Does your SME have a strategic growth plan?

Is your SME ready for 2035?

The UK government’s Innovation Strategy is to turn the UK into a global innovation hub by 2035[1].  It has been shown that long-term growth innovation in technologies, production processes, supply chains, and business models determine the ability of a country to raise its economic growth and productivity.  This offers innovative and proactive UK SMEs a significant opportunity to become more competitive and grow.

Strategy and innovation are part of the same parcel

Things have become a bit more complicated these days.  On the one hand, it is well accepted that the level of strategic planning is positively associated with the growth of the SME (e.g., Veskaisri, Chan and Pollard, 2007).  This highlights the usefulness and benefits of practising strategic planning.  On the other hand, SMEs also need to embrace, plan and integrate their innovation strategy.  Strategic planning is not only used to improve your competitiveness and future growth but also to keep pace and exploit innovation to disrupt or avoid being disrupted.

Recent statistical data coming out of the Department for Business, Energy & Industrial Strategy (BEIS) in the latest Small Business Survey, (2020)[2] evaluated the decisions behind why SME employers introduced new or improved goods or services or processes, further confirming this interrelated relationship between strategy and innovation.  Thus, strategy and innovation are part of the same parcel.

SMEs need to innovate more and more

UK innovation activity has been declining in the pre-pandemic years (see Fig 1), which might explain, in part, the government’s strategic response.  However, recent studies of SMEs[3] indicate that this trend seems to be changing and that further analysis¹ of those respondents indicates that SMEs are beginning to view innovation as a strategic imperative for growth, survival and the future mitigation of possible disruption or future opportunities (see Fig 2). This partly has perhaps been brought on by the pandemic.

SMEs are using business mentors more and more

The SME Finance Monitor study[4] found that those classified as ‘Ambitious’ SMEs were more likely to have planned to grow or have grown, have employees and a mentor, and are more likely to be ambitious risk takers.

Key takeaways

• SMEs who approach innovation strategically and practice strategic planning become more resilient, resistant to disruptions, competitive and achieve higher growth.
• SMEs need to develop two key capabilities: 
  • To Exploit current opportunities, become more efficient and agile, adopt best practices, etc; while they
  • Explore future opportunities through innovation for growth and competitiveness.
• Use business mentors who have a combination of experience from large and small firms, specialised skills in both strategy and innovation, and broad industry experience, who are tech-savvy with sound business judgment.

SMEs need to practice strategic planning

There has been a steady increase in pre-pandemic planning, which we know is related to growth (see Fig 3).  However, this appears to have dropped off during the pandemic and is out of kilter with a focus on innovation.  Perhaps as Fig 2 suggests, they were trying to adapt quickly and survive.

Most companies realise that it is not good enough to keep up and adopt the best practices, but also, they know that they must innovate to keep up with the pace of change, stay relevant, be disruptive and not get left behind. These activities need to happen in tandem.

SMEs play an important economic role[5]

Guest Blog Written By: Dr Ezra Carlson