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How does Innovation differ from Micro to Large businesses?

Do the rules of innovation differ for different size organisations? The answer is a resounding YES. Buy why?

Around a year ago, we performed a range of studies into innovation within Lancashire, addressing a wide range of factors including company size, successes, barriers, and investment optimisation. As the study was linked to publicly funded innovation support services, our conclusions were clear – investing in the larger of the SME’s (typically companies of 30 people plus) optimises the return on the public purse. The reasons for this were simple – (i) there was a higher level of commercial maturity (and hence lower “fail rate”) and (ii) the magnitude of the benefit was naturally greater in larger organisations, presenting greater value for money.

However, the fact remains that every organisation will perform better through investment in innovation, and every company needs to invest in innovation in order to remain at the top of their game. The question we ask is whether the rules of innovation differ for different size organisations. Actually, we’ll tell you the answer – it’s a resounding YES. Buy why?

The basic rules of innovation are the same for all organisations, and surround our “three R’s” – Risk, Reward and Resources. Management of these aspects is achieved using a basic set of tools which any organisation can master irrespective of size. The degree of success that a company achieves depends on how well they mix, match and optimise their toolset in order to meet their own specific organisational situation and objectives.

To give a small example, consider the portfolio of innovation projects that your company would want to pursue:

Generally speaking, smaller organisations tend to have less spare resource (financial, personnel and time) and have to be more selective about their innovation portfolio. These companies will need to minimise the projects which are not successful, and will naturally tend towards the low risk, low reward end of the spectrum. This is a relatively “safe bet” which we call the “Play to Stay” strategy. One of the main reasons for the high start-up failure rate – particularly in the tech sector – is that companies often start with the opposite high-risk strategy – which comes with a high failure rate – so they’re setting themselves up against the odds from the offset.

Larger organisations, however, tend to have greater resource at their disposal. They have more money to invest (and are able to handle greater losses from unsuccessful projects) and usually have more spare person-time. This means that they can afford to invest in a wider portfolio of innovation activities, and can range their projects from the low risk, low reward “safe bets” to the more speculative high risk, high reward projects. The latter have a much higher failure rate, but this is compensated by the successes when investing in a wider range of projects. This is what we refer to as a “Play to Lead” strategy. It’s pretty much a case of the rich getting richer – you need to have the resource (and courage) to invest in the high risk projects in order to get your rewards.

Ultimately, success comes down to your ability to manage your innovation processes and to select a good innovation portfolio of suitable projects relevant to your own conditions. You’ve got to understand the relative success potential and probability for each project you choose to invest in, and how to select a suitable range of activities to provide the optimal combination of survival, growth, and prosperity.

This is only one example of an area where innovation differs with company size. Over the last year we’ve been providing training for companies greater than 30 people with our pilot programme, “Lancashire Innovates”. We’re now proud to announce the launch of our “Implementing Innovation for Growth” programme, with 3 separate sets of courses for Micro (less than 5 staff), Small (5-29 staff) and Medium – Large (30 staff+) versions.

If you want to achieve your optimal growth conditions, contact us for more details.

Richard Harrison