SME innovation: Is it a hard nut to crack

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Bikky Khosla | 14 Feb, 2012
With the rate of economic globalization becoming faster and faster every day, our small and medium enterprises have seen an increasing market competition. This, in turn, has pushed the importance of innovation for them. Today, an SME that fails to innovate runs the risk of losing market share, and even going out of business. As such, in the new landscape, innovation has emerged as the necessary core competence for every SME -- to compete, survive and grow.

But many small businesses are put off by the very idea and word innovation. They nurture a common misconception that innovation is all about application of new technologies or carrying out extensive R&D activities, which require huge funds and therefore, do not fit into their budget. But the reality, in contrast to this widely held view, is that small firms do not necessarily need to invest large amounts of money in innovation. They just need to act smart.

The key here is to sizing innovation. The objective of innovation should not be considered as a mere one dimensional function to introduce ânew to worldâ breakthroughs. Instead, SMEs should seek innovation through small and incremental improvements, applications of new ideas, creativity by staff, and other similar measures that involve small costs. Also, innovation should be a continuous process, which transcends all areas of operation, such as production, marketing, finance, and human resource, and not only technology.

I think this approach will help SMEs a lot. Resource constraints may make it impossible for cash-strapped small firms to access formal R&D programmes, but that should not be an excuse for them to ignore all other sources where innovation can come from. Some cost-effective measures, such as new marketing methods, new ways of organizing human resources, new sources of raw materials, or opening up of new markets can play a significant role in enhancing SMEs' competitiveness.

Fortunately, compared to large corporations, SMEs enjoy more innovation advantages. For example, their small size, direct relationship with customers, quick adaptability to changing market conditions, strong social networks â all these can be key drivers of innovation. But what is important is awareness. A small firm can make the best of these advantages only when it believes in being an innovator.