Opinion ...
Commercialising innovation in small and medium enterprises
Anthon Botha, TechnoScene (Pty) Ltd
 Anthon Botha is the Managing Director of TechnoScene, a knowledge industry business consultancy and one of the Hub's Knowledge Partners.
| An enterprise is 'innovation active' when it has introduced new products or processes in the market, been involved in innovation projects not yet completed, or has had collaborative agreements with other organisations regarding innovation.
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A study on the innovation behaviour of small and medium enterprises (SMEs) was conducted by TechnoScene (Pty) Ltd and The Innovation Hub in 2005 to better understand the dynamics of innovation in these companies. An additional aim was to define a set of innovation services that The Innovation Hub could offer SMEs or direct innovators to.
Two levels of innovation exist in a national system of innovation: macro-innovation and micro-innovation. In terms of macro-innovation, governments usually set the landscape for innovative enterprising by ensuring the right policy instruments are in place and the supply side measures that stimulate innovation are optimized. With reference to micro-innovation, which takes place at enterprise level, the company seeks innovative behaviour to make it more competitive through innovation partnerships, nurturing innovative people and applying a mix of innovation activities and market positioning.
The innovation survey was designed to yield an understanding of innovation services used or required. An innovation service has a knowledge base (individuals, universities, private institutions, government agencies, trade unions or professional associations), tools and technologies (procedures, processes, software), actors (users, producers and input suppliers) and a demand (market, sector, firm, individual) which may be existing, emerging or simply potential.
Survey respondents
The majority of survey respondents hailed from private companies and closed corporations in the high-tech, business and financial services, government and manufacturing sectors, and involved in consulting and product and service development. The companies were predominantly SME, with less than 10 people per company and an annual turnover of less than R10 million.
Given the environment in which these SMEs operate, they mostly practice technological, service and product innovation. Innovation styles are conservative and mostly rely on step-wise improvement, with a limited number of companies involved in radical innovation. Only half of the respondents believed they were experienced innovators. Innovators are more radical in placing new technology in new products than they are in placing new products into new markets. Intellectual property is protected mainly by trademarks, followed by copyrights, patents and registered designs.
Market growth and market needs
For the group that responded, market growth is determined by economic trends, knowledge and technology trends. Most products placed in the market by these companies are in the early adoption phase and rely on technologies that are in development and growth phases. The most demanding changes in market needs were listed as increased awareness of standards and quality, multiple suppliers of product and service options and customisation. Competitive advantage is determined by customisation of products and services to customer needs, innovative products and services and technology leadership.
Innovation hurdles, drivers and benefits
The major hurdles to innovation are seen as financial risk, time-to-market pressures and shortage of staff with innovative behaviour and knowledge on innovation. To stimulate innovation, information sources that are used include the World Wide Web, knowledge resident in own staff and professional literature and library services. Innovation commercialisation styles mainly focus on the in-house commercialisation of innovations, and few work according to an innovation strategy or the use of innovation partners. Those who do make use of innovation partners, mainly do it with international and local corporates, and some with local SMEs. The drivers for innovation are listed as the promise of an increased market share, the potential to open new markets and the intention to extend the product or service range. Very few focus on exporting their innovations. The benefits derived from innovation are seen as creating value in products and services, enhanced customer satisfaction and an improvement in the bottom line.
Funding for innovation
Innovation is mainly funded by own private funds and profits already made in the company. Very little use is made by the private companies of government supply side funding programmes.
Innovation services required
The top five innovation services required by these innovating small and medium-sized businesses are: innovation networking, innovation funding support, innovation commercialisation support, future business solutions development and innovation partnership brokering. Clusters of innovation services required relate to the funding of innovation, finding innovation partnerships, commercialisation of innovation, innovation for future markets, innovation strategy and the understanding and improvement of internal innovation environments.
Conclusion
It is clear that although a significant level of innovation takes place in South African SMEs, many could improve their own innovation processes via access to a host of innovation services. Such services are being offered by The Innovation Hub, or are under development. A whole spectrum of innovation service providers is available to the small innovator. Here The Innovation Hub can act as a broker.
For more information contact Anthon Botha at (012) 807 0869.
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