SMEs – no risk, no reward?

Behaviour and Motivation of Businesses in Scotland (Ipsos Mori 2018)

Research conducted by Ipsos Mori across Small and Medium sized Enterprises (SMEs) in Scotland was commissioned by the Scottish Government in 2018 because at the time

• Scotland produced only half as many scaling start-ups versus the rest of UK.

• Scotland was below the EU average for medium sized enterprises engaging in innovative behaviours.

The Research grouped businesses into three categories: Growth Averse (don’t want to grow), Ambivalent (want to grow little and slowly) and Ambitious (actively want to grow). As you can see from the diagram above

- Growth Averse prioritise lifestyle choices

- Growth Ambivalent fear risk

- Growth Ambitious want rewards

Across the piece, however, SMEs cited a lack of skills, a lack of time and resource, financial constraints and uncertainty about the future as barriers to future growth.

That is perhaps why when we move forward to Scotland in 2021 and look at the National Performance Framework Indicators we see that the number of registered businesses per 10,000 adults has remained fairly static around 390 since 2016 and the number of High Growth businesses remains flat at 1.1% over the same period.

In addition, the percentage of innovative businesses dropped from 45% in 2017 survey to 32.2% in 2019, which is the latest data available.

Remember, most of this data is pre-covid. It may be even worse now!

What’s happening is that the very people the support structure in Scotland is set up to help don’t have the time, money or inclination to take what they see as unnecessary risks to attain the rewards from growth.

That is quite a conundrum. How do you solve it?

Reduce Risk and Increase Reward

What if there was a proven system for innovation that could reduce risk and increase reward for SMEs who were not Growth Averse?

There is! It is known as Innovation Engineering, and has been used by tens of thousands of SMEs to deliver successful innovations. That is not an opinion or an empty boast. It is simply a fact, based on freely available data.

The Innovation Engineering Institute has the only data base in the world with over £15 billion pounds worth of innovations in its pipeline as evidence. It has proven tools and techniques embedded in a total system for innovation guaranteed to reduce risk. Their own benchmarking comparisons with conventional business processes show a 10x greater innovation success rate alongside a 72% increase in value and 6x faster rate to market.

Significant rewards await any Growth Ambivalent or Growth Ambitious SME that has the vision to embed this system in their business. The team at Eureka!Europe stands ready to work with any SMEs that want to make that vision a reality

Create Time and Space

Of course, creating the time and space for SMEs to learn and apply innovation skills is a different kind of challenge.

One which requires the combined efforts of partners across the Scottish ecosystem to address.

My Call to Action to those public and private stakeholders is simple

- Read the Scottish Government Research that has been conducted with SMEs here.

- Look at the National Performance Framework Indicators to see the impact here.

- Collaborate NOW, with us to drive sustainable economic growth for Scotland here.

Surely the time is nigh for Scotland to realise its full innovation potential. Through Innovation Engineering an opportunity exists to bring about the change that has eluded us for so long.

Do finance professionals count - when it comes to organisational innovation?

Are finance professionals key players or just cheerleaders on the fringes of innovation. Does it matter...?

Help us find answers to this question! Click on this image 👆🏻to take our 5-minute survey.

My partners and I at Eureka!Europe, and our colleagues at AICPA-CIMA, are intrigued by the role of finance professionals in enabling innovation in organisations.

In our experience, the process and practice of bringing to market successful new business models, products and services is a team sport. Rather than the preserve of a few clever individuals in a back office somewhere, effective and sustained innovation is driven by collaboration, diversity and informed participation.

Rebecca McCaffry, in her article, 'Risk and Innovation - Polar Opposites' (CGMA) quickly gets to the heart of challenge when it comes to the role of finance professionals in innovation: "We don't like failure, losses, negative net present value (NPV), unbalanced balance sheets..." It's a professional culture thing; a preference for precision, certainty, and facts. Perhaps it's a 'right-brain preference' thing...

"[As finance professionals] we don't like failure, losses, negative NPVs, unbalanced balance sheets..."

But beyond the territory of cliches and stereotypes lies the simple reality that finance professionals hold privileged positions in organisations. They have excellent analytical and problem-solving skills. Paraphrasing AICPA's Dr Martin Farrar in a recent report, finance professionals are at the heart of organisational governance, strategy, risk management and business performance. They usually own the processes, systems, and management information that control change and measure value.

So, does this particular community of organisational influencers impact the process and practice of effective innovation? How do they interact with innovation currently, what role might they play, and what challenges do they face in doing so?

We suspect that CFOs, FDs, Management Accountants, and Commercial Directors are often left out of the innovation process. Or perhaps they're engaged only when it comes to asking for money to fund an innovation project; usually, when it's too late for them to help shape the assumptions and thinking at the heart of the concept.

This is a frustrating experience for everyone involved, and the 'big idea' loses value along the way.

Gate-keeper behaviours can erode innovation value by an average of 50%...

In fact, research from the Innovation Engineering Institute shows that reactive, 'gate-keeper' behaviours and corporate processes (focused more on risk elimination than value creation) can erode innovation by an average of 50%...

That's how big and bold ideas become boring 'safe bets'… It doesn't have to be that way.

So how can finance professionals help? What role should they play in innovation as value creation? What innovation skills might they need?

What do you think? Share your experience and help us get smarter by contributing to our 5-minute survey ... click on the button below 👇🏻

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