Innovation the order of the day as small businesses get creative

Small companies are turning to new products and services as well as exports to accelerate expansion, research finds.

A year ago, just 36 per cent of small and medium-sized companies had introduced a new product in the previous 12 months, but this year the equivalent figure is 41 per cent, according to an international study by insurer Hiscox.

In the year ahead, more than half (51 per cent) plan to introduce a new product.

The innovation bug is particularly strong among firms that export. Nearly three-quarters (72 per cent) of these businesses say they plan to introduce a new product or service in the year ahead. 

Targeting growth could be one reason that more than one in five firms (22 per cent) say they will be hiring new staff in the year ahead, with 10 per cent looking for juniors and 9 per cent taking on apprentices or interns. 

Spanish firms are most likely to be hiring, with 27 per cent anticipating headcount growth, though a similar proportion of German, UK and US firms say they are likely to hire new staff; 23 per cent, 22 per cent and 22 per cent respectively. 

In contrast, only 15 per cent of Dutch firms plan to add to employee numbers.

Overall optimism levels are at a three-year high, with 62 per cent of respondents saying they feel positive about the year ahead compared with 57 per cent a year ago and 52 per cent two years ago.  

Only in France are the optimists in the minority (43 per cent), with no movement in optimism levels there in three years.

The US looks the most buoyant, with 69 per cent of respondents optimistic. The Netherlands and, Spain are close behind at 65 per cent each. 

In both cases the current reading marks a dramatic turnaround from the picture two years ago.

A more optimistic picture

Owners and managers of businesses set up since the downturn in 2008 are significantly more upbeat on their prospects than those in charge of older businesses (70 per cent for post-recession businesses compared to 59 per cent at older firms).

Revenue growth is one reason that sentiment is on the rise.  Around two-thirds of firms (65 per cent) have experienced revenue growth in the past year. A quarter (25 per cent) report double-digit growth in revenue (up from 16 per cent a year ago) and the proportion seeing double-digit growth in their order book has risen from 15 per cent to 24 per cent.

Growth in profits, however, is generally more muted and one in three firms still report no increase. In France the figure rises to 43 per cent. However, globally, the numbers experiencing double-digit profit growth have gone up in the past year from 15 per cent to 22 per cent.

Access to credit remains a key challenge. Nearly a fifth of respondents (19 per cent) think that bank finance has become harder to access in the past year, while just 7 per cent say it has become easier.

Bronek Masojada, CEO at Hiscox says, ‘The report implies a new air of confidence among small businesses as they build on the nascent recovery to drive expansion and capture the upswing. We see this first-hand through the more than 268,000 small businesses we work with worldwide, who collectively have increased turnover by 18 per cent since this time last year.

‘The acceleration in the rate of new product launches is especially bullish. Small businesses play a disproportionately large role in global innovation and this bodes well for future growth.’

Further reading on innovation

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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