With their limitless resources and solid standing in the market, one would think that large companies and established organisations dominate Research and Development and are the main drivers of innovation in their respective fields. However, although the contribution they bring to industry development is considerable and shouldn’t be overlooked, it’s often the smaller players that distinguish themselves in this area, bringing forth a wealth of innovative concepts, products and services that lead to significant breakthroughs and advancements in numerous domains.
The emergence of the digital age and the easy access to technology that all entities can enjoy these days have somewhat evened things out in this respect, turning many small and medium-sized enterprises into real trailblazers. So, let’s see where these firms derive their innovative edge from and what can be expected of them.
Greater flexibility and adaptability
One of the biggest advantages that SMEs possess in driving innovation is their agility and flexibility. It’s much easier for a smaller company to embrace new ideas and set its wheels into motion to execute its plans because, unlike large companies, they don’t have a strict hierarchical structure that forces them to go through layers of management to get the green light for every single decision. Therefore, the journey from concept to approval to execution is less intricate, allowing SMEs to roll out innovative products/services much faster.
When it comes to making changes or adapting to market shifts – something that is often necessary when pursuing innovation – business size definitely matters and can become a hindrance or a help, depending on the situation. For larger companies, getting all their staff onboard and ensuring everyone is up to date with the changes requires a much more complicated and lengthy process, whereas smaller enterprises with fewer team members can implement new solutions and work frames with greater ease.
It’s also more likely for a big and long-established company to remain steeped in its traditional business models and become resistant to change compared to smaller firms that haven’t been around for long and have no trouble embracing novelty.
Cohesive teams
Another aspect that distinguishes smaller enterprises from their larger counterparts and influences their ability to innovate is team structure. In a small company, where most employees know each other and interactions are more direct and meaningful, communication and collaboration tend to be more effective. This strengthens team cohesion and creates a more dynamic group where the exchange of ideas happens faster, fuelling creativity and innovation. Smaller teams are also better at finding imaginative solutions, overcoming challenges and working together towards a common goal – all of which are key ingredients for innovation.
On the other hand, in larger companies, employees are split into multiple departments, often with no connection to one another, which makes collaboration and communication a lot more difficult. As a result, disagreements, misunderstandings and workplace conflicts occur more often, diverting attention from the company’s goals.
Government incentives
Funding is the one area where large companies seem to have a clear upper hand in the race to innovation. A business with healthy capital can afford to pour more money into research and development endeavours and fund larger-scale projects that small companies wouldn’t be able to support with their limited budgets.
However, lack of funds is not an insurmountable obstacle standing in the way of innovation for SMEs as they benefit from substantial government support in this respect. The R&D Tax Credits initiative gives UK-based SMEs the possibility to claim expenditure credit for working on R&D projects, making it easier for them to overcome budget restrictions and bring their innovative ideas to life. This tax credit can cover up to 27% of the expenses made towards R&D and is targeted at companies that engage in innovative projects in the field of science and technology.
Natural risk-takers
It’s often said that doubt and fear kill more dreams than failure ever will, and that might be true in the case of larger companies. Pursuing innovation in any field is a continuous process involving a lot of uncertainty and a fair amount of risk that sometimes larger companies are not willing to take. When bigger enterprises innovate, they usually prefer to take the safest route and only make small improvements to existing products or processes.
By contrast, many SMEs have a more entrepreneurial ethos and are not afraid to jumps straight into bold projects, despite the numerus risks they have to face. They have less to lose and more to gain than large companies and that makes them less fearful to the idea of a potential of failure. That’s probably why the biggest breakthroughs come from small companies that dare to dream big and set ambitious goals.
A culture of innovation
Given their risk-taking nature and ability to adapt and adjust to different circumstances, SMEs will naturally attract professionals with a penchant for exploring uncharted territories themselves. This is particularly seen in start-ups where most employees have a progressive mindset and are eager to express their creative perspectives. When employees’ motivation stems from the desire to make a difference and create something that is truly revolutionary, the result is a company culture that supports and fosters innovation.
This combination of factors is very rarely found in larger companies where the majority of workers are only interested in fulfilling their daily tasks and getting their pay checks. It takes strong leadership and a lot more effort to replicate a culture of innovation in a bigger enterprise.
Final thoughts
While there’s no shortage of ingenious ideas in the business world, transforming them into usable products, services, or processes is a complicated undertaking that not all companies are capable of. Both large and small companies are actively engaged in this race, and although the first are better prepared and positioned to invest in Research and Development projects and enjoy positive outcomes, the latter boast various advantages that establish them as notable contenders.
