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Why we need to focus on innovation for the longevity and survival of small businesses

By Samir Sathe

Why we need to focus on innovation for the longevity and survival of small businesses

In my last article, I covered how survival anxiety leads to overcoming learning anxiety, enhancing the chances of businesses becoming more prepared to innovate. The related key question is will all innovations improve the chances of survival? Will the survival of an enterprise result in the survival of others? Do innovations benefit ecosystems and individual businesses alike? Finally, what does it mean in terms of the longevity of the businesses and ecosystems?

two axes of business innovation

Small businesses that innovate live longer. It does not, however, help competitors live longer. In our work with a mission to help small businesses survive and thrive in India, we are beginning to see that strong survival instinct has to led to either innovations or dirty practices. I segment the innovations on two axes, ‘Capitalist’ and ‘Socialist’, motivated by different goals.

Capitalist Innovations

Small businesses have innovated, helping themselves, and not their ecosystems in general, resulting in the survival of the fittest. In these types of innovations, the enhanced longevity of the innovators results in the premature or expedited death of several others competing with these innovators.

The motivation for these innovators is to solve a problem of the beneficiary whom they serve to win against their competitors. Should competitors fail to adapt, they die. What is certain is the quality of life of innovators being better until the competitors follow fast enough to be threats or counter the innovators with better innovations, thereby halting the run of the innovators.

The longevity of innovators is entirely dependent on how quickly they are outrun by the competitors whereas longevity of the competitors is completely dependent on how slow, vulnerable, or weak they are to respond to such innovations.

We find that less than 2 percent of small businesses are innovators. These are largely in food, packaging, consumer, and select service industries while the incidence is low in B2B businesses. A whopping 99 percent of them are capitalist innovators and less than 2 percent of capitalist innovators have embarked on innovations that help the society at large.

Socialist Innovations

We have seen fewer innovators enhancing the longevity of competitors at large, than helping just themselves. The motivation for these innovators is to solve a problem of the beneficiary whom they serve; but competitors also gain as a result of these innovations. All win together. In this situation, the marketplace is closer to a welfare state with all being the beneficiaries.

One could argue that the quality of life of the innovator does not become as good as in case of capitalist innovations since the gains are distributed among all. In the long run, this may also impact longevity should the tendency to be parented by innovators persist among those who are unfit.

We come across these innovations rarely. I know of a business creating an affordable beverage for the working lower middle-class population in India, using unique blends known only to the promoter. The business model asks its competitors to use the innovation without any expectations of commercial returns or investments.

In the process, it is disrupting the unorganised industry that produces and markets this beverage. The question is whether this would help this business to live longer.

Globally competitive economies like the Netherlands have some of the most evolved mechanisms to encourage not only open innovations (companies use internal and external resources to innovate) but also socialist innovations, benefiting the small business community at large.

We believe that there is a significant correlation between small businesses adopting socialist innovation and their longevity.

Most small businesses settle for incremental innovations, mostly capitalist in nature. It is much harder to be socialist innovators. It is ironic that it is exactly when the system feels that they need socialist innovators. The key question is who wants to, needs to, deserves to and is fit to live longer and better?

What does India need more? Socialist or Capitalist innovators? While it is hard to be conclusive, our sense is that in the short term it might be necessary to promote socialist innovations to carry the unfit with the fit, while capitalist innovations may benefit the ecosystem more in the long run.

Source: YourStory

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