Author: Anita Ray
In today’s business environment, being able to innovate is one of the most crucial aspect that many SME firms are facing in sustaining their competitiveness. In general, innovation in small firms can be more effective when compared to big companies as SMEs are more flexible in implementing new ideas that create value to the customers. It is true that most of the big companies have enough experience to implement the successful strategies for innovation. However, small and medium business segments are more dynamic in understanding the potential market and tailor their service to the specific needs of the customers.
What is innovation means to small & medium businesses –
Most of the companies think innovation as the application of new technology or carrying out formal R&D research activities and development. This is not exactly true always, as innovation is more likely about doing things differently, in a better, quicker and cost effective manner that gains a competitive advantage in the market place. In other words, it is the capacity of the organization to generate wealth from the existing market needs either through new resources or enhancing the potential of existing resources.
Innovation has become one of the key parameters in business sustainability. It is dependent on creating economic value through optimizing business structure, understanding potential needs of the market, improving technological knowledge base, and successfully applying company resources to strengthen customers competitive position. However, small and medium businesses face many challenges to realize the opportunities for innovation as they have limited availability of manpower, lack of formal R & D activities for new technological developments, limited financial resources etc. Hence many small companies find themselves in the state of confusion whether to adopt the new business models or continue using the existing systems.
Many small and medium businesses both manufacturing and service industries, work towards developing strategies that are specific to the needs of their customers. Big companies have pre-existing business models with less scope for implementing creative ideas. These companies are worried about the loss through new models of existing business rather than getting excited by the gains achieved by implementing them. Small and medium businesses are typically dynamic, have organizational flexibility to create new ways that are commercially viable and exhibit quick response to changing circumstances.
Established companies vs new business start-ups:
Now that we have a brief idea on corporate innovation in small and medium business segment, lets discuss how it differs in established firms vs new business start-ups who are trying to establish their portfolios in the respective verticals.
Most of the established firms irrespective of their organizational size, focus more on executing the existing business models that have already proved successful rather than searching for new creative ideas that find the right match with the customer needs. When compared to start-ups, organizations that have maturity in business have little urge for innovation even though they have enough resources to invest in new projects. For start-ups, business innovation is not just about implementing the creative idea but creating a workable and profitable business model that company can offer to customer demands. It is not about providing the same solution for all customers but it is customizing the solution with unique perspective based on the specific needs.
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