WHAT CAN SME'S TEACH BIG BUSINESS ABOUT INNOVATION?
By Michael James Published March 2018
I spend much of my professional life assisting small and medium enterprises to corporatise and commercialise. So I was pleased when someone asked me this question above. It made me think in reverse – always good for the grey matter.
What makes SMEs exciting?
The SME space is an exciting one because these businesses (often defined as <250 employees or up to $50M turnover) are typically thought of as entrepreneurial, creative, passionate and nimble. They identify a niche and quickly act on it, usually hungry for results because there’s not much capital behind them - and personal consequences for failure.
They make quick decisions and take risks, as well as cutting costs while kicking goals. For example, when Boost Juice started off their first juice bar in Adelaide, their new commercial juicers wouldn't work.
‘Faced with juice bars that couldn’t sell juice, the local teams had to make a mercy dash to Myer and buy domestic juicers. Both broke after a single day, but the job was done, and new equipment was on its way. Hurdles are there to be hurdled.’ (boostjuice.com.au)
So is there something big business can learn?
There are some obvious differences between the two. Size, for starters! Larger organisations are much more hierarchical, with a more protracted decision-making and strategic execution process. It is said that bigger corporates attract different types of employees, who are more risk averse and attracted to the security of a good salary. However I’m loathe to generalise, as I’ve been exposed to such a broad spectrum of large and small organisations – all with their unique characteristics.
With that caveat about generalisations, I can think of 5 ways in which SME’s might be able to teach corporates a thing or two.
Creating mental space to think and reflect is necessary to access intuition. It’s about taking control of your own time to allow the space for intuition to be heard and trusted. This is about a human being not a human doing!
Though many senior executives aspire to be more entrepreneurial, many large organisations struggle to find the space for intuition: meetings and actions dominate the daily and weekly agenda. Corporates often go ahead on execution, even though individuals may have doubts. The machinery and sheer scale is hard to stop. In an SME, if it doesn't feel right you just don't do it.
Awarded Optus SME Business of the Year 2017, this online legal firm was founded by Stanislav Roth in 2010. It now has 12 lawyers, providing ‘de-facto in-house lawyers … for fast, practical and fixed price legal support’. The company is an industry disrupter, providing SMEs with unlimited access to legal services on a flat fee retainer basis. Roth saw a gap in the market and went for it. He streamlined processes (think one page contracts) and attracted high quality lawyers who were ready to exit high-pressure billable hours based practices. (sourcelegal.com.au)
Roth talks about the importance of making the space for intuition:
“This type of thinking flows best when we are relaxed – reading a book, going for a walk, listening to music at night… I often find creative solutions to assist my clients when I’m most relaxed.” (smartcompany.com.au)
Visionary Purpose Leadership
Business is not just about profit and market share. It’s important to humanise the organisation and make a positive contribution to society. SMEs often have more direct alignment with a social mission. Employees buy into the passion, and this can be more important than the size of the pay packet.
Enabling creativity is often seen as risky business because it’s about being prepared to be wrong. Big organisations often struggle with encouraging learning, original thinking and calculated risk taking.
SME owners are by necessity eternal optimists and risk takers - handy qualities for creativity and innovation. The irony for large corporations is that even with more resources to take on risk, their structures and need for short-term performance often inhibit them from pursuing opportunities.
Hierarchies often work against agility in execution. Innovation is easily bogged down somewhere between the layers of decision-making, risk assessment and execution. There is another irony here, that with the rate of change in business now, we often create greater risk through a lack of agility to execute. Some devolution of decision-making power is useful to empower your people to execute quickly if necessary.
Boost Juice has catapulted itself out of the SME category, with a group turnover of $158M last financial year, $1.2B since inception and 350 stores globally. Nevertheless it did start off very humbly in 2000 with an Adelaide outlet. The banks would not lend to a business ‘that just sold liquids’, so Janine Allis and her husband Jeff raised $250,000 amongst friends. A combination of passion, hard work and willingness to take risks (e.g. a 28 outlet contract with Westfield and a personal liability of $5M), got them to where they are today. Skin in the game, a clear vision, trusting gut feeling and timely decision-making were clearly key elements. (boostjuice.com.au)
The SME’s I’ve worked with have values that are down to earth and part of their fabric. They resonate deeply with employees and customers. SME leaders know they need passion, integrity and mutual trust to build the business.
Sometimes large organisations have values statements that highly polished and aspirational, but not necessarily embodied in culture and practice. Once again I hesitate to generalise: when I walk into my local Bunnings on the weekend, I see a strong customer-centric, values driven operation!
How can bigger companies harness these ideas?
I do think it’s possible. Large corporate's such as Tesla, Virgin, and GFG Alliance, are driven by strong values, vision and passion; are prepared to take risks; seize opportunities; and seem to foster an internal culture of creativity and innovation. In the end, perhaps the learning goes both ways!