SMEs – no risk, no reward?

Behaviour and Motivation of Businesses in Scotland (Ipsos Mori 2018)

Research conducted by Ipsos Mori across Small and Medium sized Enterprises (SMEs) in Scotland was commissioned by the Scottish Government in 2018 because at the time

• Scotland produced only half as many scaling start-ups versus the rest of UK.

• Scotland was below the EU average for medium sized enterprises engaging in innovative behaviours.

The Research grouped businesses into three categories: Growth Averse (don’t want to grow), Ambivalent (want to grow little and slowly) and Ambitious (actively want to grow). As you can see from the diagram above

- Growth Averse prioritise lifestyle choices

- Growth Ambivalent fear risk

- Growth Ambitious want rewards

Across the piece, however, SMEs cited a lack of skills, a lack of time and resource, financial constraints and uncertainty about the future as barriers to future growth.

That is perhaps why when we move forward to Scotland in 2021 and look at the National Performance Framework Indicators we see that the number of registered businesses per 10,000 adults has remained fairly static around 390 since 2016 and the number of High Growth businesses remains flat at 1.1% over the same period.

In addition, the percentage of innovative businesses dropped from 45% in 2017 survey to 32.2% in 2019, which is the latest data available.

Remember, most of this data is pre-covid. It may be even worse now!

What’s happening is that the very people the support structure in Scotland is set up to help don’t have the time, money or inclination to take what they see as unnecessary risks to attain the rewards from growth.

That is quite a conundrum. How do you solve it?

Reduce Risk and Increase Reward

What if there was a proven system for innovation that could reduce risk and increase reward for SMEs who were not Growth Averse?

There is! It is known as Innovation Engineering, and has been used by tens of thousands of SMEs to deliver successful innovations. That is not an opinion or an empty boast. It is simply a fact, based on freely available data.

The Innovation Engineering Institute has the only data base in the world with over £15 billion pounds worth of innovations in its pipeline as evidence. It has proven tools and techniques embedded in a total system for innovation guaranteed to reduce risk. Their own benchmarking comparisons with conventional business processes show a 10x greater innovation success rate alongside a 72% increase in value and 6x faster rate to market.

Significant rewards await any Growth Ambivalent or Growth Ambitious SME that has the vision to embed this system in their business. The team at Eureka!Europe stands ready to work with any SMEs that want to make that vision a reality

Create Time and Space

Of course, creating the time and space for SMEs to learn and apply innovation skills is a different kind of challenge.

One which requires the combined efforts of partners across the Scottish ecosystem to address.

My Call to Action to those public and private stakeholders is simple

- Read the Scottish Government Research that has been conducted with SMEs here.

- Look at the National Performance Framework Indicators to see the impact here.

- Collaborate NOW, with us to drive sustainable economic growth for Scotland here.

Surely the time is nigh for Scotland to realise its full innovation potential. Through Innovation Engineering an opportunity exists to bring about the change that has eluded us for so long.

The Climate Emergency and Crossing the Chasm

Think about the behaviour change required to address the climate emergency.

That is, the behaviour of politicians, legislators, energy producers, industry leaders, private sector, public sector, non-profits, householders, in fact everyone, everywhere!

Figure 1: Dr Everett Roger's 'Diffusion of Innovation' curve - why we need to support the proactive 2.5%

Geoffrey A. Moore in his book Crossing the Chasm details the co-called 'adoption curve' and uses it to explain the take-up of high-tech products. The first 2.5% to buy are classed as innovators, the next 13.5% the early adopters. These two sectors represent the visionaries with a passion for the new idea. Over the other side of the 'chasm' are the early majority at 34%. The pragmatists, and the significant prize that allows the new product to tip into the mainstream.

The Climate Emergency is not a high-tech product. However, Moore’s theory holds true for disruptive innovations that force a significant behaviour change on the part of the customer. If we are to save humanity, this is what we need and fast! Therefore, it can be argued that the adoption curve is certainly applicable and perhaps helpful as we seek to tackle the significant behaviour change required of us all to address the climate emergency now and at pace.

Similarly, the Diffusion of Innovation (Dr Everett Rogers,1962) in Fig.1 follows the same pattern. At Eureka!Europe, we enable leaders to embed a culture of innovation into their organisations. This starts with a cross-section of the business being trained in the tools and techniques of an operating system (Innovation Engineering™) that establishes innovation as a business-wide system. This is a system in which everyone involved understands their role and how to contribute. We see the diffusion of innovation (Fig. 1) spread across the organisation in the same way, leading to a culture of never-ending innovation.

It's actually very helpful to accept laggards as a fact of life. In this way, we don’t waste energy.

Understanding the theory of adoption and the theory of diffusion helps you figure out what it takes to convince each segment of the need for change. It's actually very helpful to accept laggards as a fact of life. In this way, we don’t waste energy. We work with the willing, those who volunteer to be part of the change. The innovators and early adopters win hearts and minds and build a body of evidence that convinces the early majority who persuade the late majority.

So, back to the climate emergency. Who are the Innovators and Early Adopters? Are they in positions of leadership that can bring about change quickly? Or is it only activists and their supporters that make up that game-changing 2.5.% + 13.5% at the start of the adoption curve?

There is evidence ('Economic policy making in evolutionary perspective' 2011-09-20 by Ulrich Witt, Max-Planck-Institute for Research into Economic Systems) that suggests that the Official, Political and Economic elite are less likely to be Innovators and Early Adopters. The research compares Diffusion of Innovation Theory with Public Choice Theory and finds that the “Elites are often not innovators and innovations may have to be introduced by outsiders and propagated up a hierarchy to the top decision makers”. It seems those with power and influence are more likely to be resistant to change.

It seems those with power and influence are more likely to be resistant to change.

However, let’s end on an optimistic note. When driving culture change, even in complex organisations, once 10% of the business has unshakable belief, culture change does follow. Laggards either leave or are won over. Change happens faster working with the willing.

To cross the chasm, we need to urgently support the 2.5% doing their passionate best to bring about change from the bottom up.

I'm in the 2.5% of my organisation. Let's talk!

How did the father of Lean and 6 Sigma help Pixar make great Films?

"You don't have to ask permission to take responsibility."

Ed Catmull's 'Creativity Inc.' alongside WE Deming's 'Out of the Crisis'

Ed Catmull, former President of both Pixar and Disney Animation Studios and the author of Creativity, Inc., explains in his book how a key tenet at Toyota influenced the way he managed his creative teams.

W. Edwards Deming, an American statistician who introduced just-in-time manufacturing and total quality control at Toyota, had a lasting impact on Catmull's management philosophy.

In his book Out of the Crisis, Deming writes about how changes in which products and services are offered are needed to assure the long-term success of an organisation. This means that leadership accept certain obligations.

1. They must innovate. A basic requirement for innovation is faith that there will be a future. Innovation, the foundation of the future cannot survive unless leadership have declared unshakeable commitment.

2. They must put resources into research and education.

3. They must constantly improve design of product and service.

Catmull was inspired by the analogy of what Deming had done with Japanese Manufacturing and applied it to the creative process of making films.

Effective Feedback

At Pixar, Catmull created teams responsible for helping Film Directors see problems. As you can imagine, giving and receiving effective feedback is challenging, so Catmull introduced a system for everyone.

“Good feedback says what is wrong, what is missing, what isn't clear, what makes no sense. Good feedback is offered at a timely moment, not too late to fix the problem. Good feedback doesn't make demands; it doesn't even have to include a proposed fix. Any successful feedback system is built on empathy, on the idea that we are all in this together”

It was this belief in empathy and shared experience that allowed Pixar to focus on the idea and not on the person; to identify the flaws in the film so that problems could be addressed without attacking the creator.

An Experimental Mindset

Iterating on a story can, and does, take months; many of Pixar’s Directors start to worry if a story comes too easily. Instead, a good story emerges from being able to run experiments and learning from them. Catmull understands that this process can be draining and acknowledges the importance of maintaining the right mindset.

“Experiments are fact-finding missions that, over time, inch us toward greater understanding. That means any outcome is a good outcome, because it yields new information. If your experiment proved your initial theory wrong, better to know it sooner rather than later.”

Catmull also acknowledges the importance of leadership, to set an example and to allow others to fail. “If we as leaders can talk about our mistakes and our part in them, then we make it safe for others. Management's job is not to prevent risk but to build the ability to recover.”

Protect the New

Catmull identifies a key challenge to sustaining innovation.

“The natural impulse is to compare the early reels of our films to finished films -- by which I mean to hold the new to standards only the mature can meet. Our job is to protect the new from being judged too quickly.”

Protecting the new creates space for new ideas to flourish. Few ideas are good right from the start. A good idea is born through the maturation of lots of bad ideas.

The onus remains on Pixar's leadership to deliver successful films and by using the analogy of Deming’s approach in manufacturing, Catmull introduced a system for his creative teams that enabled everyone to help make great products:

• by giving and receiving effective feedback.

• by having an experimental mindset.

• by protecting the new.

Ed Catmull enabled Pixar to make great films by learning a better way to create, communicate and ultimately commercialise, based on what he learnt from Dr W Edwards Deming.

👉🏻 How does the analogy of Pixar inspire you?