business environment, it might be relevant to establish laboratory to test innovative product ideas. Start searching for inspiration outside of your own company, for example, visit customers or through open innovation discussion with suppliers and better Intellectual Property (IP) and patent management. Consider to establish a project manager and / or facilitator who can prepare the innovation approach and focus the work to deliver results quicker. And make sure you integrate your innovation results into existing product development and other processes in an agile and lean fashion.

4. Constantly work on concrete and tangible results. Nothing motivates the organization as much as the first design study or even a prototype.

SMEs generally have too few resources to begin with and all of them are always deployed on important day-to-day operations. This is a general challenge about prioritisation and efficiency. Determine the most important innovation tasks for the company and complete them “good enough”. For example, the 80 / 20 rule states that 80% of the results usually get produced in 20% of the time; strive for these kinds of results to begin with. Since the internal resources are not used to work on innovation, they are likely to take more time to get going than it is necessary. Consider to employ a facilitator (internal or external) to produce results quickly. And remember, nothing is as successful as tangible results. Not only do they proof to the organisation why innovation is important, but they also can deliver business results which can be used to fund the next year’s innovation work.

Overall, it is important that each business, small or large, understands what innovation means in their specific environment and how to use innovation to support their business goals and needs. And innovation supporting a company’s success needs to be measured. In the end, only innovation that supports the SMEs’ business targets and goals will be useful and successful.


*Source: Innovation in KMU – Der ganzeinheitliche Innovationsansatz und die Bedeutung von Innovationsroutinen für den Innovationsprozess by E. Kirner, O. Som, C. Dreher, V. Wiesenmaier for the Fraunhofer Institute.

The author: Andreas Rülke is a management consultant focusing on product development and innovation management. For over 23 years, he has been supporting high-tech companies. He has a proven track record in numerous international projects in Germany, Sweden, UK, US and Switzerland. His expertise includes R&D and product strategy, product portfolio optimization and roadmaps, and technology and product development. Andreas Rülke (Dipl.-Ing, MBA) teaches R&D and innovation management at the Swedish Royal Institute of Technology (KTH) in Stockholm, among others.