Why large companies fear the innovation of small businesses

Small businesses are often in a position to innovate – they just need to find the time, says James Welch.

Small business owners often cite lack of time and low-quality employees for the reason that they have little time for innovation – and large companies love it.

Why do large companies love it? Because if small business owners continue to ‘not have enough time’ to innovate, then the chances of small businesses creating new products and services that challenge an industry’s status quo are greatly lessened.

While larger companies can spend great amounts on innovation departments and consultants, they still struggle to match the sheer creativity and innovative thoughts that a lack of resources and concentrated passion can muster. For myriad reasons including innovation’s great enemy, bureaucracy, the vast majority of larger companies just don’t have the makeup, urgency or desperation to become truly innovative, despite how much they may exalt how innovative they are in marketing communications. Small businesses should be taking advantage of this.

Innovation strategies or innovation behaviours?

What many large companies say internally is that they need an innovation strategy, where in reality they need to adopt innovative behaviours – and encouraging several hundred, or several thousand staff to adopt innovation behaviours is a very hard task indeed. In most cases it’s a non-starter and so an innovation team – and often consultants – are brought into the business to ‘do innovation’.

As you can imagine, a well-salaried staff in an innovation department could be a very articulate, intelligent bunch of people, but the urgency and lack of finances that can help to drive innovative thoughts is not usually present, meaning that the time to create innovative products or services is usually severely extended. This extension of time and resources can encourage leaders and staff within a large company to think that the innovation team add very little to the business and ponder just how useful an innovation team actually is.

However, a small business owner asking 2-100 staff to adopt innovation behaviours is a much easier task, of course, which is why and where small business owners should see several ways for them to take advantage of being small and nimble. In fact, ‘nimble’ is a very powerful word that is not used anywhere near enough by small businesses when pitching against larger companies – and being ‘nimble’ really comes into effect when innovating.

Innovation near misses

Within a small business, salespeople will know what the requirements and needs are of customers and potential customers, marketing staff will see that complimentary services and extra channels could be the way to greater business and engineers or those ‘on the ground’ will see ways that technology can help. Add to this the gut instinct of the small business leader and this can become a way to innovate in rapid-quick time.

But…if innovation behaviours are not encouraged by small business leaders and not adopted by staff, then many innovative thoughts and ideas by staff within a business become missed opportunities as they never meet the thoughts or ideas of others – often between people that work just a few feet away from each other.

Let’s just make clear what the last two paragraphs are saying; even in small businesses, where people work very closely with each other every day, and even socialise together outside of work, innovative ideas, without innovation behaviours being put in place by management, have a huge chance of not meeting other innovative ideas and encouragement and therefore often stay somewhere between the originator’s brain and an overlooked piece of paper.

There are genuine tragedies happening in thousands of small businesses today in the UK because there is no way to capture innovative thoughts – a lack of innovation behaviours.

Ingredients for innovation behaviours

For innovation behaviours to become commonplace, according to PwC, these ingredients are needed: the right organisational culture, strong business leadership, creativity, willingness to adapt and the ability to capture ideas.

It is very hard to disagree with PwC’s ingredients and upon adoption of them, most small businesses fail at ‘capturing ideas’ more than any other. The other ingredients are quite commonplace albeit in differing quantities.

A company culture can be ‘whipped up’ by the exciting sounds made by management and key employees when talking about innovation, yet letting innovation run wild and free among employees without recording ideas, meetings, processes and prototypes can leave a staff deflated after their efforts have seemingly come to nothing – and that’s the problem with innovating – you could be creating the world’s best, or indeed worst, product, but if you don’t record your ideas, actions and processes, then no one will know either way!

Here’s the thing: large companies are good at this part (capturing ideas), but are not as good as small businesses at the other parts (actually coming up with some great ideas and having a team that can work together with passion to make them a reality).

Small businesses listen! It’s easier for a small business to learn how to capture ideas than for a larger company to build nimble, passionate teams.

And guess what? The small businesses that learn how to capture ideas make lots of money or get bought out and the larger companies that learn how to build passionate teams make lots of money too. Think of all those breakout small businesses that get bought for millions, and the large companies that continue to diversify and break new markets – this is because they have the right mix of ingredients.

Create a small business that adopts innovation behaviours

Create a small, eclectic innovation team. There have been several studies that indicate that many, if not most, innovations come from outside of an industry – or from people who do not know a particular product or competitors within a sector. This means that Jane from accounts could be the catalyst for your company’s greatest ever product. Instead of creating an innovation team of product specialists, mix the team up with people from marketing, accounts, administration, graphic design and so on.

Remove roadblocks for innovation teams. Roadblocks can come in the form of historical company rules such as stationery ordering systems, or protocols for purchasing tools (physical or web applications) – and the very worst roadblocks, people. You know the guy that always moans when he has to do something, or says things like ‘that isn’t my job’ – don’t include him in your innovation team and NEVER require things from him during an innovation project. If you think he is hard to work with in normal working practices, just wait until he knows its for the ‘stupid innovation thing’.

Just one metric – updates. Undertaking your first innovation project can be worrying. There are bills to pay and work to get done, so not having a numerical metric too adds to the worry. But persevere, and very quickly you will know whether the team assembled for the innovation project is adding great value to the company, or indeed is using it as a time to slack off. Require that one person from the innovation team is in charge of recording every meeting, idea, process, prototype and everything in between. Whilst you should not require ‘War and Peace’, bullet points will not suffice when the innovation team/project will almost certainly become a point at a board meeting or perhaps a management meeting. As innovation projects progress, you will adapt updates and include metrics that suit, but for your first few projects, just detailed text updates are suffice.

‘Quick and Dirty’ does it. An annoying (and particularly deathly) trend in many businesses is ‘analysis paralysis’. The reason why it’s so annoying is that it becomes the norm in so many businesses and they don’t see it in place as it’s happening. Several meetings per problem/issue becomes the norm and time runs much more slowly in businesses with this horrible defect. Find me one person that argues that analysis paralysis is the right way to do business. I didn’t think so.

To counteract analysis paralysis, testing things fast and cheaply should be encouraged. What something looks like, or feels like should not be of concern, especially in early testing. Something fails? Good. On to the next test. If a small business leader can incorporate quick and dirty testing where failure is not chastised but understood to be a step along the way, then, with the other behaviours listed here, innovation success is so much more closer than before.


There’s something worse than a small business that doesn’t innovate: a small business that communicates that it’s innovative but is nothing of the sort. Your small business should have the component parts for innovation success. It has entrepreneurialism, creativity, it has dedicated staff, it has concentrated passion. Add to this innovation behaviours to encourage improvement of your products, services and/or internal operations and you’ll be way in front of other businesses large and small when it comes to discovering the next innovation in your industry.

James Welch is chief innovator at the Innovation Company.

Further reading on innovation

Ben Lobel

Ben Lobel

Ben Lobel was the editor of SmallBusiness.co.uk 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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