A new research report from Intuit takes a look at the key factors that drive, enable, amplify, and shape the outcome of innovation in small businesses. We frequently hear soundbites in the news about how small businesses are such an important driver of our economic growth, but the stats are pretty amazing. Small businesses:
- employ about half of the country’s 144 million private sector workers
- create 60 to 80 percent of new private sector jobs
- generate more than $6 trillion in annual revenue
Intuit Future of Small Business Report: Research Brief: Defining Small Business Innovation, explores why and how small businesses use innovation to increase productivity, create new products and services, better serve their customers and improve their businesses overall.
Often the term “innovation” brings to mind companies that are based on a completely new product idea, or some totally new way of doing things. However the report explains that 80% of a firm’s innovation efforts are really “incremental innovation” – refinements in products and processes that most businesses come up with regularly in order to improve productivity, boost customer satisfaction, save time and make more profit. It’s more fine-tuning than ground-breaking. The headline-making type of innovation (like eBay, for example) makes up a much smaller piece of the innovation pie.
Drivers of Innovation
The study found that small business owners are natural innovators, and are driven by three basic needs: necessity, opportunity, and ingenuity. They innovate both reactively and proactively – from responding to customers and markets to creating something bigger, better, or different.
The report describes six advantages that let small businesses innovate more easily than larger competitors:
- Personal passion: Personally invested, most small business owners are willing to try new approaches to make their business more successful.
- Customer connection: A deep and direct relationship with the market and customers helps small businesses understand customer needs, identify new opportunities, and fix problems quickly and efficiently.
- Agility and adaptation: Unlike large corporations, small businesses can quickly adapt to changing market conditions and implement new business practices.
- Experimentation and improvisation: When pursuing new opportunities, many small business owners and managers aren’t afraid to experiment and improvise, accepting failure as part of the path to success.
- Resource limitations: Small businesses are adept at doing more with less. And these resource constraints lend to their innovative mindset.
- Information sharing and collaboration: Small businesses traditionally rely on strong social networks to share information and inspire innovative thinking.
There are factors that amplify the ability to innovate, including:
- Use of technology
- Access to capital
- Culture that values experimentation
- Market knowledge
- Government regulation or lack thereof
The full report can be found at http://about.intuit.com/futureofsmallbusiness/
Laura Leites, Assistant Editor, Smallbiztechnology.com