SMEs and Innovation: Top 10 List

Government agencies around Asia are citing innovation as a key driver of growth of SMEs. To this end, several schemes and initiatives are being formulated and launched to encourage SMEs to embrace and adopt innovation for their business. As a start, we put together a list of steps for SMEs to kick off innovation effectively. Here is the list:

Step 1: Know what innovation means

First and foremost, be sure you know what innovation is. Innovation is the implementation of creative ideas in order to add value to the firm, usually through increased income, reduced operational costs or both.

Step 2: Innovation is best embraced in groups
Understand that innovation is not an individual but a group thing. Do remember that an idea is not an innovation. It is only the beginning. In business, ideas need to be evaluated for viability, developed into concepts and turned into reality. A new product idea, for example, will likely involve developing prototypes, seeking feedback, testing functionality, setting up production facilities, seeking suppliers and much more. Each of these steps requires the participation of numerous different people, all of whom contribute to the overall innovation process.

Ideally, new creative thinking will go into the product concept at every step of this process, making it more and more creative all the time!

We must recognise that Risk adverse committees or individuals tend to remove creative elements of new product ideas at every step of the production process, thereby reducing innovation potential. If you company is like this, you either need to get rid of those committees or start with incredibly creative ideas so that by the time the committees finish with the ideas, they still have lots of innovation potential.

Step 3: Define your innovation goals and link to bottomline
You need to have clear innovation goals to aim for. Fortunately, these goals tend to be rather similar to strategy and business goals. So, it is usually a simple matter of reformulating these. Typical innovation goals might be to ensure that 25% of your product line is replaced annually; or to improve process efficiency by 5% per year; or that your firm is the technology leader in your sector; or that your company achieves a billion dollar turnover by 2012.

Step 4: Put your money where your mouth is
You need to set up an innovation process, put a team in charge, invest in innovation tools and invest in training. That all requires money. Moreover, you need to make a pot of money available for implementing highly risky yet potentially highly innovative ideas. After all, the ideas with the greatest innovation potential are by necessity radically different to business as usual. This means they are also risky. If you are going to aim for breakthrough innovation, then you need to provide budget for developing and implementing breakthrough ideas.

Finally, bear in mind that if your innovation budget is zero or has ambiguous commercial direction, the attention your managers will give to innovation will also be zero! On the other hand, if there is budget for innovation or potential for high commercial success, you can be sure your managers will be scrambling to participate in the process!

Step 5: Promote an innovation culture
For creativity and innovation to thrive, you need to have a corporate culture that nurtures creative thinking, sees mistakes as on the job training and embraces every step of the innovation process. Sadly, very few firms actually do this.

For instance, what is the typical response to an intern who announces a wild and crazy idea during a unit meeting? Is it (a) to laugh knowingly and explain that there is no budget, the CEO would never like it and that the intern clearly does not know how things work in your company? Or is it (b) to congratulate her on a clever idea, discuss the challenges that would be faced in implementing that idea and asking her to work out how she could improve the idea so that it can overcome the challenges?

Step 6: Establish diverse teams
Diversity is not only politically correct, it is also innovatively correct! Diversity of membership brings a broader range of knowledge, experience, thinking and creativity to any team. You should therefore ensure that project teams, problem solving teams and all teams that are expected to contribute to your innovation process are as diverse as possible.

Step 7: Collaborative tools
Collaborative tools can help support your innovation process. In smaller firms, Wikis, blogs and shared documents permit a lot of collaboration with little technological investment. In larger firms, innovation process management tools can help ensure cross enterprise collaboration, facilitate collaboration by predefined teams as well as ad hoc virtual teams and provide a detailed record of your innovation results. But be careful to choose tools and use them to achieve your innovation goals. Many tools might be great for generating and sharing ideas, but if those ideas are completely irrelevant to your goals, they will not help your firm become more innovative.

Step 8: Make mistakes and learn from them
Most great innovations are built upon mountains of mistakes. As long as you can identify ideas that will not work relatively early in their implementations, you can kill them before they eat up too much budget. You can then congratulate the team responsible for their efforts, evaluate what went wrong, learn lessons and try again. But as soon as mistakes cost people jobs, no one will dare to try anything very radical – and that will kill all but incremental innovation.

Step 9: Implement
Innovation is not about ideas or creativity or training programmes. It is about implementing creative ideas in order to add value. If your firm is reluctant to implement highly creative ideas, then your entire innovation process will be little more than a creative thinking exercise. Moreover, if employees note that highly creative ideas are routinely not implemented, they will not bother sharing or developing such ideas.

Step 10: Evaluate and improve
Your innovation process can also improve through innovation! That's why you need to review the process and the results on a regular basis. Moreover, use your innovation process for generating, developing and implementing ideas for improving that innovation process!