Small Business and Innovation

Posted: May 17, 2015 by Chuck Matthews in Innovation, Startup

Dr. Chuck Matthews“There’s a way to do it better – find it.” – Thomas Edison

In recognition of National Small Business Week earlier in May, small business owners were celebrated for turning their innovative ideas and passion into successful business ventures. It is richly deserved recognition. In fact, research by the US Small Business Administration Office of Advocacy and others suggests small business owners outperform larger companies when it comes to driving innovation. Specifically, considering patent issuance as a measure of innovation, it is estimated that small businesses produce sixteen times more patents per employee than large firms. While small firms’ cumulative patents account for only eight percent of total patents granted, they contribute a fourth of the patents in the top 100.

Patents, however, are only one aspect of innovation in small business activity and success. Management science guru, Peter Drucker, notes that innovation is the specific instrument of start-ups. The question becomes, what else is important for us to consider that drives innovation and transforms our start-ups into successful ventures? Let’s examine three critical aspects of small business start-ups as each relates and applies to the role of innovation and entrepreneurship: 1) Growth over time; 2) The critical path of innovation; and 3) Small business in a global economy.

Growth over time. Innovation is not the exclusive providence of fast-paced scalable growth ventures. The eminent entrepreneurship scholar, Dr. Alan Carsrud, Visiting Research Professor at Åbo Akademi University in Turku, Finland, recently spoke at UC. He along with co-authors, Malin Brannback and Niklas Kiviluoto, note that while we tend to over focus on the “gazelles” that seek rapid, accelerated growth, the reality is that 97% of all firms are more accurately described as “mice” that seek slower, incremental growth over time.

For example, a local company, Cincy Tool Rental, personifies the value of steady state growth over time. Founded in 1971, by retired 33-year veteran firefighter George Bruner, he spent the next 44 years innovating business practices, hiring employees, opening new locations, and more. In talking recently with his daughter, Barbara, it is clear that his vision, insights, passion, and drive were key factors in taking his ideas to practice and grow the business her two brothers now successfully run.

Innovation. While a complete treatment of innovation is beyond the scope of this column, Mr. Bruner typifies three critical dimensions of entrepreneurs: curiosity, creativity, and connections. Be curious always, both within and outside a given topic area. While it is often good to avoid distractions, sometimes our best learning occurs when we take a divergent path while pursing information in another area (e.g., making the leap from firefighting to tool rental). Innovators develop a sense of the value of creativity to facilitate change, break with the norm, and challenge conventional wisdom. Finally, look for and make connections. Nothing happens in a vacuum.

Small Business in a Global Economy. At its core, innovation is about new methods, ideas, products, and services that create value for people. Marshall McLuhan, the late professor and thought leader from the University of Toronto, notes that innovation in practice does four things:

It enhances something. For example, Google, Apple, GoPro all enhance how we live, communicate, and capture memories.

It eliminates something. For example, smart phone applications make direct connections often eliminating once established connections.

It returns us to something from our past. What goes around comes around. Think Southwest Airlines, Starbucks, craft beer.

Over time, it reverts to its opposite. That is, innovation is specific to the situation that propels it to prominence, but it is then destroyed by it. Innovation in this sense is both transformative and relentless. For example, the telephone has not completely disappeared, but its transformation continues apace. In the words of the Austrian economist Josef Schumpeter: creative destruction. Innovation has a shelf life – who knew!

Our operations may be local, but our markets no longer need be. Moreover, our universe of knowledge that feeds curiosity and innovation is virtually limitless. Small business in a global economy is only limited by our imaginations.

Just like Mr. Bruner, innovators and entrepreneurs challenge traditional definitions of value and seek to solve market inefficiencies. Time to heed Edison’s advice: find it! Till next time, all the best for continued entrepreneurial success!

 

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