What do businesses that grow fast have in common? If we knew that, we could bottle it.
Since 2010 a project led by Drs Martie-Louise Verreynne and John Steen has captured and analysed the plans, behaviours and motivations of over 2,000 Australian businesses to see what growing firms have in common.
The results challenge a number of start-up stereotypes. An innovative business doesn’t have to be a shoe-string start up, run out of a garage or off the kitchen table, it seems. Larger firms proved the most innovative – with their critical mass of internal sources for bright ideas on how to serve their customers better, faster or cheaper.
And if tech, bio-tech and nano tech are the first industries that leap to mind when you think innovation, think again. The data shows that it’s manufacturing that has proved the most fertile industry for new thinking and new practice.
DR MARTIE-LOUISE VERREYNNE
A specialist in innovation management, Martie-Louise has won awards and grants for her work. She is currently carrying out research into small firms’ growth and innovation.
A whole range of patterns are emerging. Most evident perhaps is the correlation between innovative firms and firms that export. Add to that a further correlation between innovative firms that export and firms with a high rate of growth.
More than three quarters of businesses that successfully export are innovating. In comparison, only a third of businesses that focus exclusively on the domestic market have innovated in the past three years.
There’s also a pattern that suggests bright ideas to drive innovation are coming from inside the firm, in 67% of cases in this study. But great ideas also come from outside. Suppliers, partners, customers and competitors are all important sources of innovation.
The next question, of course, is how is what is happening in Australia the same or different from the business growth story internationally. The project has been extended through collaborations with Cambridge University in the UK and the University of Auckland in NZ. When the data sets combine, an international comparison of deep data using qualitative analysis will be able to tell the international business growth story with unparalleled insight.
Perhaps we’ll be able to bottle it.
BOTTLING GROWTH, LESSONS FROM CEOS
- Businesses that aspire to growth see success as the ability to meet the needs of a broad range of stakeholders.
- Firms who have low growth plans see business in more personal terms: complementing lifestyle, making a living, providing for retirement and satisfying customers with whom the principles have a close relationship.
- High growth firms innovate, export, train and delegate.
- High growth firms have their eggs in more than one product basket – and innovations in the pipeline to replace existing products as they complete their life span.
- Innovative firms chase long-term business sustainability over short-term returns.
- The most common barrier for growth firms is skills shortages; for non-growth firms it’s government regulations and access to finance.
- To create competitive advantage, look to the customer facing parts of the business: reputation, personal attention and quality.
DR JOHN STEEN
An experienced consultant, John is Senior Lecturer in Strategy, with key expertise in innovation and strategic management. His risk management skills have helped various blue chip clients to develop business strategies.
KILLER INNOVATION
Kodak announced the closure of its digital camera division in February 2012. Had it missed the digital boat? No. Kodak invented the first digital camera in 1975 but, according to Forbes Magazine, decided to bury its head in the innovation sands, afraid that the new technology would cannibalise its film business.
It did. Sony and Canon saw the opportunity and charged in. By the time Kodak accepted the inevitable, it was playing catch up. Market share declined for film, and Kodak had lost the march on its competitors in digital imaging.
WHAT’S STOPPING YOU?
THE TOP FIVE BARRIERS TO GROWTH IN AUSTRALIAN FIRMS
- Lack of skilled labour
- Issues of government relations and compliance
- Increasing competition
- Reduced growth of market demand
- Availability and cost of finance
LEARN MORE
If you would like to learn more about the research in this article, then take a look at:
“Small business strategy and the industry life cycle”, Small business economics, 2010
“Employment systems in small firms: A multilevel analysis”, International Small Business Journal, 2011
“The Role of Networks in Small and Medium-Sized Enterprise Innovation and Firm Performance”, Journal of Small Business Management, 2012