KUALA LUMPUR, Feb 25 — To stay globally competitive, SMEs need to continuously innovate, reinvent their business strategies and invest in new capabilities to seize growth opportunities.
SMEs are driving the economies of many countries in the world. Over 99 per cent of all corporates are SMEs in Malaysia. Some Malaysian SMEs are laser focused on innovations and are driving their ventures while being innovative but not all are enjoying the benefits of innovation, either through lack of knowledge or a perceived lack of time.
To start a great business, one needs a fantastic idea, the right people, and sizeable financial support. But none of the above means anything at all if innovation is not put to the forefront – a crucial process that many SMEs are ignoring at their peril.
Recent research by Bain Capability Centre (BCC) found that two-thirds of organisations highlighted innovation as a priority, yet fewer than 25 per cent believed their company was an effective innovator.
There are countless ways in which companies can move into the 21st century – so what are the main issues holding SMEs back? Often, it could be as simple as companies aren’t prioritising innovation, either because they don’t know how to make changes happen or they feel it is too time-consuming.
Why do SMEs fail to innovate?
The common denominator in SMEs failing to innovate internally in terms of processes they establish for business efficiency seems to be their reluctance to progress digitally.
Some SMEs hold back from investing in innovation which slows down their growth, compromises their efficiency and allows more digitally advanced competitors to shine.
What is commonplace is that SMEs are reluctant to adopt digital processes. It’s often the case that SMEs stick with outdated systems that are no longer fit for the purpose, and end up stunting growth. The cost of doing nothing far outweighs the cost of investing in innovation.
Things are not rosy even in innovative nations such as the United Kingdom. For example, recent research has demonstrated that approximately 80 per cent of UK businesses are still relying on paper-based systems to monitor sick leave and other leave requests, the equivalent of more than four million businesses across the UK.
This outdated method of running a company could be wasting valuable time and resources, so why aren’t more companies making these technological advances?
Digital HR systems become invaluable as they allow organisations to make smart decisions about resourcing and productivity. All too often SMEs buy solutions that don’t work hard enough for the business and unfortunately they can restrict innovation rather than supporting it.
Regardless of the aforementioned, many SMEs feel that they are better placed, as smaller businesses, to lead the way in innovation.
SMEs are well placed in the innovation stakes, because they have the ability to be agile and react quickly to a situation. The issue for SMEs is that really game-changing, deep innovation, perhaps in its classic sense, requires a lot of resources and more of a longer term view, which is much harder for SMEs to take.
Furthermore, innovation can be risky and disruptive. It involves change, especially to business cultures and practices. Many SMEs are not very adaptable to change, and so attempts at innovation fail.
Additionally, most innovation involves a cycle of stages that includes idea generation, idea selection, idea implementation and idea diffusion.
Although many SMEs are very good at the generation of new ideas or inventions, innovation often gets derailed at the other three stages.
What is needed?
Overall, there seems to be some key factors in building innovative SMEs:
• Failure-tolerant leadership — A business cannot go far initially without good leadership, as leaders bring people together and provide the direction for the business.
Leadership is really important. Internal leadership from within the company is needed to drive the direction and to make sure the business is going in the right direction.
Identifying and celebrating the successes of people who have come from similar backgrounds who have started a company and made it a success, and who are now doing really well for themselves, is important.
• Right business culture — It is people who innovate. A business needs to send clear signals that innovation is valued, rewarded and critical for its success and growth.
How business leaders provide the time to their people to innovate is one part of this strategy to reward and support innovators.
While good ideas can emerge in response to a crisis, the best creative outcomes actually emerge when employees are protected by their leaders from time pressures.
• Teamwork and collaboration — A business leader cannot innovate alone. So, innovation involves creating cultures and systems that effectively sustain innovation.
The positive impact of collaboration, alliances and networks in driving innovation is strongly supported by evidence from successful companies.
This collaboration includes connections with people and organisations outside the organisation — called external collaboration — combined with those within the organisation, internal collaboration.
• Access to financial and business support — One of the risks around innovation is whether the funding can be secured to start a business, whether you can self fund or get external funding.
Probably the biggest risk of not securing funding is not being able to launch the product. Funding still remains a big issue, and a lot of SMEs still seem reluctant to invest in early stage innovation development.
A good business plan, right leadership and some lined up clients can significantly improve the chances of securing early stage funding.
** Dr Viraj Perera is the CEO of PlaTCOM Ventures Sdn Bhd, the national technology commercialisation platform of Malaysia which is a wholly-owned subsidiary of Agensi Inovasi Malaysia (AIM) formed in collabouration with SME Corp Malaysia.
Source - http://www.themalaymailonline.com/features/article/time-is-ripe-for-smes-to-put-innovation-to-the-forefront#sthash.LQSg4zHT.dpuf