Innovate to be competitive: Steps SMEs can use to succeed
Small and Medium-sized Enterprises (SME) exist as a driving force for economic recovery globally. This is measured taking into consideration their contribution to economic growth in spite of the numerous challenges that they face.
The SME sector is one that is resolute and determined to succeed at all cost because those who run them are always anxious to navigate the challenges no matter how difficult.
But there is one key thing that must go with that zeal and determination. That is, the determination must be accompanied by the need for them to innovate at all times to be able to stay afloat and expand into conglomerates or stay big enough to last a lifetime. Understanding the determinants of SME innovation is, therefore, essential in clarifying this phenomena.
Pointers to innovation
In an attempt to innovate, SMEs are required to demonstrate a little or more technological sophistication, depending on their resources, to be relevant in competitive markets. SMEs need to be innovative to overcome relatively limited resources, vulnerability to uncertainty, turbulence in business environments and extensive customer and supplier power.
It has been established that there is very often some amount of uncertainty surrounding potential future SME innovation activity to design future innovation policies. It is imperative to find a positive relationship between innovative orientation and growth in the face of limited financial or management resources taking into consideration a few pointers.
An obvious capital of relevance to a firm is productive capital in the form of equipment and machinery. It has been identified through studies that investment in new machinery and equipment can be classified as embodying technological change. The investments are vital in generating innovative outputs. For instance, updating firm production technology via such capital investment may help innovative SMEs to overcome internal resource limitations. With technology being developed for everything and anything, serious-minded SMEs should be able to acquire what suits them and be able to do something new that helps them stay above competition if not stay within to avoid a shutdown.
It has also been suggested that SMEs’ ability to attract, develop and retain employees impacts upon their capability to effectively pursue growth. Staffing must be within limit to avoid budget overruns. Thus, SMEs need to effectively manage their staffing levels to pursue innovative activity. Once staffing cost is within limit and is exactly what is required, roles are well shared and people are placed in areas where they are needed. Innovation doesn't only affect your ability to be successful with clients. It also plays a large role in the engagement and satisfaction of your employees. Talented team members, especially those classified as millennials, are particularly motivated by staying at the forefront of their field. So SMEs that get staffing right are guaranteed success.
Importing and exporting
It has also been established that firms deemed to be innovative sought to gain enhanced competitive performance from the application of knowledge-based resources to marketing their outputs in several countries. Studies have also found product innovation impacting positively on the decision to export. Innovation focus is consistently and positively linked to exporting for SMEs. Conversely, it is postulated that exporting allows access to knowledge not available in the domestic market, promoting learning that can foster increased innovation. This means exporting is associated with innovation. Girma et al. (2008) also found that previous exporting experience enhanced innovative capability. If you are a big SME, exporting your products should be part of the business strategy.
A study by Pickernell et al. (2013) confirmed a significant positive relationship between SME online presence and innovation. It has also been suggested that innovation and online presence adoption are positively related, while others claim that online presence represents an enabling mechanism for SME innovation activity, improving efficiency of processes, enhancing communication and revolutionising existing business models, increasing competitiveness and improving performance.
Examples of highly innovative SMEs prepared to adopt higher levels of online presence and change their business operations are also apparent.
Investment in marketing/advertising
Marketing itself can be viewed as an innovation activity. Marketing also interacts with other functional departments, such as Research and Development (R&D).
Significantly, it impacts new product success. Marketing and R&D seemingly have equivalent influence on new product decisions. Investment in reputational capital through marketing is also important in making the firm more able to exploit innovation.
Innovation allows businesses to add value that positively impacts their bottom line. SMEs that innovate well plateau and the evidence is all over. Innovation helps SMEs stay ahead of the competition. With globalisation and a rapidly changing market, there are more competing businesses than ever before and that is why SMEs must innovate to survive and be competitive.