Innovation and Imagination at Work 2004

Innovation and the issue of organisational size

As stated earlier, organisational size does not matter when it comes to innovationtoday all organisations must innovate to survive and grow. What size will determine, however, is the organisations focus and approach to innovation.

In general, medium- sized business must overcome four disadvantages when building an innovating enterprise:

• Scarcity of capital . Organisations that are part of big businesses usually have access to internal investment processes that incorporate some standardised risk management and decisionmaking processes. In smaller organisations, however, the scale of innovation may be held back by a lack of affordable funds.This may mean looking for development paths to generate funds internally and can also mean structuring business development to share risk in joint ventures with several parties.

• Limited talent . Expansion often requires different or greater capabilities than presently exist. Medium-sized businesses usually do not have a pool of established or developing talent within the business to call upon in times of change or growth. The chief executive must identify these needs realistically and plan to fill them.

• Inadequate business infrastructure . Small and medium-sized businesses often begin and grow with a commitment to slim infrastructure. The right type of co-location is often a challenge. Communication systems and management processes are also often geared to a small number of sites, which presents a major challenge for organisations that need to grow nationally and internationally.

• Inadequate systematic business processes . Communications are simpler in small businesses, so good process is often seen as an unnecessary overhead, wasted effort and too formal. This extends to most areas of activity. Planning, remuneration and recognition regimes are often rudimentary, because communication within the business is usually easily achieved. Succession planning is usually seen as something for larger organisations. The CEO has to look hard at which processes need to be more systematic.

On the other hand, there are some real advantages to being medium sized:

• Better communication . Medium-sized businesses have relatively small numbers of people and small management structures, so face-to-face communication is much easier to achieve than in large organisations. In addition, there are fewer people to mobilise to a shared vision, making the process of changing direction or reshaping priorities easier to achieve.

• Higher customer intimacy . Smaller businesses can often get closer to their customers because the cycle time for decision making and response is shorter than large businesses. The underlying organisational strength for smaller businesses is their ability to concentrate effort on understanding their customers needs and to respond to them. Few large organisations are able to achieve this strength. The trend towards sophisticated customer relationship management, coupled with responsive supply chains, however, is reducing this business advantage.

• Attractive work environment . Flexible working environments are attractive to employees who feel constrained by the often very ordered environments of large businesses. Small and medium- sized businesses have the advantage of covering a wide range of activity with relatively few people. This means a lot of scope for broad and challenging jobs with a high level of accountability and authority.

The task for the chief executive is to strike the right balance in their strategy for building an innovating enterprise between the needs of the future and requirements of the present. The ideal result, of course, is to build organisational capability just in time to avoid unnecessary investment in unused capability on one hand and excessive, unsustainable workload on the other.