Mighty Tools That Small Businesses Overlook

For many small firms, innovation doesn’t come easy. Common digital technologies can help ease the way
Young African woman using computer and smiling while working in clothing workshop.

By Yolande Chan, Rashmi Krishnamurthy and Craig Desjardins

Innovation in small firms has been likened to building a new plane in the air, even as you fly the old one. It’s certainly true that small firms face significant headwinds. For one, they lack the deep pockets and networks of larger companies. As a result, they often must simultaneously search for new knowledge from outside while efficiently exploiting what they already know. 

Small businesses also have a smaller margin for error. A single market mistake may be a temporary setback for a large company but result in the failure of a small firm. Small companies must accurately identify and evaluate opportunities in fast-paced, turbulent environments amid changing customer needs, technological advances and intense competition. 

But these challenges do not mean that small businesses should be relegated to the sidelines of innovation. Digital technologies are radically changing how all businesses are conducted. Many small businesses need to more fully engage with the trend toward digitization. 

Our research team has been collaborating for more than 10 years to complete case studies and conduct research involving small firm innovation in Ontario. Several businesses we studied are high-growth startups; many others are small firms happy to stay that way. 

What we often observe is that these businesses frequently neglect or are unaware of the potential of digital technologies they already have or can acquire at minimal cost. They fail to recognize that innovation strategies can be executed with minimal technology investments by using readily available tools such as Skype, Zoom, Dropbox and Google Cloud Platform. Many businesses we study tell us they are not “technical,” falsely assuming they can overlook these commonplace tools.

In our study, we adopted a well-established opportunity development framework to examine how small firms use digital technologies to recognize, develop and evaluate business opportunities. Business owners can use this framework as well to determine how best to deploy everyday digital technologies to drive innovation.

Digital tech for recognizing opportunities

Recognizing opportunities involves understanding market needs, finding a fit between market needs and resources, and creating or updating a business model. Successful small businesses see opportunity recognition as both an internal and external process in which they engage stakeholders in detecting and validating opportunities. Tapping into the wisdom of external players can help small firms with limited resources. It can also help small business owners build a loyal support base for their products and services. Oftentimes, these interactions can lead to small businesses working with partners or customers to create a product that meets market needs.

To achieve this objective, small business owners should use technology-enabled tools and networks to:  

  • Monitor how core technologies and markets are changing and identify new business opportunities. Small firms can use social media, online forums, newsfeeds and technology-focused e-magazines, for example, to regularly search and scan their industries for threats and opportunities. Small firms should also keep an eye on other industries to see if the technologies they use are transferable. We recommend that these businesses provide employees with tools to monitor technology and marketplace changes. 

  • Clarify business concepts. Small businesses can use digital technologies to engage external groups in clarifying their ideas. They can leverage social media tools, for example, to connect with customers and partners around the world. Internet communities, online forums and social media provide channels to reach out to industry-specific experts and customers and to assess the viability of ideas. Diverse perspectives push business owners to fine-tune opportunities. 

Digital tech for developing opportunities

After a firm identifies an innovative business concept or idea, the next step is to decide what resources have to be invested to exploit the opportunity. Small firms may need to acquire resources to put their ideas in place quickly. But research suggests that many find it difficult to hire and retain talent because of the lower pay they offer. They can creatively use technology to combine their internal resources with outsiders to implement their ideas, though their business models may need to be adjusted.

In this phase, small businesses can use digital technology to: 

  • Identify and access external partners and resources. Small firms can leverage digital technologies to employ workers outside their organizational boundaries. Simple digital technologies such as Slack, Microsoft Teams, Skype and Zoom can support virtual workforces with a range of formal and informal communications and teamwork. Technology can also support seamless, distributed workflows that are remotely designed and managed, and track the division of labour and task deadlines. Small firms can also use technology to overcome the challenges of finding the right workers and partners at the right times, and to engage them and capture their knowledge on the fly. Instead of hiring full-time employees, small firms can hire contract workers dispersed around the globe, and even get things done at a fraction of the cost.

Digital tech for evaluating opportunities

Once a product or service is developed, a firm must then evaluate and refine it. This process may involve conducting feasibility analyses to assess not just new products and services but also entire business models. It also often involves learning from customers and converting that knowledge into action, which may require making further changes to business processes, products and practices. Understanding what does and doesn’t work spurs further innovation and pushes products and services to the next level.

Small firms should use technology in this stage to:

  • Evaluate solutions and implement best designs and practices. Small firms can use common digital technologies to rapidly and repeatedly obtain feedback from their customers, partners and other stakeholders. In this way, they can continuously learn and periodically use technology to codify the lessons they’re learning. 

  • Stay agile. As they refine their solutions and implement best practices, small businesses must remain dynamic and evolve as their environment changes. To remain competitive, they require processes for routinely using inexpensive digital technologies to gather information and learn from feedback.

Time and again in our research, we see high-achieving small businesses use common digital technologies to drive learning, innovation and transformation. Technologies that we all take for granted can support processes that translate initial ideas into viable products and services. They can help overcome resource constraints, innovatively find human talent, validate products and grow customer bases.

Yolande Chan is E. Marie Shantz Professor of IT Management and associate dean (Research, PhD and MSc programs) at Smith School of Business. Rashmi Krishnamurthy is a postdoctoral fellow at Smith. Craig Desjardins is director of strategy, innovation and partnerships at the City of Kingston, Ontario.

Smith School of Business

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