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Small businesses have always been a driver of new products and services. Many products and inventions that we might commonly associate with large businesses were originally created by small businesses, including air-conditioners, Bakelite, the FM radio, the gyrocompass, the high resolution computed axial tomography scanner, the outboard engine, the pacemaker, the personal computer, frozen food, the safety razor, soft contact lenses, and the zipper.Jerry Katz and Richard Green, Entrepreneurial Small Business, 2nd ed. (New York: McGraw-Hill, 2009), 17. This creativity and innovative capability probably stems from the fact that smaller businesses, which may lack extensive financial resources, bureaucratic restraints, or physical resources, may find a competitive edge by providing customers value by offering new products and services. It is therefore important to consider how small businesses can foster a commitment to creativity and innovation.
One way smaller firms may compete with their larger rivals is by being better at the process of innovation, which involves creating something that is new and different. It need not be limited to the creation of new products and services. InnovationNew ways in which a product or a service might be used, new ways of packaging a product or a service, or identifying new customers or new ways to reach customers. can involve new ways in which a product or a service might be used. It can involve new ways of packaging a product or a service. Innovation can be associated with identifying new customers or new ways to reach customers. To put it simply, innovation centers on finding new ways to provide customer value.
Although some would argue that there is a difference between creativity and innovation (see Note 2.38 "Video Clip 2.13"), one would be hard pressed to argue that creativity is not required to produce innovative means of constructing customer value. An entire chapter, even an entire book, could be devoted to fostering creativity in a small business. This text will take a different track; it will look at those factors that might inhibit or kill creativity. Alexander Hiam (1998) identified nine factors that can impede the creative mind-set in organizations:Alexander Hiam, Creativity (Amherst, MA: HRD Press, 1998), 6.
One of the great mistakes associated with the concept of innovation is that innovation must be limited to highly creative individuals and organizations with large research and development (R&D) facilities.“Innovation Overload,” Trendwatching.com, accessed December 2, 2011, trendwatching.com/trends/pdf/2006_08_innovation_overload.pdf. The organization’s size may have no bearing on its ability to produce new products and services. More than a decade ago, studies began to indicate that small manufacturing firms far exceeded their larger counterparts with respect to the number of innovations per employee.A. Roy Thurik, “Introduction: Innovation in Small Business,” Small Business Economics 8 (1996): 175.
A more recent study, which covered the period from 2003 to 2007, showed that R&D performance by small US companies grew slightly faster than the comparable performance measures for larger US firms. During that period, small firms increased their R&D spending by more than 40 percent, compared to an approximate 33 percent increase for large companies. These smaller firms also increased their employment of scientists and engineers at a rate approximately 75 percent greater than larger companies. Further, the results of this study, which are presented in Figure 2.6 "R&D Intensity by Firm Size", illustrate that particularly since 2004, smaller businesses have outpaced their larger rivals with respect to R&D intensity. The term R&D intensity refers to the current dollars spent on R&D divided by a company’s reported sales revenue.L. Rausch, “Indicators of U.S. Small Business’s Role in R&D,” National Science Foundation (Info Brief NSF 10–304), March 2010.
Figure 2.6 R&D Intensity by Firm Size
It cannot be over emphasized that innovation should not be limited to the creation of products or services. The following are just a few examples of innovation beyond the development of new products:
Vijay Govindarajan: Innovation Is Not Creativity(click to see video)
An interview with Vijay Govindarajan on the difference between creativity and innovation.
Where Good Ideas Come From(click to see video)
This cartoon was developed for Steven Johnson’s book on innovation. He concluded that with today’s tools and environment, radical innovation is extraordinarily accessible to those who know how to cultivate it. Where Good Ideas Come From is essential reading for anyone who wants to know how to come up with tomorrow’s great ideas.
Steven Johnson: Where Good Ideas Come From(click to see video)
This relatively long presentation (eighteen minutes) by Steven Johnson maps out the ideas presented in his book.
Encouraging Innovation with Employees: Innovators Forum Guest Danika Davis(click to see video)
Danika Davis, Innovators Forum guest and CEO of the Northern California Human Resources Association, discusses the ways to reward innovation among employees and how to foster innovation in your small business. Discuss this and other topics at http://blogs.cisco.com/category/smallbusiness.
Creating an Innovation Mind-set(click to see video)
Vijay Govindarajan discusses that to create an innovation mind-set, managers must bring in fresh voices from outside the company, encourage collaboration, and consider how emerging market needs can spur ideas for innovative offerings.
Tom Peters: Innovation Is Actually Easy!(click to see video)
Tom Peters declares war on the worthless rules and absurd organizational barriers that stand in the way of creativity and success.
How to Spot Disruptive Innovation Opportunities(click to see video)
Disruptive innovation occurs when an innovator brings something to market that is simple, convenient, accessible, and affordable. Here are some tips to help you pinpoint disruptive opportunities within your organization.
Not all businesses have to concern themselves with social and consumer trends. Some businesses, and this would include many small businesses, operate in a relatively stable environment and provide a standard good or service. The local luncheonette is expected to provide standard fare on its menu. The men’s haberdasher will be expected to provide mainline men’s clothing. However, some businesses, particularly smaller businesses, could greatly benefit by recognizing an emerging social or consumer trend. Small businesses that focus on niche markets can gain sales if they can readily identify new social and consumer trends.
Trends differ from fads. Fads may delight customers, but by their very nature, they have a short shelf life. Trends, on the other hand, may be a portend of the future.MakinBacon, “Why and How to Identify Real Trends,” HubPages, accessed October 8, 2011, hubpages.com/hub/trendsanalysisforsuccess. Smaller businesses may be in a position to better exploit trends. Their smaller size can give them greater flexibility; because they lack an extensive bureaucratic structure, they may be able to move with greater rapidity. The great challenge for small businesses is to be able to correctly identify these trends in a timely fashion. In the past, businesses had to rely on polling institutes for market research as a way of attempting to identify social trends. Harris Interactive produced a survey about the obesity epidemic in America. This study showed that the vast majority of Americans over the age of 25 are overweight. The percentage of those overweight has steadily increased since the early 1980s. The study also indicated that a majority of these people desired to lose weight. This information could be taken by the neighborhood gym, which could then create specialized weight-loss programs. Recognizing this trend could lead to a number of different products and services.“Identifying and Understanding Trends in the Marketing Environment,” BrainMass, accessed June 1, 2012, http://www.brainmass.com/library/viewposting.php?posting_id=51965.
In the past, the major challenge for smaller businesses to identify or track trends was the expense. These firms would have to use extensive market research or clipping services. Today, many of those capabilities can be provided online, either at no cost or a nominal cost.Rocky Fu, “10 Excellent Online Tools to Identify Trends,” Rocky FU Social Media & Digital Strategies, May 9, 2001, accessed October 8, 2011, www.rockyfu.com/blog/10-excellent-online-tools-to-identify-trends. Google Trends tracks how often a particular topic has been searched on Google for a particular time horizon. The system also allows you to track multiple topics, and it can be refined so that you can examine particular regions with these topics searched. The data are presented in graphical format that makes it easy to determine the existence of any particular trends. Google Checkout Trends monitors the sales of different products by brand. One could use this to determine if seasonality exists for any particular product type. Microsoft’s AdCenter Labs offers two products that could be useful in tracking trends. One tool—Search Volume—tracks searches and also provides forecasts. Microsoft’s second tool—Keyword Forecast—provides data on actual searches and breaks it down by key demographics. Facebook provides a tool called Lexicon. It tracks Facebook’s communities’ interests. (Check out the Unofficial Facebook Lexicon Blog for a description on how to fully use Lexicon.) The tool Twist tracks Twitter posts by subject areas. Trendpedia will identify articles online that refer to particular subject areas. These data can be presented as a trend line so that one can see the extent of public interest over time. The trend line is limited to the past three months. Trendrr tracks trends and is a great site for examining the existence of trends in many areas.
Online technology now provides even the smallest business with the opportunity to monitor and detect trends that can be translated into more successful business ventures.