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Irish SME innovation does not have to = high risk – my piece on this in the Sunday Times

In My views on March 26, 2013 at 5:40 pm

My contribution to a piece in the Sunday Times on SME innovation….

My piece starts towards the end of the first column – Sunday Times SME Innovation

Here is an outline of what I covered:

Q. Do you think that Irish small firms (not so much the start ups, but the ones that have been around a while) are, in the main, fully aware of what innovation means  (ie, not just R&D or something tech firms do)?

A. Yes and no. SMEs in fast moving sectors such as ICT, bio technology and aerospace are. With honourable exceptions such as Realex Payments and X the average Irish SMEs (particularly those in traditional service industries) are in the main not.

While involved in the series of national Info2Innovate seminars (Enterprise Europe Network ran a series of fact finding workshops for Irish SMEs which contributed to the creation of the Info2Innovate directory of services that are available to Irish SMEs – http://bit.ly/XngUVH ) series my research with attendees found that the majority felt that the products and services that they offered were not innovative. They felt that ‘innovation’ was the preserve of labs, universities and the big tech companies. Indeed many SMEs rule them selves out at the mention of the word ‘innovation’ due to the misconception that it is a high cost and high risk. I suppose this is very understandable as for many SMEs innovation = time + money + risk with no guarantee of success which = fear for many SMEs

Also amongst Irish SMEs there is a misconception that ‘innovation’ is limited to product/service improvement. In fact successful innovation can take place across the spectrum of a firm’s activities, from finance, process, offering through to delivery. Doblin Group’s research found, contrary to expectations, that in the 10 years of data they examined business model and financial innovation had created far higher returns than product/service innovation.

Therefore from my personal experience of working directly with many SMEs innovation needs to redefined in as straightforward a way as possible. In fact any action taken on converting new ideas into new ways of doing things should be considered innovation if such activity has a positive impact on your business.

Why is it such an important concept?

A: A long term study of the stock exchange companies found that less than 20% survived 100 years, therefore companies must continuously evolve and innovate to survive. The strongest, most successful companies in one decade can be rapidly undermined in the next (look at Dell Computers for example).

Why it is important to SMEs is that SMEs are our dominant form of business organisation in Ireland (97% of business in Ireland employ less than 50 people). Furthermore research has found that SMEs are disproportionately higher creators of innovative in business (particularly those disruptive innovations that change whole industries).

Innovation is also an important concept due to the fact that innovative firms gain up to 30% growth in sales consistently, have far longer longevity (28 years on average) and are more profitable that the non-innovating firms in the sample (according to the ICE Innovation benchmark survey of Irish companies – http://www.iceprogramme.com/fs/doc/publications/ice-benchmark-survey-report.pdf ).

Furthermore innovation cannot be divorced from strategic planning, a company has to ask itself what is it doing today that will create the sales growth in 2014. Without a growth aligned pipeline of innovation in their core processes and services/products most SMEs are trapped in a plateau of flat, reactive sales and fail to scale.

Innovation is also an important concept at a national level. Currently Ireland lies 10th on the EU’s ranking of Innovation Performance (called the Innovation Union Scoreboard – http://bit.ly/YmdHZU ) trailing what are termed the Innovation Leaders of Sweden, Denmark, Germany and Finland. To create the next upswing in jobs we need to move from the ranks of the innovation followers to innovation leaders as innovative companies on average scale successfully and create more jobs as a result.

What would your advice be to them as to where to turn for help on becoming more innovative?

A: Now is a key time for SMEs to implement the discipline of innovation as in the coming 24 months as it is predicted that the level of technological innovation in the next 10 years will be greater than the last 100 years, many companies will be left behind.

The starting point for SMEs is to understand that ‘innovation’ does not have to be high risk. Without terming it innovation the majority of Irish SMEs are working on changing and improving their businesses every day. Therefore I would argue that the engine of innovation is in place in many SMEs and the prime source of successful innovation is the customer interface.

We need Irish SME’s to see it as what they are already doing, working on a daily basis to improve across all their activities and become continuously market focussed.

A key starting point I would suggest starting with is the Info2Innovate directory here – http://bit.ly/XngUVH . It is maintained by the Enterprise Europe Network and contains all the key resources available to SMEs that wish to become more innovative.

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