Written by Phillip Waite
Alarmingly, almost half of the businesses in Australia that go bankrupt do so because of their own deficiencies – they do not develop the basic internal strengths to survive. Given the current state of global economies, now more than ever, innovation has become fundamental to building this internal survival strength.
Most at risk are small to medium enterprises (SMEs), who account for over 90 per cent of exporting businesses in Australia, and between 63 – 78 percent of private sector employment growth (OECD 2005). This is why the Australian Government has developed programs like Enterprise Connect, which helps SMEs innovate and improve productivity in order to compete in the global economy.
So what is innovation? Quite simply, it’s the “identification, application and exploitation of a new product, process or marketing opportunity by the business which increases its capability to generate wealth and strengthens its competitive position” (Frances, 2001). For you to be innovative, you need access to new information and knowledge, processes and resources to turn this knowledge into opportunities. Sounds easy, but the reality for most small businesses is they are time and resource poor.
The importance of innovation for long term sustainability has been elevated by the global economic downturn, which has increased the ferocity of competition in the fight to stay alive. Innovation can lead to increased productivity and profits and therefore needs to transcend all areas of operations – production, finance, planning, human resource management and marketing. However many of these functions are carried out by the owner manager and thus often leads to a lack of realisation of the processes needed to implement innovation. Management then, is central to the innovation process.
But how do you drive innovation when you are struggling for time and suffer from a lack of critical resources? One way might be to listen and talk more to your staff. However sometimes staff are reticent to talk up or make suggestions for fear of being ridiculed or fear of failure. Another way is to invest in building social capital.
Social capital is about building trusting relationships and a culture of confidence within the workplace. In other words, if management can build trust where staff feels free to contribute their ideas, then innovation is more likely to flow.
Ideas can also flow from the relationships between other kinds of colleagues. For example, UPS workers frequently get together on a lunch break, not simply to eat but to exchange information or to divide up the workload more fairly. Everywhere you look nowadays you will see people in cafes discussing work over cappuccinos, something that until recently would attract the scorn of management who deemed that they were just skiving off. Social capital therefore represents the pool of goodwill residing in a social network within the firm (Anderson 2007) and is an asset required for innovation (APEC, 2006).
So if you are looking at ways to ensure you thrive during these tough economic times, then innovation is the key to differentiating your firm or developing new products and services. To achieve this without spending a fortune, start with one of your most important resources; your staff. They know your business, they know your offering and they know your customers. Show them some love and trust, and they will reciprocate with some great suggestions on how to improve your firm’s offerings.
For more information about this topic or if you are interested in a free business review and government funding through the Enterprise Connect program, please contact Phillip Waite on 0417277171 or email email@example.com