Stick to what you know - a recipe for SME success?

Pioneering research into the nature of innovation in small and medium sized enterprises (SMEs) has revealed that ambitious, smaller enterprises are more likely to focus on incremental innovation, rather than radical developments.

The research, carried out by Cranfield School of Management, contradicts the traditional and widely held belief that SMEs tend to focus on radical innovations because of their agility, flexibility and entrepreneurial management style.

The most successful, ambitious SMEs are in fact those which have achieved growth by ‘sticking to the knitting’ – selling more of their existing products or services to their existing market.

Gerard Burke, Director of the Business Growth and Development Programme (BGP), said the research findings could have important implications for policy-makers.

“Our research shows that SMEs tend to focus on continually improving their products, services and processes – often in response to customer feedback or demand – not on launching new products or venturing into new markets. This ‘incremental’ innovation, often popularised by the term ‘sticking to the knitting’ appears to be part of the recipe for success for SMEs, rather than attempts at radical innovation.

“This could be important for government policy as significant investment is made in schemes to help SMEs to develop new products and to enter new geographic markets. This money could perhaps be better spent encouraging SMEs to concentrate on incremental innovation based on focus, deep understanding and rapid response to a core existing market,” he said.

The findings are the outcome of an innovation survey completed over a 12-week period. Of the 108 respondents almost three-quarters (73.1%) were the company’s managing director or chairman, 64.8% had been established for more than 10 years and 81.6% had up to 50 full-time equivalent employees.

To download a copy of the academic paper detailing the research, click here.