Innovation for the SME Sector

On 6th August, I got an opportunity to address the delegates of the SME Conclave 2009 at the Taj Land’s End, Bandra. I spoke to them on ‘Innovation for the SME Sector’. Just a few days back, I had also interacted with the SME Chamber of India, Chakala, Andheri.

Speaking to several SMEs, I was surprised to find the relatively big players quite uninterested in innovation while the startups were very enthusiastic about it. Frankly, I had expected the reverse. My confusion cleared when, by sheer coincidence, I read a small piece on Prospect Theory by Jeffrey Baumgartner on Innovation Tools, that evening. Prospect theory (Daniel Kahneman & Amos Tversky,1979) clarifies that people are highly risk averse when it comes to potentially increasing their wealth, but risk seeking when dealing with potential economic loss.

So, this was what was happening.

The established SMEs were getting good ROI and were looking to increase their wealth. That made them risk averse and distrust innovation. Why rock a boat that is sailing well enough? On the other hand, the startups were in a phase in which they were only incurring expenditure with no or little income. They were dealing with potential economic loss and hence welcomed suggestions that could change the situation. For them, all change was change for the better.

Innovation does trigger a change in status quo. How much you welcome innovation depends on whether the status quo seemed attractive to you or not.

Of course, whether the status quo would remain as attractive without ‘running twice as hard just to stay in place’ is another matter.