How should SMEs approach innovation?

Stability is an important part of every business, with a dependable cash flow, qualified staff and quality goods and services all necessary for success. However, there are times when it's worth challenging the status quo and moving beyond your business's comfort zone. 

Businesses should consider innovation whenever the opportunity arises, whether it be for an improved marketing campaign or a new product altogether. There are also financial rewards, with a new report from the Department of Industry finding that innovation is essential for business development.

Findings from the Australian Innovation System Report 2014

The report focused on how innovation can positively affect businesses and encourage competitiveness within markets. It also offers an operating definition of innovation to ensure all businesses are on the same page. 

"Innovation is the implementation of a new or significantly improved product (good or service), process, new marketing method or a new organisational method in business practices, workplace organisation or external relations," stated the report. 

According to the department, approaching innovation in this way provides tangible benefits to businesses. These include up to a 31 per cent increase in revenue , while the likelihood of higher profitability rose by 46 per cent for innovative businesses. 

Innovation also increases business expansion opportunities, with these companies twice as likely to export their goods and services. They were also found to target five times as many markets when pursuing exports, indicating they are better prepared for these processes. 

The difference between businesses that innovate and those that don't is also clearly shown when profit per employee is compared. Companies that focused on innovation were found to earn up to $20,400 in profit for each employee, compared to just $13,900 for businesses that followed the status quo. This is a difference of 47 per cent, clearly illustrating the role innovation plays in business growth. 

Based on these statistics, businesses that feel like they have been stuck in a rut should consider opening up to new ideas or strategies, with research indicating this can help them grow.