Change is good for business, whether it’s creating new products, developing cutting-edge services or streamlining internal systems.
And it’s even better for small businesses – on an individual level, SMEs innovate to evolve and grow, while as a sector they drive UK productivity. Simon Edmonds, Deputy Executive Chair and Chief Business Officer at Innovate UK, sees an insatiable appetite among small businesses to develop and grow: “Three-quarters of the companies we work with are small businesses, across all sectors of the UK economy.”
FSB’s 2018 Spotlight on Innovation Report found that 76 per cent of smaller businesses have innovated in the last three years, while 11 per cent are considering doing so. Of the former, 25 per cent have introduced a new-to-market product and 95 per cent a new-to-firm development.
“Innovation makes you think about new, market-changing inventions,” says Chris McDonald, FSB Policy Chair for enterprise and innovation. “But for small firms, it’s often changes adopted within a business that have huge impact on productivity. This could be a basic change to software or cloud-based services, or organisational structure or marketing process.”
When innovating for the market, smaller companies have the advantage in agility and flexibility. Cohesion Medical develops connected digital health solutions to help patients self-manage and optimise clinical workflows.
“There are well-established players in our market, but we want to challenge how healthcare works,” says founder Euan Cameron. “We’re a small business with a technical edge, and potential customers can see the differential value of our disruptive technology. Customers recognise that smaller companies can offer better value and innovation.”
The depth of expertise seated in Britain’s entrepreneurs also fuels innovation. Jamie Smith, founder of Ice Factor, masterminded a three-year, £3.6 million project to create the world’s biggest indoor ice-climbing facility. A former military instructor, he says: “I was acutely aware that the only way of learning ice climbing was doing it for real, with all the inherent danger. To mitigate that risk, I came up with the idea of an indoor ice-climbing wall, the first in the UK. We built a prototype at our shop in Kinlochleven, then applied the lessons we learned.”
Service provision is another area of SME innovation. Cariad Marketing is an award-winning digital marketing agency with a unique offering. “Our delivery method is innovative: our clients buy a monthly allocation of hours that are used on whatever benefits their online presence most: website updates, design, content marketing, social media or any combination of services,” says Managing Director Justine Perry. “Digital marketing is fast moving, so every team member is innovating on a daily basis to achieve our clients’ campaign KPIs and targets.”
Online innovation isn’t the preserve of digital companies: Mr Smith credits it with the success of Ice Works.
“I recognised an exploding trend in online buying, so we switched to a digital-first marketing strategy, and now have £1 million per year in online sales, and just under 50,000 followers on social media,” he says. “We employ a photographer and filmmaker, a digital designer and a team in Glasgow to create and monitor social media. It’s way beyond the occasional column or ad.”
As a company grows, it must also innovate to remain effective. “The challenge is to ensure that any growth is managed and sustainable, with enough staff to provide a great service for every client, and enough clients to sustain profitability,” says Ms Perry. “We have a formula that enables us to predict when new staff are needed, enabling us to recruit ahead.”
Wherever the innovation, support – financial and otherwise – can be an essential ingredient for turning an idea into reality. “If you’re making a change and taking a risk, it’s important to know what type of support is available, so that you can improve the chances of success,” says Mr McDonald.
There is a wealth of Government-backed assistance for new-to-market innovation, including UK Research and Innovation (UKRI) grants, R&D tax credits, Patent Box tax credits, and Small Business Research Initiative (SBRI) funding.
Despite all these offerings, FSB research shows that 90 per cent of innovating smaller businesses have not accessed Government support. Almost half (46 per cent) aren’t even aware that this is available, so more must done to promote it.
Innovate UK supports businesses across all economic sectors and regions. “We fund business and research collaborations to accelerate innovation and drive investment into R&D,” says Mr Edmonds.
Businesses can access grant funding through Innovate UK competitions, the Industrial Strategy Challenge Fund, and programmes from other Government departments. A new pilot programme is also providing innovation loans to SMEs in the later stages of R&D, to support commercialisation.
In 2014, Cohesion Medical received the £46,000 Scottish Edge award, a Government initiative for entrepreneurship and innovation, and in 2017 it followed this up with three Innovate UK SBRI innovation awards.
“We won feasibility studies, which varied from £25,000 to £35,000, which helped us enhance and evolve our products in collaboration with NHS Scotland,” says Mr Cameron. “It helped shape our products and the business for a higher level of procurement, through compliance, conforming to ISO standards, and developing capacity to deliver at-scale solutions. R&D tax credits have also been helpful.”
Finance is also available from non-Government sources. “We received funding via Grant Thornton for a management training scheme, which was further funded by winning Hertford Entrepreneur of the Year, which meant £1,500 from the Hertford Town Council via Hertford Entrepreneurs,” says Ms Perry. “This enabled us to invest in a full management training programme, taking the business to the next level.”
Collaboration is as important as finance in developing innovative solutions. “We connect businesses to partners, customers and investors that can help them turn ideas into commercially successful products and services and business growth, for example by working with our network of 10 Catapult centres, which offer world-class facilities and expertise to help businesses commercialise their ideas,” says Mr Edmonds. Innovate UK can also link small businesses to The Enterprise Europe Network, which includes 3,000 experts in 600 partner organisations worldwide.
Access to academic expertise and research facilities can supply R&D opportunities for small businesses lacking staff or internal resources. One option is to engage a university academic as a consultant.
“The benefit is you sign a contract that means you retain the IP. In terms of competitive advantage in the innovation space, that is important,” says Mark Reed, Professor of Socio-technical Innovation at Newcastle University and CEO of researcher training company Fast Track Impact. But, he adds, with some academics charged out at more than £1,000 per day, it’s beyond the reach of many SMEs.
An option suited to small businesses, says Professor Reed, is applying directly to academics in your field, bypassing the ‘gatekeepers’ of universities’ innovation offices.
“Pitch academics who are working in your area, saying you want to work with them and in return give real-world impact,” he advises. “Universities are allowing academics to work for free for small businesses in the hope that their work will generate impact that’s valuable enough to gain them funding through the Research Excellence Framework.”
The Knowledge Transfer Partnership (KTP) scheme, run by Innovate UK, also links businesses to academics, graduates and research organisations. “A KTP enables a business to bring in new skills and the latest academic thinking to deliver a specific, strategic innovation project,” says Mr Edmonds.
“For any business problem that you’ve been battering your head against, there are big brains working on similar problems around the world,” adds Professor Reed. “There are people in the university sector who are open to sharing ideas with you.”
Change can be hard. The FSB’s Spotlight on Innovation report reveals that, of those who are considering innovating, 43 per cent lack the time, 37 per cent lack staff or skilled employees, and 27 per cent find it too challenging.
“Many business owners tend to be focused on the day-to-day operations of their business and don’t have the capacity to make longer-term plans, including decisions about how best to improve their business operations or diversify the products on offer,” says Mr McDonald.
“All of these barriers centre around decision-making: a core component of effective leadership and management, which is critical in putting good ideas into action. Improving this within small businesses is key to increasing innovation and output.”
Manchester-based Langford Direct uses recycled materials to produce permeable paving for sustainable urban drainage systems, which help alleviate surface water flooding.
“Our premier paving product is unique in bonding resin-bound aggregate to a rubber sub-base and installing it onto an aggregate base rather than concrete or tarmac,” says Sales Director Tracey Langford. “Our surface flexes slightly, allowing particles of grit to agitate through the surface, ensuring it remains permeable.”
Business back-up has come from a number of sources. “We received invaluable support with free marketing from the enterprise team at Salford University; we work closely with the Business Growth Hub which provides funding for training and networking opportunities; and we joined the FSB last year, and were introduced to the Refund Agency which secured a tax refund for us for our R&D. We’ve also worked with the DTI and sought advice from them regarding exporting.”
Networking has resulted in high profile contracts, including the cycle super-highway for Transport for London. “We have been involved in award-winning projects such as the roof garden at Canary Wharf, which won the European Garden Award, and Exchange Quay at Salford Quays, which won the Hardscaping and Construction Award from BALI.”
For SMEs looking to innovate, Ms Langford says research is key. “Know the market you are entering; join a trade body relevant to your business; invest money into testing and certification; and be aware of new legislation that could affect your business, and recognise that it can present an opportunity for you to innovate.”