Why are small businesses more innovative? | HR blog

Published on June 29, 2022 by Sarah Iqbal
    HR · Finance · SME

Business and finance writer Sarah Iqbal looks into the reasons why small businesses can be more innovative than larger companies and how SMEs can make the most of business innovation.

Being innovative is crucial for businesses of all sizes who want to stay ahead or even keep up with the competition. It’s a misconception that innovation is only for large companies with employees and even entire departments to research, develop, and manage new products and services. Small companies are being increasingly recognised as more innovative than larger corporations for a variety of reasons. They can take advantage of their nimble structures and ability to react quickly and boldly when it comes to executing new ideas within the business.

In this article, we will look at why small businesses are more innovative than larger organisations, how innovation benefits small businesses, and what small business owners can do to make the most of innovation.

The innovation benefits of small businesses

The innovation benefits of small businesses

Being innovative is a key ingredient to any business’s success. Whether it’s introducing a new product, executing a new marketing strategy, or identifying new ways of doing business, innovation allows companies to grow and set themselves apart from the competition.

However, with smaller budgets and arguably more stretched teams, is it possible for small businesses to innovate at the same rate as large corporations? Actually, there are several ways in which small companies can out-innovate larger competitors due to their structure and agility.

Here are a few examples of the benefits of small business innovation:

Ability to execute new ideas quickly

If your team come up with a winning idea that will improve your processes or customer experience, as a small business you will have significantly fewer hoops to jump through to get your idea launched compared than a larger company with a more hierarchical culture going through the same process. With fewer executives and shareholders to answer to and gain approval from, you don’t need to wait for lengthy business plan approval processes, complex budget signoffs, and countless planning meetings to get an idea off the ground.

Within small businesses, it may simply be a case of the person with the innovative idea approaching the manager and putting together a strategy to get your idea out to the market far quicker than any large corporation could. However, it’s important to make sure your team’s fast-paced adaptability doesn’t undermine the company’s overall vision and goals.

Learn more: Is an adhocracy culture undermining your business?

More integrated teams

Small businesses tend to have smaller, closer-knit teams that are better at working together to achieve a common goal than larger corporations with multiple departments that tend to work in their own silos. This means that smaller teams are more likely to support business innovation goals, and it’s easier for managers to keep teams updated on innovations and highlight why they are important and the benefits the new concept will bring to the whole business. These messages are more likely to get lost in translation within larger companies.

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Adapting faster to changing technology

Innovation can sometimes mean making changes to how your small business works. For example, using digital tools to replace manual processes. For smaller companies, rolling out new systems to replace older ones is far more straightforward. It will cause less disruption within businesses with a dozen employees than in a large corporation that needs to train hundreds of employees, where the switchover process can be much harder to coordinate.

How can small businesses make the most of innovation?

How can small businesses make the most of innovation

Small businesses should take advantage of their unique position and ability to innovate more agilely than larger competitors. As a small business owner, you are better positioned to test out new ideas and processes with minimal investment compared to your larger competitors. Small businesses are better at adapting to changes in the market. They are often closer to their customers, putting them in a better position to gather feedback from their clients, which could allow them to make positive, innovative changes to the customer experience quickly and often with minimal investment.

Learn more: How can employee happiness improve customer retention?

Additionally, employees of small businesses are more likely to be cross-trained across different functions so they can be more involved in the innovation process and can understand how an idea affects multiple departments vs a larger company which will have many more employees and extra time will be needed to consider each department’s effect on the proposed change, as well as multi-layer sign off on new projects and processes before going ahead with even a trial.

Many small businesses shy away from innovating because they simply lack time and resources. However, by taking the leap and working through the process with your team, you can improve your business functions and the customer experience and perhaps even streamline your processes, saving you more time and money in the long run.

Read more from the myhrtoolkit blog

How can you reduce business overhead costs using HR?

The 7 best HR cost-cutting strategies for small businesses

How to salary benchmark for your small business

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Written by Sarah Iqbal

Sarah Iqbal is a fully CIM qualified marketing executive and copywriter who specialises in business and finance writing. She regularly writes about how businesses can make profitable investments and use strategies to save on costs and boost revenue.

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