I have been thinking about SMBs and IT Innovation (SMB means “Small – Medium Businesses, or Small-Medium Enterprise (SME) as most of the world calls it). I have worked with SMBs and Large Enterprise, helping each define and implement IT strategies or systems.
I have seen that SMBs tend to quickly implement and get value out of new technology, which is advantageous. They are more innovative in this way.
SMBs and IT Innovation: What is Innovation for SMBs?
Because their budgets are smaller than large enterprises, SMBs do not generally create new information technology. They are still much quicker to implement a specific technology or combine various information technology tools and approaches into a new, innovative capability.
Evidence is the number of patents they generate. The SBA examined all “high patenting firms” (those with fifteen or more patents over four years) and found small businesses produced sixteen times more patents per employee than larger firms. That may be in part because small businesses account for 43% of high-tech employment. And while many patents may be outside the information technology space, it indicates an ability to innovate.
While my work with large enterprises revealed many smart, innovative people and initiatives, I found that SMBs are overall more resourceful and capable of bringing new information technology to bear.
Why does the SMBs and IT Innovation Combination Work So Well?
It comes down to four things.
They Make Decisions Faster
With a smaller team and less structure, the decision-makers are in the room for the discussion. There are not as many approvals to get, or a large organization between people make a decision. Decision making is a social activity, even in business. Consider if you and a friend are going out for dinner and had to decide where to go. Now add ten other people; doesn’t it naturally take longer to choose?
Faster decisions mean you start sooner.
Internal Communication is Tighter
When Steve Jobs (of Apple fame) gave input on the Pixar Studios office layout, he wanted the bathrooms centrally located. It could take as long as fifteen minutes to get to them, but you ran into people along the way. Jobs viewed that as creating “mixing opportunities”, and the employees confessed, “They all talk about the great conversation they had while washing their hands.“. Steve created the same thing happening in all small office spaces: the water cooler conversations develop solutions.
Having a smaller space fosters idea sharing and breaks down cross-functional barriers (silos) to generate better thoughts and collaboration towards solutions. People are invigorated by the opportunity to help. One team in a large organization I consulted to refused to share what they were working on with people across the hall. The senior staff fostered competition between business units, indicating weak leadership, hoping the Darwin effect kicks in, not the most inspiring approach.
Make sure you allow people to talk to one another.
Closer to Customers / Clients
There are various approaches to innovation. Many companies listen to customers’ problems and requests. Others try to innovate internally. You need to do both. If you are waiting around for customers to tell you what works, good luck with that. It is better to understand your customers, know their challenges and needs, and offer solutions before they even know they need them. Or to quote Steve Jobs again: “Get closer to your customers. So close, in fact, that you tell them what they need before they even realize it.” And a related statement he made: “Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d ask customers what they wanted, they would’ve told me a faster horse. ‘People don’t know what they want until you show it to them.”
The point is to stay close to the market, primarily your most satisfying, profitable customers. Know their pain, think about what you can contribute, and suggest it. Don’t wait for them to tell you. And eat your own dog food – as much as possible use the technology you are providing.
The SMB has an advantage because fewer customers, account managers, sales reps, etc., allows greater intimacy and understanding.
Employees are More Engaged in Strategy and more Engaged in General
In this case, large enterprises have a formal strategy process involving senior leadership. This team of leaders has filtered the ideas from the levels below them, so you end up with a homogenized set of thoughts, being evaluated by people who may be less likely to take risks.
In a small organization, anybody can walk into the President’s office and talk; let them know what they are thinking. This is essential to getting ideas flowing.
If the employees in an SMB are more engaged in the organization’s strategy and direction, they are naturally more involved. They were part of the path, and given the team size, they see what is happening more clearly, and understand the risks. At one point, I took a position with a three-person company in another state. When the business lost an enormous opportunity in the first week, we created a brand new one. That would not happen in a large enterprise. When the going gets tough, and the innovation is not working, they will persevere because they provided the idea or at least had the opportunity to give input on it. And that makes them more likely to support it as is if their life depended on it.
I have found SMB employees tend to be connected to the organizational goals and results. Don’t you want engaged employees?
An SMB simply has an advantage here.
What Market Shift Helped This?
Two things.
The first shift is the advent of low cost, high-speed internet. It created connectivity and availability.
Second, on the other end of the line is a proliferation of web services, which an SMB can evaluate and combine more quickly with the advantages cited above. A large enterprise can use SalesForce.com, so can a small one. They both have the same capabilities. But fewer people involved in the decision, and less to integrate, employees to train, formal process, etc. It’s just faster, and sometimes faster gets you to the expected results, but it can also get you to failure, which can also be valuable (fail fast).
What Should You Do?
While there are things SMBs should do? Some thoughts:
- Embrace Smallness – yes, you are small – that is an advantage here. Just embrace it!
- Set Goals – what can you do to improve? Ask that question of everybody and set goals to develop. What gets measured gets improved (the Hawthorne effect)
- Build lightweight structures – rather than create a ten-step stage-gate process for creativity, structure the organization (or don’t structure it) for collaboration and implementation. Encourage cross-functional meetings and open sharing of ideas. Do not create structures that would slow things down.
- Don’t over-focus on failure – if you send a message that failure is not an option, you just turned off the idea hose. When failure happens, identify it quickly and move on to the next initiative.
- Reward innovation – publicly acknowledge the great ideas and people who had them. Talk about them. Give monetary awards and promote success.
And finally – call me; I have been helping companies get the most out of technology and love seeing the breakthroughs! Let’s talk!