1. A study of how the drivers of innovation contribute to successful business
performance within SMEs around the South West.
James Macdonald
A DISSERTATION
Submitted to
Bath Spa University
In partial fulfilment of the requirements for the degree of
MA Business and Management
3rd October 2013
2. 1
A Dissertation entitled
A study of how the drivers of innovation contribute to successful business
performance within SMEs around the South West.
By
James Macdonald
We hereby certify that this Dissertation submitted by James Macdonald
conforms to acceptable standards, and as such is fully adequate in
scope and quality. It is therefore approved as the fulfilment of the
Dissertation requirements for the degree of MA Business and
Management.
Approved:
Dissertation Supervisor
Date
3. 2
DECLARATION
I hereby certify that this dissertation constitutes my own product, that
where the language of others is set forth, quotation marks so indicate,
and that appropriate credit is given where I have used the language,
ideas, expressions or writings of another.
I declare that the dissertation describes original work that has not
previously been presented for the award of any other degree of any
institution.
Signed,
4. 3
Acknowledgments
I would like to thank all the companies and individuals that participated in my
research for their time and trouble. I would also like to thank my supervisor John
Middleton for his advice and expertise. I would like to thank my family for their advice
and support.
5. 4
Abstract
This study identifies the use of innovation within small to medium sized enterprises
(SMEs). The aim of the research is to examine how innovation can provide
opportunities to SMEs. It provides a theoretical framework of the main elements of
innovation. It has identified how SMEs adopt innovation to ensure growth and
improved performance. The study addresses the use of management techniques,
which encourage competitive advantage. The research pursued opinions of local
entrepreneurs and businesses through semi-structured interviews. Online surveys
were also used to collect a greater proportion of data. The findings suggest that
innovation can increase profitability and growth. It also stated innovation improves
sustainability and working conditions. The research has identified gaps such as
leadership and organisational culture that are important to the process of innovation.
The study is limited by the number of participants who attempted the online survey
and the number of companies who were interviewed, it however contributes to the
understanding of innovation within SMEs. To conclude, SMEs must attempt to
identify and implement alternative ways of business for profit and sustainability.
6. 5
Table of Contents
Acknowledgments...................................................................................................................... 3
Abstract......................................................................................................................................4
1.0 Introduction .......................................................................................................................... 8
1.1 Research Background......................................................................................................8
1.2 Research Aim................................................................................................................. 11
1.2.1 Research Question 1:.............................................................................................. 11
1.2.2 Research Question 2:.............................................................................................. 11
1.2.3 Research Question 3:.............................................................................................. 11
1.2.4 Research Question 4:.............................................................................................. 12
1.2.5 Research Question 5:.............................................................................................. 12
1.3 Research Focus and Scope.............................................................................................. 12
1.4 Research Methodology...................................................................................................... 13
1.5 Structure of the study......................................................................................................... 14
2.0 Literature Review ............................................................................................................... 16
2.1 The Drivers of Innovation............................................................................................... 16
2.2 Innovation Capacity........................................................................................................ 18
2.3 Measuring Innovation..................................................................................................... 20
2.4 Total Quality Management (TQM) ................................................................................. 22
2.5 Business Process Re-engineering (BPR) ..................................................................... 24
2.6 Six Sigma ....................................................................................................................... 26
2.7 Radical and Disruptive Innovation ................................................................................. 28
2.8 Incremental Innovation................................................................................................... 30
2.9 Diffusion of Innovation ................................................................................................... 32
2.10 Summary...................................................................................................................... 34
3.0 Research Methodology and Methods................................................................................ 35
3.1 Research Purpose......................................................................................................... 35
9. 8
1.0 Introduction
The purpose of this research is to identify how small and medium sized enterprises
(SMEs) use innovation to generate growth and improve performance. The idea was
generated from the recent recession, during which small businesses had to adopt
innovation, creativity and change business policies to ensure their survival during
times of hardship. The potential benefits of the research will identify that the process
of innovation is a fundamental business component that maximises growth and
future sustainability. According to Tidd et al. (2010) 'Innovation is a key factor for a
company to survive and grow in the long run.' It is therefore essential that SMEs
utilise the concept of innovation and maintain its importance.
There are positive and negative effects that could hinder the result for successful
future growth. A business should innovate to improve itself continuously to meet the
demands of new markets and competitors which may threaten future sustainability
and growth.
This research will highlight the essential elements of innovation and discover the
opinions of local SMEs to identify its main processes and achievements.
1.1 Research Background
Innovation is a modern business concept that identifies gaps in the marketplace, and
when utilised effectively can enhance the growth and performance of an
organisation. This concept is popular within small to medium sized enterprises,
although many organisations are limited as to its use because of capacity and risk;
larger companies are able to afford having greater resources.
10. 9
The research will attempt to analyse what the main drivers of innovation are,
the processes of innovation and the capacity to attempt innovation within the
marketplace. It will identify that it is not primarily large enterprises that innovate to
generate growth, but also SMEs.
Innovation is defined by Drucker (1985) as 'the act that endows resources with a new
capacity to create wealth.' This definition tries to show that innovation is primarily
adopted to create wealth and is more specifically an attempt to build opportunities.
Tidd and Bessant (2010) suggest that 'the skill to spot opportunities and create new
ways to exploit them is at the heart of the innovation process.' This definition is an
accurate account of what innovation within a business seeks to achieve. This piece
of research shows, innovation within SMEs is a driver for economic growth.
According to Henderson (2002:316) 'entrepreneurs create new jobs, increase local
incomes and wealth and connect the community to a larger global economy.
Innovation is therefore a driver for economic growth and by utilising the concept
within SMEs, it will benefit society. That is why it is necessary and meaningful for this
research to be conducted.
The overall motivation of the research is to discover how small businesses use
innovation within their core competences to improve their position in the marketplace
and overcome obstacles which large businesses are better able to overcome. SMEs
must innovate in an effort to guarantee survival, especially during and after an
economic crisis and to prevent saturation of their markets. This is a relevant situation
facing all businesses across the United Kingdom and probably the whole European
Union for that matter and as mentioned by Oke et al. (2007), 'In the UK at least it is
11. 10
clear that policy makers see an important link between innovation and business and
economic growth.'
The piece of research will address relevant theories of innovation and
operational strategy to ascertain how SMEs can improve performance. The main
topics of relevance, examined in greater detail within the literature review, will
attempt to understand the drivers of innovation, the capacity for SMEs to innovate
and the risks which face organisations. The different processes of innovation such as
radical innovation and incremental innovation, are explained in detail within the
literature review. The research will target local SMEs, primarily through interviews
and online surveys, using social media such as “Linkedin” to collect opinions of
professionals.
There are a number of local businesses available to collect this information from and
it is feasible to conduct an analysis over a fifteen-week period. The only issue for
access is the co-operation, enthusiasm and availability of time for SMEs to
undertake interviews and whether or not they are prepared to reveal company
information. The research will address whether or not innovation is key to ensure
SME sustainability. This is outlined within the research aim and questions in the next
section.
12. 11
1.2 Research Aim
Based on the above background, this research aims to ascertain whether SMEs
understand that initiating an effective operations strategy is not enough to respond to
competitive threats and change; the organisation must be capable of innovating new
products and services to meet growing demands and competitive threats. The
purpose of this research is to attempt to understand how SMEs use and develop
innovation processes, plus how this understanding will impact on business financial
performance. It will also address the barriers to innovation and discuss the reason
for them.
To achieve this, research questions are formulated as follows:
1.2.1 Research Question 1:
How does innovation improve performance and sustainability within SMEs?
1.2.2 Research Question 2:
How do SMEs conduct innovation within their operations, and does the use of Total
Quality Management, Six Sigma and Business Process re-engineering encourage
innovation?
1.2.3 Research Question 3:
Does innovation place a burden on SMEs, which will ultimately distract the
organisation from its core competences and hinder its performance?
13. 12
1.2.4 Research Question 4:
What are the main drivers of innovation and why should SMEs explore innovation?
1.2.5 Research Question 5:
Does an SME require sufficient capacity to enable an organisation to innovate? What
is required to develop innovation and make it work for an organisation?
1.3 ResearchFocus and Scope
The overall focus of the research will attempt to analyse a number of local small to
medium enterprises and analyse the driving factors behind innovation, whether or
not they have succeeded in generating performance. It will assess if the company
has used innovation successfully and why others have not attempted to use it at all.
Overall the research will help to identify if innovation increases operational efficiency,
reputation or image, improving business financial performance.
The research will not only consist of interviews to obtain these opinions from
SMEs, but also attempt to analyse how other professionals see innovation as a
business function. This will be collected through an online survey and will be used to
fulfil the research questions. The surveys will, again, try and pinpoint what the main
drivers of innovation are, the risks that are involved within the process, what
innovative processes are used and the capacity to innovate. The data collection
involved will seek the opinions of individuals within business and local businesses
themselves in order to achieve a wider range of opinions.
14. 13
The scope of the research is targeted at a few local businesses, which are expected
to provide a broad understanding of the functions of innovation within the South
West and South Wales. An Online survey will also be used to obtain data from more
professionals whose opinions will hopefully provide richness to the research.
The study will then use the information formulated within the literature review in
chapter four to form an evaluation of the findings. This will initiate an analysis that
will indicate if any gaps in the research have been filled or not as well as any
criticisms that have been made.
1.4 ResearchMethodology
This section will be covered in chapter three of the research and embodies the
principles and methods of the research that will be conducted to form an analysis.
The research is designed so that it utilises both qualitative and quantitative aspects
of research under an interpretivist paradigm. It will be conducted through the use of
online surveys and semi-structured interviews to understand the views of innovation
over a wide scale and how it is used within a business. Both sources of sampling are
designed for one to compensate the other, so the benefits of both are utilised to
improve the scope and viability of data. This will produce a greater amount of data to
ensure the analysis is sufficiently rich of strong opinions and viewpoints. The
potential problems with the survey are a poor response rate from the number of
individuals and during the interviewing the responses may deviate from the purpose
of the research aim. The results of the data will be categorised into relevant themes
and will be analysed on the opinions of the individuals. The analysis will then attempt
to ascertain what kinds of patterns and themes of response are emerging. The
15. 14
findings will be presented within tables and pie charts at the appendix to give the
reader a visual interpretation of the data when reading through the analysis.
1.5 Structureof the study
Chapter 1: Provides an introduction which identifies what the research entails
as well as defining the purpose of the research. This chapter outlines the
research aim and questions, as well as addressing how the research will be
conducted. It will introduce the necessary research methodologies used to
conduct the study before undertaking the analysis. Innovation will be defined
as well as an interpretation of academics who have previously studied the
subject.
Chapter 2: This chapter explains the literature that will attempt to answer the
set research aim and questions. It will attempt to form an evaluation and
explain its importance analysing the research. The purpose of this chapter is
to convey viewpoints and academic theories of innovation. Each theory will be
assessed and critically analysed. An overall analysis of the empirical research
and the literature review will be discussed within chapter four.
Chapter 3: Explains the research methodology and will define what types of
research will be used to justify an overall analysis and an explanation of the
most effective sample selections. It will also attempt to discuss what data
collection methods will be used, how effective they are, identify the limitations
and how those limitations can be reduced. The chapter will then summarise
what the research will entail and benefit the overall analysis.
16. 15
Chapter 4: Gathers all the data collected from the online surveys and
interviews to evaluate the findings and depict any trends. It will present the
findings in a logical order to processes a clear interpretation.
Chapter 5: Analyses all the data collected and presented within chapter four.
The overall function of this chapter will use the results to form an analysis
using theoretical arguments described within the literature review.
Chapter 6: Concludes the research and analysis and summarises the findings.
It will also attempt to outline any limitations and suggest recommendations
that could be useful to the organisations that were used within the research.
The research will be summarised in this chapter and comments will be made
on possible future research and suggestions for the companies that have
been interviewed.
17. 16
2.0 LiteratureReview
2.1 The Drivers of Innovation
To understand how organisations innovate it is essential to examine what drives
them to innovate. According to the available literature, which suggests that there are
five main drivers of innovation, namely competitive advantage, improving
performance and growth, product development, survival and technological change.
The purpose of evaluating the main drivers is to answer research question four.
The main driver for businesses to innovate is to seek a competitive edge within the
marketplace, which will offer them a chance to achieve growth. According to Scozzi
and Garavelli (2005:122), ' Innovation is the main source of competitive advantage
for many organisations.' This is a driving force behind innovation, however it
depends on the current market environment. It has been suggested by Salavou et al.
(2004) that 'firms operating in more competitive environments, with lower density and
lower barriers to entry, tend to have better performance in product innovation.' This
means that companies which innovate in competitive environments will have greater
success due to fewer barriers to entry. This interpretation of the market environment,
does not however justify a company’s decision to innovate and could in fact lead to it
refraining from innovating, due to competitive pressures from globalisation that is the
build-up of foreign competition.
It is not only a competitive advantage that companies seek, but gaining
company growth is a major driver behind innovation. According to de Jong and
Marsili (2006) 'small firms which innovate increase their chances of survival and
growth.' It is the ability to preserve viability as long as possible and remain
18. 17
sustainable that is a major driving force behind innovation. This is particularly
relevant to small companies who are forced to develop sustainable ideas. The desire
to achieve sustainable growth will only be successful if the companies adopt certain
attitudes that will facilitate success. According to Ozsomer et al. (1997) firms which
achieve growth are 'innovative companies with a proactive strategic posture,
aggressive firms, competitive and risk takers.' It is essential that with these
characteristics innovative companies can achieve success through innovation.
Improving products is also a driver to innovation and as mentioned by Oke et
al. (2007) 'product innovation, which may include new product offerings or
improvements in existing products, appears to be the most common form of
innovation.' It has been suggested by Mosey (2005:114) that 'new product
development, suggesting product innovation activities are the cornerstone of better
performing companies and those with ambitious growth targets.' This ascertains that
product development is a driver of innovation because it generates substantial
growth appealing to many organisations; however this can only be achieved if the
company has sufficient capacity, both financial and structural, to initiate product
development.
The overall drivers to innovation are namely competitive advantage, improved
performance and growth, product development, survival and technological change.
These encourage companies to innovate and maximise their potential within the
marketplace, however, this can only be achieved through a collaboration of
commitment, determination and strong organisational culture.
This answers research question four, which asks what are the main drivers of
innovation and why SMEs should explore innovation. The drivers of innovation will
be analysed to depict the incentive SMEs have to become innovative. It is essential
19. 18
for many SMEs to use innovation essentially to maintain their place within the
marketplace and hopefully, survive if they are struggling to remain viable. It all
depends however on the ability of an SME to obtain the necessary capacity to
innovate before it can begin to think about implementing any innovation.
2.2 Innovation Capacity
Research question five asks if capacity is required for an SME to innovate.
Innovation capacity is referred to as 'a continuous improvement of the overall
capability of firms to generate innovation for developing new products to meet
market needs' as mentioned by Szeto (2000:149). Innovation can only occur if the
capacity to innovate exists within the company, otherwise it would hinder business
financial performance according to Laforet (2010:383). This would benefit the entire
research and development process to allow innovation to proceed. It either entails
the amount of resources required or a combination of suitable training and
experience of staff to participate in innovation. It is an important priority for
organisations to continuously improve their product and range of services to produce
new innovative developments.
However it is usually only viable to improve capacity when companies have
the financial resources and access to highly skilled staff. Such attributes are
available to larger firms, due to the staff numbers and access to financial resources.
It goes almost without saying that access to a highly skilled workforce is important to
generate and facilitate innovative ideas. It has been suggested by Dimov and
Shepherd (2005) that 'a key component of human capital is the possession of
specific knowledge, which yields competitive advantage and therefore, the types of
20. 19
education, and experiences of employees are important in assessing high
performing companies.' This reinforces the notion that the capacity for an
organisation to innovate, depends on the skills of the workforce.
If a skilled workforce or any workforce does not have the ability to adapt to
change then innovation will not occur. According to Humphries et al. (2005)
'Implementing and developing the innovation process requires energy to overcome
the resistance to change.' An organisation’s capacity is therefore restricted if there is
no willingness to change and adapt to new innovations. It is vital that in order for an
organisation to have the ability to change, a new culture must be created. The way to
bring about innovative based change according to Beer et al. (1993) is to first
change staff behaviour, which will consequently lead to changes in desires and
attitudes. This will lead to a greater belief that change is necessary, thus benefiting
the overall capacity to innovate. It must be argued though that without effective
leadership these desired outcomes will never be achieved. A workforce must be
guided by leaders who are determined and willing to make improvements to an
organisation. Leaders with an innovative role must inspire innovation to adapt to
cultural organisational change. 'The word inspire is deliberate and important because
you cannot tell people to be more innovative, you have to inspire them to be so', as
mentioned by Stamm (2009:14). It seems that leadership is an essential requirement
for any organisation to innovate and capacity is judged on the ability to acquire
essential talent within the workforce.
It is therefore necessary for SMEs to effectively innovate they must ensure that there
is sufficient capacity, in particular the skilled labour force which must be inspired
culturally to change, with the provision of effective leadership, this can be achieved.
21. 20
Through this thought process SMEs can administer innovation effectively and ensure
that capacity does not override their desire to improve performance. More
particularly referred to in the answers to research question five.
2.3 Measuring Innovation
Measuring Innovation is fundamentally important in order to understand that the
business has met its objectives of creating opportunities and ascertain if a return on
investment has been achieved. This is essential to answer research question one
which asks how innovation can improve performance and sustainability.
Organisations that are innovative usually produce better quality products and
according to Simpson et al. (2006) ‘innovative firms focus on successful creation and
implementation of novel ideas, products, and services in the market place; as well as
having the ability to anticipate consumer needs, and responding to them better than
competitors.’ This is a good statement, however it does not take into consideration
whether organisations are willing to innovate by taking risks and have the necessary
capacity to innovate. Furthermore organisations are successful through innovation,
but without the correct leadership to channel this innovation into effect, organisations
will remain stagnant. According to Zhou (2003:413) ‘employee’s creativity often
provides a starting point for organisational innovation, but leadership is often
responsible for deciding what creative work is championed toward innovation.’
Therefore effective leadership is a driver and measurement of innovation as it
pushes an organisation to engage with the innovation.
New product development essentially improves the performance of an organisation
however Neely et al. (2001) states ‘with respect to outcomes of new product
development, past research has shown positive outcomes of product innovations
22. 21
relate to lower costs, existing product enhancements, extensions to product range,
better customer service, more rapid delivery, product customisation, and improved
after sales service.’ These performances suggest the range of measures to indicate
successful innovation.
Business performance and profitability is another measure of innovation success and
can be measured over three to five years in relation to return on investment,
turnover, market share, return assets, profits, sales, or relative sales growth, new
product sales as a percentage of total sales, new product sales, competitive position
and value to customers. This has been suggested by (Neely et al., 2001; Matunso
and Mentzer, 2000). However the performance of an organisation can also be
measured by positive consequences such as market advantages, involving
competition, customer related aspects and employee advantages, such as job
satisfaction and performance as suggested by Simpson et al. (2006). There are
different variations on how to measure innovation performance and it is necessary to
analyse them in order to ascertain how innovation can succeed within SMEs.
However it is a known fact that the process of innovation can conversely jeopardise
the performance of a business. It is important to realise that innovation is not only a
tool used to seek further opportunity, but it can also impose a burden on an
organisation. The risk factor indicates that before an organisation implements a
decision to innovate it must assess the risks. Negative consequences, such as
taking unnecessary risk can amount to unprofitable innovations leading to excessive
costs. To measure such risk According to Vargas-Hernández (2011:4) ‘it depends if
the innovation in general is more related to an incremental or radical dimension. A
23. 22
radical innovation has a high risk in comparison with an incremental which has a low
risk.’ Risk however it can also be argued is how the current market will react to such
an organisational change or new product, rather than if innovation is gradual or
incremental. If the R&D department has spent a long time developing a product and
the market reacts badly, it could either be the fault of the product or the demand for
it. If however the risk is so great, but it is able to penetrate the marketplace, then in
terms of measuring innovation it should be deemed a successful innovation
implementation. It is essential that organisations especially SMEs appreciate that
without taking a risk innovation will never work.
Measuring innovation is the ability within an organisation to understand how the
implications of it have affected the company’s progress. This is an essential element
of innovation in determining what SMEs want to achieve out of their innovation and
understand the desired consequences. This section overall endeavours to answer
research question one as it focuses on how SMEs use innovation to improve
performance and sustainability.
2.4 Total Quality Management (TQM)
Total quality management is an operational strategy that promotes members of an
organisation to utilise skills and experiences to generate continuous improvement. It
is a method of innovation which encompasses every opportunity and their greatest
attributes to ensure maximum potential productivity. It is suggested by Jabri
(2012:165) that 'the need for TQM remains high. Organisations constantly need to
improve quality as a result of increased globalisation and international accreditation
of quality standards.' It is therefore essential that organisations benefit from TQM to
ensure every opportunity is met. This is a method that if incorporated within SMEs,
24. 23
could ensure a greater competitive edge within the marketplace. However according
to Samaha (1996:145) 'TQM focuses on identifying work processes that need
revamping or replacing to finding new and more efficient ways of doing business and
in this way the TQM concept supports innovation.'
Total quality management as mentioned by Lorente et al. (1999) ‘has
demonstrated its potential to be a successful way for organisations to eliminate
costs, improve productivity and gain competitive edge in the marketplace.’ This is an
operational method, which can improve the performance of an organisation toward
gaining a greater competitive edge within the marketplace. Companies use TQM to
innovate their processes making their operations more effective. It can be argued
that TQM enables long-term sustainability through the continuous process of
innovation. However Yu-Yuan et al. (2010) otherwise acknowledges that 'TQM
promotes principles and practices that hinder innovation.' It is though, enough to
apply the principles of TQM to SMEs which will improve the rate of innovation within
an organisation. Again as suggested by Lorente et al (1999:14) 'companies following
a TQM approach can more easily assimilate innovations imported from other
situations due to the willingness of its employees to accept new ideas flowing from
the continuous improvement ethos promoted by TQM.' This can also become a
cultural issue regarding change within an organisation, but with regards to effective
leadership this problem can be resolved. It is however argued by Mertins et al.
(1997) that empowered employees taking part in the change process, are more
willing to get fully involved in making continuous improvement to the process for
which they have responsibility.' Having analysed that leadership is vital towards the
effects of TQM, it seems that there is a direct affect between innovation and the
parameters of effective organisational leadership. Perhaps this is a common goal
25. 24
that is, all SMEs are required to innovate thus improving business financial
performance. It again, however, depends upon capacity to introduce TQM within a
business and whether or not it can be incorporated within an SME because of
financial restrictions and the willingness to administer such a scheme.
This process will ascertain if innovation progresses within an organisation over a
period of time rather than adopting an entire business model change and to engage
new competitive markets. It is again critical that effective leadership is provided
within business innovation and it seems that there is a possible gap in the research
towards identifying leadership as a key principle to innovation. Overall TQM is a
business method an SME can use in innovation to seek new opportunities, which
they can develop to suit continuous progression. This method is essential to answer
research question two on how SMEs conduct innovation within their operations.
2.5 Business Process Re-engineering (BPR)
Business process re-engineering is another business strategy that aims to
completely reconfigure and change the direction of an organisation. This is another
operations strategy which attempts to answer research question two on encouraging
innovation. According to Ostadi et al. (2011) 'BPR aims to improve business
processes by substantially revising their structure and by dramatically changing how
these processes are managed and implemented.' However according to Hammer
and Champy (1993) (BPR) is defined as ‘the fundamental rethinking and radical
redesign of business processes to achieve dramatic improvements in critical
contemporary measures of performance, such as cost, quality and speed.’ This
process effectively changes the entire business, but it is a riskier solution to improve
business performance and can lead to dire consequences, as it is radical change,
26. 25
rather than seeking continuous sequential improvement. It is also suggested by
MacDonald and Dale (1999) that 'large step changes are riskier, more complex and
more expensive than continuous improvement.' Re-engineering and TQM share
some common similarities and it is suggested by MacDonald and Dale (1999) that
‘TQM and re-engineering are complementary and that TQM can often serve as the
building block for subsequent re-engineering efforts.’
Research question two asks how can these strategies be imposed on SMEs
to encourage innovation and would they be beneficial towards an organisation? The
main issue regarding TQM and BPR is that they use old strategies that were
beneficial to organisations within the 1980’s and 1990’s. It might be inappropriate for
these strategies are adopted now within SMEs due to the high level of risk. However
the use of Six Sigma might be a better approach for SMEs to adopt. Again it all falls
to available resources that SMEs can access and arguably its capacity to innovate.
Arguably, it may not therefore be appropriate for SMEs to incorporate (BPR) due to
the lack of resources and the amount of time wasted as it will interrupt the status of
the cash flow.
The purpose of business process re-engineering enables an organisation to
completely renovate the business and essential enabling organisational change. Due
to the age of this business instrument it may not be plausible for SMEs to undertake
such a venture, but should still be considered as an option for innovation to answer
research question two.
27. 26
2.6 Six Sigma
This is a relatively recent strategy for a business to adopt a step by step shift
towards innovation which again is targeted at answering research question two.
Although it does provide a similar structure to the previous management strategies
such as TQM and BPR that have just been mentioned. According to Schroeder et al.
(2006) ‘that although Six Sigma shares the same tools and techniques with
traditional quality management methods, it provides an organisational structure not
previously seen.’
The concept of Six Sigma is however usually adopted within larger
organisations but the qualities can be utilised effectively within SMEs to advance the
process of innovation. Six Sigma is another operations strategy which can
encourage innovation and answers research question two.
This operations theory which attempts to place new products and services into the
marketplace is defined by Antony (2008:420) and ‘seeks to identify and eliminate
defects, mistakes or failures in business processes or systems by focusing on those
process performance characteristics that are of critical importance to customers.’ It is
also suggested that Six Sigma is a driving force of business innovation and
according to Sauer (2001:10) ‘With a Six Sigma approach, researchers first find what
the customer wants and then look at the process capability study.’ This implies that
Six Sigma is an innovative tool that can lead to business performance and can be
utilised within SMEs.
However it can also be argued Six Sigma is only suitable for use within large
organisations, because of the greater amount of resources available to them
28. 27
compared to the limited budget of SMEs. According to Antony (2008:423) ‘Scale
should not really enter into a decision to adopt a Six Sigma management philosophy.
All companies, large and small share many common features and problems.’
There are problems using Six Sigma especially within small businesses as it
could potentially cause too many distractions, because employees have to engage
with multiple roles within the organisation. However according to Eng (2011:253)
‘Six Sigma provides methods to generate systematic innovation in a structured way
linked to market opportunities.’ The author Eng continues to acknowledge that it is
organisational learning that further improves the prospects of innovation. This in fact
leads to incremental innovation as Six Sigma continuously adapts to fulfil the needs
of customers, according to Santos-Vijande and Gonza´lez-Alvarez (2007).
Customers’ requirements consistently change and it is important for SMEs to adapt
and ensure they meet the right demand, so gradually implementing innovation,
rather than radically.
Six Sigma is therefore suitable for SMEs and is an innovating management
technique, especially eliminating waste according to Sony and Naik (2012) ‘Six
Sigma can also serve to eliminate waste of time and resources in the conception
process by linking it directly to customer wants and needs.’ It is important that SMEs
use Six Sigma in order to change their approach to new markets and customer
demands. However it depends on resources available to SMEs that justify the use of
Six Sigma, especially regarding expensive training budgets. Even if staff within
SMEs are trained with Black Belt Six Sigma for example, they may be inclined to
seek employment in larger organisations according to Antony (2008:422). Six Sigma
is an option empower SMEs in seeking new opportunities and assessing customer
demand through new products and services. This provides an answer to research
29. 28
question two on how SMEs conduct innovation within their operations.
2.7 Radical and Disruptive Innovation
Radical innovation imposes spontaneous innovation upon an organisation that either
involves the breakthrough of a new product or a new industry offering a service. It
involves entrepreneurial thought and identifying a gap in the marketplace, according
to Cooper (2000:1) ‘radical product innovation and disruptive or discontinuous
product innovation, creates a new dimension to the customers perspective.’ In other
words its objective is to entice the customer to purchase this new breakthrough or
inspire organisational change within the organisation. It however has some
implications to the organisation such as high risk and the effects upon the workforce
adapting to instant change. This is essential to answer research question three and
to understand if innovation can become a burden upon an organisation.
This is a type of innovation which according to Oke et al. (2007) are said to be
characterised by 'uncertainty, knowledge intensity and boundary crossing.' Radical
innovations are popular amongst SMEs as they generate high returns and it is
paradoxically easier for smaller firms to adjust their operations than large firms which
is mentioned by Kanter (1985:47). There is however a high risk and uncertainty with
using radical innovation and as mentioned by Chiesa et al. (2009) 'the main impact
of radicalness is related to an increase of uncertainty especially concentrated in the
early stages of the process.' Despite the risks involved in radical innovation it is
easier for SMEs to adapt to changes in organisational behaviour due to the nature
and size of the business as well as the lower costs of R&D.
30. 29
Radical innovation is a relevant process of innovation, which can assist SMEs
to become more competitive within the marketplace with the potential for generating
higher returns.
Disruptive innovation is a method according to Assink (2006:217), which 'attacks an
existing business, and offers greater opportunities for new profit growth.' It is an ideal
method for expanding the business. Christensen (1997:61) defines disruptive
innovation as a ‘product or service designed for a new set of customers.' However
the author, further states that improving the demand for a service or product does
not guarantee demand will rise and constitute market growth. In fact disruptive
innovation can create chaos within large successful organisations that have already
achieved growth within their R&D departments. The author Assink (2006:218)
reiterates that disruptive innovation is ‘affected by exogenous determinants such as
economic, social and political factors, competition and infrastructure, and
endogenous determinants such as resources, corporate structure and corporate
culture.’
The advantages of using disruptive innovation will ensure greater success with
achieving a competitive advantage, thinking outside of the box and gaining
knowledge to outwit main competitors. It is a useful tool for SMEs to take advantage
of new ideas that could potentially change the performance of their business. The
outcome could however backfire if the organisation is not ready to carry out the
innovation, which again depends upon having sufficient capacity to innovate.
With this type of innovation it is useful to understand the thought processes
within SMEs in formulating new ideas to generate profit. It is necessary for
businesses to expand their ideas for new opportunities, but depends upon whether
or not the idea produces a return on investment. However if an innovation is so
31. 30
extraordinary that it has the potential to change the fabric of society, it is worth the
risk and implementation. This again answers research question three and outlines
how innovation is essential for SMEs and not a burden.
2.8 Incremental Innovation
Incremental innovation is the opposite of radical innovation as it imposes gradual
innovation over a period of time avoiding spontaneity. According to Tidd and Bessant
(2010:27) it is essentially ‘doing what we do but better.’ Which means that an
organisation continues its usual function, but seeks additional or alternative ways of
improving those procedures. In effect this type of innovation will gradually change
the culture of the company, as incremental innovation will accumulate progress over
time. It is therefore a less risky alternative for an SME to introduce innovation this
way as it in theory adapts and learns from previous precedent. This answers
research question three as it identifies ways in which SMEs can benefit from low risk
innovations and not disrupt its main functions.
This type of innovation seeks to improve a product or service with small minor
improvements to their usual function ability. It is defined by Hoonsopon (2009:56) as
'the development of products that have minor changes in attributes, and the benefits
from these changes are minimal from the customer’s perspective.' It allows an
organisation to make certain beneficial changes that will progress a competitive
advantage over time rather than radical instantaneous innovation.
However Storey and Easingwood (1998) argue that 'simple augmented service
offerings (or incremental service innovations) have the capability to impact a
32. 31
company’s profitability and sales, but do not offer enhanced opportunities.' This is
suggesting it does not provide instant opportunities to organisations, but it is
however suitable for small organisations to use this method in order to initiate
innovative ideas with limited resources.
The advantage of the incremental method to SMEs is gradual innovation over time,
which allows the organisation to maintain control and clarity of business strategy. It is
different to radical innovation, which involves a different perspective and can create
uncertainty. According to Oke et al. (2007) 'Many of the innovation studies in large
firms revealed that management requirements for managing normal and existing
activities and developing incremental innovations are different from those required to
develop and manage radical innovations.'
The requirements for SMEs to manage incremental innovation is suitability
and its low risk element for those who desire to progress a little over time. It does not
encourage organisational change and could create boredom in the workplace, if
there is no active ambition for a business to succeed in the long run. It is a way of
avoiding organisational decline and market saturation as in theory the business
remains up to date with new markets and trends, as well as being open minded
about new sources of technology. This type of innovation is a suitable measure for
SMEs to adopt and encourage gradual change and growth and is useful to formulate
an answer to research question three.
Furthermore it is essential to understand how an organisation will use innovation, but
it must develop a process to push the organisation in a clear direction of innovation.
33. 32
2.9 Diffusion of Innovation
The process of innovation is an important aspect SMEs must adopt to implement
their ideas and goals and diffusion is the key to identify the influences and the
direction of adopting an innovation. With regards to the research question three the
purpose of diffusion allows an organisation to carefully implement innovation to avoid
disruption.
Diffusion of innovation is the 'process by which an innovation is communicated
through certain channels over time among the members of a social system'
according to Rogers (2003). It is the overall thinking process of adopting innovation
to improve the organisational abilities and growth. The process occurs in 5 steps
namely: knowledge, persuasion, decision, implementation and confirmation.
However according to Shanklin and Ryans (1984) the concept of ‘diffusion of
technological innovations is the basis for developing useful high tech market insights
for effectively researching those markets and for formulating consequent marketing
strategies that prove capable of proving company goals. ’Diffusion is not necessarily
about developing technological ideals, but it is about spreading the novelties of
innovations to changing societies as mentioned by Zenko and Mulej (2011) ‘all
novelties and or new solutions need to complete the process of spreading/diffusion
of potential users.’
Adopting an innovation depends on the interaction of the demand side and supply
side factors according to Tidd and Bessant (2010:352). It therefore depends on the
perceptions of the benefits and risks implementing the innovation as well as
assessing the relative barriers of adoption and availability of information. They also
34. 33
continue to state that the factors which can influence adoption of diffusion fall on the
characteristics of the innovation itself; the characteristics of the individual and the
characteristics of the environment. This might suggest that it depends on the
character of the organisation and could potentially lead to an organisational culture
that for example is keen to take necessary risks. As mentioned by Zenko and Mulej
(2011) ‘innovators are mostly technically educated people and differ from most
potential users.’ Therefore innovation is subject to capacity and acquiring a highly
skilled workforce with the necessary skills to adopt innovations during diffusion.
Rogers (1962) reiterates that it is also the encouragement within organisations of
opinion leaders who frequently influence others orientations toward adopting an
innovation.
It is important to identify that certain variables will bring different innovative ideas to
an organisation and indeed the marketplace where these are derived from
organisational characteristics. According to MacVaugh and Schiavone (2010) ‘firms
launching product innovations should consider a broad range of variables in order to
maximise their adoption within market.’ It is possible that an organisation’s
characteristics have an impact on the process of innovation to configure the
complexities of initiating and implementing an idea. This involves the members of an
SME and fundamentally the organisation’s culture. It is essential SMEs have the
necessary characteristics, whether individual or environmental to ensure successful
implementation of innovation.
The application of diffusion if managed appropriately will ensure the successful
application of innovation during the operation of any new business venture or
35. 34
strategy within SMEs. Provided certain measures are incorporated to analyse the
impact of a new product or idea within a certain environment. This again attempts to
answer research question three.
2.10 Summary
The purpose of this chapter is to answer the research questions and elaborate on
the relevant theories of business innovation. The main themes stated in the literature
review are that innovation has the ability to procure both profitability and
sustainability for SMEs. This can occur where an organisation has the capacity to do
so, especially if acquiring highly trained staff and ensuring effective leadership. It
should then be able to progress the innovation effectively, through either of the
operational strategies or using diffusion of innovation. An SME must then decide if it
would like to initiate the innovation incrementally or radically depending upon the
level of risk. This attempts to answer the research questions and form an analytical
viewpoint.
36. 35
3.0 ResearchMethodology and Methods
This chapter analyses research methodology, which is defined by Collins and
Hussey (2009) as ‘an approach to the process of research, encompassing a body of
methods.’ It outlines the purpose of the research, the strategy adopted, what
samples have been incorporated and analysed as well as the data collection
methods used.
3.1 Research Purpose
The research is delineated into three categories which embody the principles of the
purpose of the research. They are categorised as exploratory, descriptive and
explanatory, however each category has its own characteristic which can be
exploited to suit that piece of research. Collins and Hussey (2009) outlines the
description of each category as follows:
Exploratory research is conducted into a research problem when there are
very few or no earlier studies to draw information from.
Descriptive research is conducted to identify and obtain information on
characteristics of a particular problem or issue.
Explanatory research is a continuation of descriptive and aims to understand
phenomena by discovering and measuring casual relations among them.
The primary focus of this research is to understand the main drivers of innovation
and how they are incorporated into SMEs to improve performance. It is directed at
the research aim and questions, which focuses on the main drivers of innovation, the
capacity for SMEs to innovate, how innovation is measured, the main processes and
37. 36
how they are conducted as well as identifying the barriers to innovation. Judging
from the comparison with the research aim and questions the focus of this research
is therefore exploratory. This is because the research seeks to identify patterns and
ideas of how SMEs use innovation within their establishments. The research also
aims at solving the problem of how SMEs can remain sustainable by utilising
innovation within their business strategy.
3.2 Research Approach
The research approach identifies which research paradigm, was used and whether
or not the study has been essentially qualitative or quantitative.
The purpose of this study was to understand the process of innovation within SMEs
using an interpretivist paradigm.
Interpretivism is defined as a paradigm that 'involves an inductive process with
a view to providing interpretive understanding of social phenomena within a
particular context' according to Collins and Hussey (2009). The research primarily
targeted local SMEs to discover how they have used innovation to improve their
businesses. It sought an effective response to answer the research questions.
Having identified that the research is based on an interpretive paradigm it was
essential to define qualitative and quantitative and how they were to be incorporated
into the research.
A qualitative research approach, is non-numerical data gathered in nominal form that
has not yet been quantified and the quantitative research approach is data obtained
in numerical form according to Collins and Hussey (2009). Qualitative research has
38. 37
focused on the opinions of business leaders by interviewing managers or owners of
small medium enterprises, with the focus of collecting fact and opinion and
recognising particular themes or trends. As the research is focused on SMEs they
have been specifically targeted. However due to the nature of such companies very
few local business have been prepared to spare any time. The research has been
limited by the availability of people to be interviewed. Quantitative research has
been utilised to provide a greater proportion of professional opinion and clarification.
It was necessary to conduct this research to obtain broader data when conducting
the analysis.
For the purpose of fulfilling the aims and objectives of this particular research a
qualitative research approach has been followed. This research is not aimed at a
scientific perspective, but is focused on an interpretivist paradigm, which seeks to
provide an interpretative understanding of social phenomena. Both qualitative and
quantitative approaches have been included into the research as it is focused on the
opinions of others through structured interviews and online surveys. The research
has focused primarily on obtaining information of fact from interviews and statistical
analysis and utilising an online survey. These approaches are necessary, as they
provide greater richness to the analysis and attempt to answer the set research aim.
The data was gathered to analyse if the targeted local SMEs agree or disagree with
the research aim and questions. The data clarifies within the analysis that innovation
does indeed impact on the scope of performance in SMEs. The data collected is rich
and meaningful, by procuring the opinions of managers and business leaders,
bringing essential rigour to the analysis.
39. 38
3.3 Research Strategy
The strategy focuses on problem-based research, which according to Wisker
(2008:243) ‘all research involves the posing of problems or the positioning of ideas,
innovations or questions of some form or another.’ This identifies the problems many
small and medium sized enterprises have such as remaining sustainable and
remaining competitive. The research strategy considers how these businesses have
found solutions to their problems with the aid of innovation.
In order to focus on problem based research, it was useful to use some of the stages
and strategies of action research which, according to Gummesson (1991:102) 'action
science is primarily applicable to the understanding and planning of change in social
systems and thus is a suitable research and consulting strategy for business
organisations.' It has been vital to use qualitative research strategy to study
environmental change within an organisation, where it has adopted innovation to try
and solve an issue. Action research has allowed the identification of organisational
change brought about by innovation and has attempted to address the process of
that innovation, to reflect upon how it has improved the performance of the
organisation or hindered its business functions.
This research strategy was assessed to fit the parameters of the research aims
and questions. It focuses on how SMEs have utilised innovation to enter new
markets and remain competitive to avoid market saturation.
40. 39
3.4 Sample Selection
The sample of data that corresponds with the research aims involved semi-
structured interviews with local SMEs and online surveys to target business
professionals via social media. As the research was within an interpretivist
framework the sample sizes obtained have been small and are concerned with
generating theories.
Interviews were separated into three categories; structured interviews, semi-
structured interviews and unstructured interviews as mentioned by Wisker
(2008:194). Structured interviews involve the interviewee completing a set of multiple
choice questions, this does not however provide detailed information or the ability to
probe the interviewee for more information. Unstructured interviews are more in
depth and involve more of an open ended conversation, however the interview could
go off the point and would be very difficult to transcribe. For the benefit of the
research aim and questions, semi-structured interviews were used to maintain focus
within the interview as well as giving the interviewer the chance to be probed and
obtain more detailed facts.
Data has therefore been collected from a sample of semi-structured interviews,
which were conducted over the summer months, which have attempted to analyse
how various SMEs within the area of the South West and South Wales, use
innovation or dismiss it as a strategy. Interviews are according to Arksey and Knight
(1999) ‘concerned with exploring data on understandings, opinions, what people
remember doing, attitudes, feelings and the like, that people have in common.’ A
series of questions have been structured to ensure the collection of necessary
41. 40
information, which will benefit the research analysis. Collection of information was
obtained by note taking and recorded dictation where possible to ensure the
information gathered was capable of being reproduced accurately. An online survey
was composed to target other professionals, to establish those who believed that
innovation was a necessary element in business performance or those who
disagreed. The number of interviews was limited because of the difficulty in
identifying companies who were interested in taking part in the research and who
could spare the time. This limitation may have affected the analysis, which is why an
online survey has been simultaneously conducted to broaden the amount of data.
Due to these difficulties and the limited timescale a maximum of five local SMEs
were targeted for interview, each lasting an hour. The information obtained has
benefitted the overall analysis by providing experiences and insights to innovation
and there beneficial use.
The research has also focused on the collection of online surveys, which were aimed
at a selected population to produce a greater richness of data for the analysis. The
purpose of the online surveys was to seek the opinions of individuals who are either
in business, are students, or have an interest within an industry. The information
from the data collected from the interviews has been re-enforced by the data
produced from the online survey providing a fuller analysis. It has been easier to
obtain information from individuals rather than from interviewees as the individuals
have been less concerned about confidentiality.
A survey is defined by Collins and Hussey (2009) as follows ‘a survey is a
methodology designed to collect primary and secondary data from a sample, with a
view to generalise the results of a population.’ The purpose of the online survey has
been to generate unbiased data from individuals who are independent of local
42. 41
business and who have their own personal viewpoints. It is acceptable to use a
survey within an interpretivist study as again acknowledged by Collins and Hussey
(2009). The survey has been implemented within the social network service
“Linkedin”, which is aimed at seeking the opinions of professionals especially those
involved in business. It has also been targeted at business students to obtain a
broader collection of viable information of both individual facts and opinion. In order
for the data to be convincing twenty five samples were collected to achieve an in-
depth analysis.
Both sources of sampling have been designed for one to compliment the other, so
the benefits of both have been utilised to improve the scope and viability of data.
This has hopefully allowed the collection of a greater amount of data to ensure the
analysis is sufficiently rich with strong opinions and viewpoints. This data has also
been re-analysed with secondary research contained within the literature review,
which encompasses the use of strong academic journals and opinions of
professionals from current articles.
3.5 Data Collection Methods
The data collection has ensured all learning outcomes are met and are designed to
achieve an answer and understanding of the research aim and questions. This
collection has been the most effective method of achieving results within a qualitative
and quantitative research approach.
However, there have been a few limitations that could have jeopardised the
research outcome. These include the reliability of conducting interviews with local
businesses and choosing companies that do not have the sufficient capability to
43. 42
conduct innovation within their businesses. The information received from
businesses has not always been sufficient enough to conduct a full investigation,
which has had consequences on the research. A further problem was receiving
biased data from businesses, which is another reason why an online survey was
conducted within the research. There was also an issue with conducting an online
survey as many professionals decided not to complete the survey. These limitations
have been reflected within the dissertation and have been analysed to ascertain if
they have had a significant impact on the overall assessment.
As previously stated the purpose of the study was to achieve the objectives of
the research aim that innovation is an important aspect of business performance
within the growth of SMEs.
Data collection has involved processing information from semi-structured interviews
and online surveys. A series of set questions has been prepared for the interviews
so a consistent approach is achieved. There were plenty of opportunities to further
probe each interviewee to gain more valuable information. This data has been
recorded (if allowed by the interviewee) by transcript and questions were asked in
accordance with the ethics form regulations. The focus was on the collection of
professional fact, opinion and trends from each local business. It was important to
identify opinions that did not support the literature, as this would establish any
important changes and alternatives. Overall the data gathered has attempted to
classify how many companies agree or disagree with innovation. It also attempted to
identify failed methods and new innovations that have improved the performance of
their business. Potential risks of obtaining poor data were, running out of time during
the interview or not acquiring relevant information, together with not securing
44. 43
sufficient interviews. These risks limited the research, which is why as previously
stated an online survey was also used to act as a backup.
The survey was designed to concentrate on the research aim and questions that
formulate the purpose of the research and to ensure a broad overview of the
literature and the chosen topic of innovation. It was also designed to compensate for
potential problems encountered with the interviews as outlined above and was
intended to achieve a higher level of participation and more data to analyse. This
research was carried out satisfactorily within the timescale and available resources.
The survey itself comprised twenty five questions aimed at obtaining as much
information as possible on fact and opinion. The questions asked individuals to
agree or disagree and then to provide a brief narrative explaining their answers,
again with the purpose of producing more information to interpret within the analysis.
The potential problems were a poor response rate from the number of individuals
involved with the survey. The only solution to this problem was to make sure the
online survey was offered to as many individuals as possible to achieve a greater
success rate. However the answers from the interviews ensured enough data was
collected as well as from the online surveys. It was essential that sufficient
encouragement was made to individuals to produce a higher return of adequate data
responses.
3.6 Data Analysis
The analysis of the interview results, primarily focuses on identifying direct
correlations between each interviewee and ascertaining their views and opinions.
Various remarks have been placed into categories to identify certain trends and
45. 44
behaviours that show organisations’ views on innovation. The data derived from the
interviews that had not agreed with the literature or the research aim and questions,
has been used to enable further analysis and draw conclusions as to whether or not
innovation is the correct course of action that SMEs should take. The main
implications of the data involved categorising emerging themes gleaned from the
responses of each interviewees. A generalisation has been made within the analysis
as a few responses from the interviews produced the same or similar trends of
opinions.
The analysis of the online survey results were aimed at collecting viewpoints of
individual opinions from professionals and people in business. The survey has been
created on the site “So Go Survey” which records every completed survey and when
finished can be uploaded on to a spreadsheet, to facilitate an analysis of the results
using various charts and tools. As this is only a small scale study, the data has been
concentrated on finding a relation between a few variables. The overall assessment
of the results is based on identifying trends and correlations which have helped to
conduct the analysis. However some of the information from the survey has
produced biased information and as said before, there was reluctance to complete
the questionnaire. The responses from the data have been categorised into relevant
themes and are analysed in accordance with the opinions of the individuals. The
analysis then attempted to ascertain what kinds of patterns of response, emerge and
what kind of themes emerge.
Both sets of results from the survey and the interviews are combined within the
analysis as they both seek to identify emerging themes. This collection of data and
analysis was designed to seek the opinions of leaders in small businesses and
formulating the opinions of other businessmen. A comparison has been provided to
46. 45
discuss if the results from the survey fail to agree with the responses from the
interviews. A discussion has been implemented within the analysis to ascertain why
this occurred and form a critical analysis of the results.
From the initial findings the literature review will be used to analyse the themes in
more depth and draw a conclusion as to why these themes have occurred. If there
are no themes or correlations an argument as to why this had not occurred, will be
incorporated into the analysis. The empirical findings have been used to question the
validity of the literature review or vice versa the literature review questions the
significance of the findings. The comparison within the analysis has formed a
number of generalisations which answer many of the research questions. This
attempts to discuss if these findings could perhaps benefit small businesses or pose
a warning as to the risk and complications of innovation.
This research approach collectively embodies qualitative and quantitative data which
has strengthened the analysis. It also allows a greater body of data which has been
interpreted for themes and general patterns. The online survey asked more
questions as there was no chance of probing information unlike during the
interviews. Allowing both types of research approaches complimented weaknesses
from both. The approach not only pinpoints the opinions of SMEs, but also a general
opinion of individuals which removes any bias from the analysis. Overall this
research approach has collected a sufficient amount of data to further form an
evaluation and adequate answers to the research aim and questions. However the
weakness of the research approach was demonstrated by a lack of responses due to
the reluctance to complete the survey and also to arrange an interview.
47. 46
3.7 Quality Criteria and Ethical Consideration
To ensure that the research design was valid and reliable the utilisation of both the
online survey and the interviews was designed to complement each other’s
limitations. It was vital to target businesses under the categorisation of SMEs,
otherwise the results would have been invalid and not meet the parameters of the
research aim and questions. The online surveys were targeted at individuals who
work within organisations and have already developed business acumen. “Linkedin”
has provided access to this category of people who are engaged within the business
world. This has enabled the data to be reliable as it is targeting a specific sector of
people with similar ranges of knowledge.
There was an element of reluctance when completing the online survey as generally
people are inundated with consistent unsolicited requests, which would exclude a
large proportion of people from the data. This is known as non-response bias
according to Collins and Hussey (2009) ‘non-response bias is crucial in a survey
because your research design will be based on the fact that you are going to
generalise from the sample to the population.’ This means that if not all responses
are collected from the individuals targeted, the data will not represent the overall
population.
To avoid any errors or mistakes when collecting the research, it is paramount that
the questions submitted can be understood by individuals and maintain focus on
collecting essential data to fulfil the obligations of the research aim and questions. It
would be pointless to submit questions that would confuse the individual, making it
harder to justify their opinions and select the most appropriate answer.
48. 47
During the interview process it was essential to maintain and establish a rapport with
the interviewee before commencement of the interview. A digital recorder was used
to collect the responses during the interviews, but permission was granted first by
the interviewee. Each question was structured to collect fact and opinion, it was not
designed in any circumstances to gather confidential or financial data from any
organisation, only to understand their thought process of innovation. Therefore
confidential and financial information was avoided as it does not in any event benefit
the finalised results of the research. An ethics form was prepared which outlines the
terms of the research conducted within the online surveys and the interviews. The
data collection was therefore fair and objective towards each individual and
businesses participated in undertaken the research and in no circumstances will data
be passed onto other bodies.
3.8 Summary
This chapter covered the process of the intended research methodology. To
conclude, the purpose of the research is to be exploratory because it seeks to
identify patterns and ideas of how SMEs use innovation within their establishments.
The research was so designed to utilise both qualitative and quantitative aspects of
research under an interpretivist paradigm. The research has been conducted
through the use of online surveys and face to face semi-structured interviews to
understand the views on innovation over as large a sample group a possible and its
use within a business. Both sources of sampling are designed for one to compensate
the other so the benefits of both are utilised to improve the scope and viability of
data. This will hopefully allow a greater amount of data to be collected to ensure the
analysis is sufficiently rich in strong opinions and viewpoints. The potential problems
49. 48
with the survey could include a potential poor response rate from the number of
individuals and also during the interview the responses may stray from the purpose
of the research aim. The responses from the data have been categorised into
relevant themes and analysed using the opinions of the individuals. The analysis
attempted to ascertain what kinds of patterns of response are emerging and what
kind of themes are emerging. Overall, obtaining the research conformed to ethical
consideration and avoided compromising financial and confidential information as
previously stated.
50. 49
4.0 Data Presentation
The purpose of this chapter is to formulate the results achieved from the semi
structured interviews and online surveys used to collect quantitative and qualitative
data. The data will be provided in a logical order and will present the findings, to form
an evaluation on the role of innovation within SMEs.
These findings will attempt to answer the research aims and questions. The majority
of the results from the online surveys have been composed within tables and charts.
They can be viewed in the appendices to allow a full visual representation of the
research.
Every interview was conducted to understand the importance of innovation and how
it has been utilised. It seems that innovation is an essential part for SMEs to cultivate
ideas and generate growth and sustainability. Each company interviewed had
different agendas, but the principle factor is to develop new ways of obtaining
growth.
4.1 Online Survey Presentation
This part of the research was conducted to obtain the thoughts and opinions of those
individuals who are either involved within business or have studied the subject in
depth. The results suggest that a proportion of people within the set population have
sufficient knowledge to understand innovation and its importance within SMEs. The
survey was conducted online in order to reach the population. However a percentage
of the population was disinclined to participate, which may have consequences on
51. 50
30%
32%
8%
15%
15%
Competitive Advantage
Improve Growth and
Performance
Product Development
Survival
Technological Change
the analysis. Despite the non-participation there is enough data to establish an
analysis and answer the research aims and questions. All the results have been
calculated accordingly and can be viewed in the appendices of this research project.
The results suggest that the majority of people believe the importance of innovation
is essential to any business whether small or large. Its importance is justified by the
participants who established that they agreed innovation is important for a business
to achieve growth. This confirms the parameters of the research aim and questions
that innovation is an important element towards business success.
4.1.1 Results
The participants were asked what the main drivers of innovation were and it seems
that 32% felt that achieving performance and growth and 30% felt that obtaining a
competitive advantage were the most beneficial factors of innovation (appendix 2).
This suggests that the research from the survey so far, corresponds with the
interpretation within the literature review and research question four. The majority of
52. 51
20%
56%
12%
12%
0%
strongly agree = 20%
agree = 56%
unsure = 12%
disagree = 12%
strongly disagree =
0%
the population agreed that capacity was an important factor in introducing an
innovation, however only a small percentage really thought it was a necessity
(appendix 3). This might be due to the fact capacity may only affect certain industries
that concentrate on introducing a new product to the marketplace and therefore
require a larger amount of capacity than others. This answers research question five.
The majority of candidates 64% agreed that innovation was worth the risk (appendix
4). However again only a small proportion 24% stated that they strongly agreed with
taking the risk. This might be due to the fact that certain participants in the research
are not all risk takers and do not have an entrepreneurial personality. It could also
point out that many innovations are risky and do often fail, but this is an essential
part of innovation process. This directly links to research question three.
0%
10%
20%
30%
40%
50%
60%
70%
strongly agree = 24% agree = 64% unsure = 12% disagree = 0% strongly disagree =
0%
53. 52
4%
0%
36%
52%
8%
strongly agree = 4%
agree = 0%
unsure = 36%
disagree = 52%
strongly agree = 8%
The next question asked candidates if having a flawless operations strategy is more
effective than implementing innovation, which 52% of participants disagreed with the
statement in total 52% (appendix 5). This suggests that innovation is an essential
element to any business and directly answers research question one. It is not just
about running the business and ensuring everything is optimised efficiently, but
ensuring new ideas are implemented to improve the performance of the business.
Improving performance is a recurring element in innovation and as suggested by the
next question on the survey it scored 40% of the total participants as a measurement
of innovation. This is due to the fact that an innovation will improve the return on
investment and stimulate new business procedures.
The majority of participants (72%) also agreed that implementing innovations
incrementally is more effective than any radical innovation, according to the 28%
who thought it was more favourable. The participants who thought incremental
innovation was more important have further stated that it is a less risky way of
innovating without imposing greater costs. They also stated that staff need to be
aware of the changes made by the innovations as otherwise they could possibly lose
clientele. They also thought that it was a more effective way to monitor and manage
54. 53
the change effectively. Furthermore it was preferable that SMEs themselves
implement innovation incrementally as changes are more manageable and will
ensure greater sustainability and survival. Some participants thought radical
innovation was more beneficial, as they believed innovation should be carried out
with speed and decisiveness with the notion of failing quickly in order to carry out
more effective innovations through learning and acquiring knowledge. They also
pointed out that every opportunity should be harnessed when it arises to gain an
advantage the over competition. Organisations which are within a fast paced market
also need to innovate quickly in order to adapt and respond to these new market
changes. Overall innovation within SMEs must be carried out incrementally to
minimise risk ensuring consistent sustainability. This has attempted to answer
research questions one and three respectively.
The next question asked if having highly trained staff would further innovation within
organisations. The majority of participants 76% stated that they would and this was
because they believe that without the consistency of a skilled workforce, there will be
no generation or development of new ideas. They also speculated that the skilled
workforce can create innovation within the organisation and having acquired the
necessary technical expertise and pre-requisites to handling the necessary change
in the operation and promoting a transition. Skills are essential, such as behavioural
skills and hard technical skills. The majority of participants thought that knowledge
and experience amongst staff was an essential element to spur innovation within the
boundaries of an organisation.
The 24% of the participants who thought highly trained staff were not
important, and believed that in order to generate innovation, bring together people of
all skills into a comprehensive mix where unique ideas can surface. The people who
55. 54
56%
40%
4%
0%
Strongly agree = 56%
Agree = 40%
Unsure = 4%
Disagree = 0%
Strongly disagree = 0%
generate innovation within an organisation must have a comprehensive outlook.
They also feel depending on the complexity of the innovation entailed, not all
innovations require highly skilled staff for an organisation to benefit. It is important to
therefore to have a firm mix of people with differing levels of skills and motivation, as
one participant stated even some highly skilled people are not always motivated.
The majority of participants 56% had strongly agreed that effective leadership was
an important factor to spur innovation as well as highly skilled staff as shown in the
pie chart below (appendix 7). This suggests that leadership is a vital factor in
implementing innovation and possibly an important factor within SMEs to push
innovative ideas into practice.
The next question focused on asking the participants whether or not innovation may
distract the organisation from completing its goals which also attempts to answer
research question three. Nearly every participant disagreed with this statement an
overall 60% as shown in the pie chart below (appendix 8). Most of the participants
felt that it is necessary for an organisation to innovate to achieve growth and should
56. 55
0%
0%
36%
60%
4%
Strongly agree = 0%
Agree = 0%
Unsure = 36%
Disagree = 60%
Strongly disagree = 4%
be administered with the business to compliment progress. They also stated that if
an organisation has no innovative goals, it will not be able to remain up to date with
technological advancements and the competition would have an advantage. It is also
a faster way to achieve an efficient and suitable outcome. An organisation cannot
advance if it does not have innovation, it must be at the heart of the business to
succeed, and it should not distract the organisation from its goals. Small companies
therefore must innovate to ensure their survival, otherwise the competition will
innovate and achieve a larger customer base at their expense. Another quote which
mentioned that as long as innovation is implemented gradually it will not distract the
main operational functions of the business.
The next few questions focused on ascertaining what the participants thought of
innovation within SMEs. The first question asked candidates whether or not
innovation is important within SMEs, to which the majority agreed that it was. 36% of
candidates strongly agreed with the statement and 56% agreed, which makes the
majority. Overall the participants suggested that innovation allows small to medium
57. 56
sized enterprises to embrace change and build something new, which is critical to
sustainability and momentum. One suggested that with large corporations on the rise
small businesses need to find ways to survive. They need to keep up to date with
technology, marketing and other areas of business, making them stay afloat in a
world that is increasingly competitive. Competing with large corporations requires a
fresh approach and your customers need a reason to use your products. The
importance of innovation within SMEs assists them with remaining competitive and
also acts as motivation for staff to improve work experience. It is essential that
SMEs’ implement innovation because often they have to be more creative in how
they compete and the services they provide. If they cannot provide value by scale or
assurance by being long established as a market leader, often an SME will have to
offer something different. One of the participants also produced an example such as
‘Streetcar’ who implemented the use of innovative technology to give its members
the flexibility that other large car hire companies could not offer their customers.
However you could argue that the wheel turns slower with established SMEs but
start-up businesses are often destructive to competitive positions.
The next question ascertains whether or not participants thought that without
innovation SMEs would never grow and remain sustainable. 40 % of participants
agreed that this was the case, however certain participants argued that it also wasn’t
as shown below (appendix 10).
58. 57
12%
40%
20%
20%
8%
Strongly agree = 12%
Agree = 40%
Unsure = 20%
Disagree = 20%
Strongly disagree = 8%
The number of participants who provided answers, agreed with the statement, which
suggests that it is important for small businesses to continuously innovate to remain
competitive. However others maintained that small businesses can find alternative
ways to become competitive, such as to re-locate to a low cost economy, create
world class organisations to drive better efficiency. That also SMEs can survive by
simply providing a good, reliable service and maintaining consistent reputation. If a
business has a core offering and works hard to establish a good reputation and
deliver at a sustainable price, they can have a long and successful lifespan.
Furthermore apart from the participants who disagreed with the statement that
innovation seems to be a necessity for organisational change, believing that even
without innovation, someone will eventually produce a breakthrough product
resulting in a greater market share. There would be no reason for the organisation to
grow or remain dynamic against its competitors who may be more innovative.
The next question set asked participants more specifically, if they thought that
innovation would ultimately improve the performance of SMEs, which every
participant said it would and that it is also worth the risk. This may be due to the
previous questions being aimed at identifying how innovation can be utilised within
an organisation, this asks candidates specifically whether or not would benefit SMEs.
59. 58
The participants were then asked what management techniques could be used to
stir the process of innovation, which also answers research question two. The figures
suggest below (appendix 11) that all participants favoured Total Quality Management
at 40% and that most of the participants were aware of these practices. The least
preferred method was Six Sigma at 16%.
The final question of the online survey and also research question two asked
candidate’s if these management principles could be of use within SMEs. A majority
(76%) stated that they could, but only if the organisation has sufficient resources and
timescale. However many outlined that these methods can inspire innovation, but
they are not enough on their own. Incorporating innovation needs an entirely
different way of thinking and all of the methods are designed to achieve gradual
improvement of existing systems. Total Quality Management was the most popular
technique, which according to the participant’s enables businesses to provide a
strong performance model with a mark of excellence. The quality mark demonstrates
the use of strong business management and willingness to innovate and change.
They also suggest that TQM is important in every business, those producing and
those initiating are equally as important in the success of the product. Six sigma was
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Total Quality Management Business Process Re-
engineering
Six Sigma Lean Operations
60. 59
thought to benefit an organisation by identifying strengths and weaknesses within a
company which may benefit the process of innovation.
Overall as suggested these techniques the light use of any of the above principles is
an excellent platform for designing the right interventions. The corporate tendency to
build self-perpetuating industries around such methods delivers too much distraction,
cost and overhead for SMEs. The people who lead SMEs are mostly unimpressed
by the technical or intellectual merits of prescriptive methodologies. However as
stated by one particular research candidate, all of them are relevant in encouraging
individuals and companies’ to think about the challenges they face and quantify
them. These management principles can be administered and even the smallest of
companies can benefit from the processes as long as they don’t hinder daily
operations. Processes can focus individuals and the organisation as a whole, and if
in place, can make growth a lot easier.
4.1.2 Summary
The survey obtained the opinions of individuals, of professional people and those
who work in the world of business. The data collected ascertains that innovation is a
concept that most people understand and that it is a genuine business function that
can be applied within small to medium sized enterprises to improve performance.
The next section of the chapter will form a critical analysis of the results and will use
the contents of the literature review to form an evaluation and comment on the
patterns and trends that have been presented so far. The presentation of the
individual semi -structured interviews will be presented before an analysis is
conducted.
61. 60
4.2 Semi-Structured Interviews Presentation
The purpose of the semi-structured interviews was to enter an SME and specifically
ask questions about that particular organisation and their thoughts on innovation. A
total of four organisations were interviewed (a fifth withdrew) and were asked
whether or not they had considered innovation. The companies picked are all from
different industries which utilise innovation in their own way and sometimes not at all.
Each company was different in character to remove any bias from the research.
Each interview began with a number of set questions designed to fulfil the
research aim and questions. As previously explained in chapter three the questions
were designed to maintain consistency within the interview and to also probe the
interviewee for more information on previous innovations. The interview questions
can be viewed within (appendix 12).
The questions were focused on obtaining as much detailed information on innovation
within that particular company to answer the research questions. After the last
question the interviewee was probed for more information regarding the importance
of leadership within innovation.
The first question asked companies what their main drivers of innovation were, which
attempts to answer research question four. Most stated profitability was most of all
important as well as ensuring long term sustainability. This was also backed up with
the view of seeking a competitive advantage within the marketplace and taking in
different types of work to ensure greater profitability. Diversification was mentioned
by a few companies who thought that it was an important feature of innovation. One
of the companies in particular, stated that their main driver to innovate was
62. 61
identifying a gap in the marketplace and finding a new market which would
guarantee the company profitability from their services. A change in the economy
had led a few businesses to re-think their strategies and adapt to the new
challenges, by using innovation to seek other forms of income. Overall this attempts
to answer research question four, where it seems that profitability and sustainability
are the main drivers of innovation.
The next question asked what innovation meant to their company and the majority
stated that creating new opportunities was the purpose of innovation. This attempts
to answer research question one on improving performance and sustainability within
an SME. Apparently it is a vital factor to introduce something new to the
organisation. However it is difficult to implement change especially when members of
staff are not accustomed to change. It is also difficult to initiate due to the wide
variety of competition. Most companies stated that innovation is essential to do
things better and know more than the customer. Maintaining a consistent reputation
and seeking to promote the company through that reputation by not being
complacent.
The following question asked the participants if their companies had the necessary
capabilities and capacity to adopt innovation. This was an attempt to answer
research question five on why capacity is required to innovate. Most of the
companies suggested that staff are an essential element needed to implement and
carry out organisational innovations. A few of the companies rely solely on labour
and maintain that staff with interchangeable skills are necessary to carry out the
implications of innovation. One company stated that staff innovate with the right mind
set and skills to identify and manage opportunities. Staff manage technical tools
such as IT, which are updated continuously to innovate and to give the company an
63. 62
edge. It is therefore not only about highly skilled staff, but also the technical
resources, which maintain consistent innovation. Skills, knowledge and the right
tools enable the company to become really efficient. This also answers what is
required to develop innovation and make it work for an organisation within research
question five.
Another company has taken the advantage of the decline in jobs available for
graduates and employs those who struggle to acquire jobs. It utilises them to
improve the prospects of innovation using in house intelligence work to provide them
with work experience and skills for their input. Arguably this is innovation itself.
The next question asks how each company measures innovation where most
responses were measured by business success and profitability. For some however
they felt it was too early to tell about the recent innovations they had implemented.
Usually some of the companies mentioned the fact that they had expanded their
business infrastructure as well as introducing new customers. Measuring innovation
can be identified as organisational growth where the organisation itself has identified
new opportunities and acquired new customers.
Each company was then asked how their company had been innovative in the past.
A few of the organisations identified gaps in the market and have succeeded in
providing businesses with cost cutting effective energy solutions. This was asked of
interviewees as it demonstrates how they have used innovation, which again
answers research question one. This is an example of how using innovation can
identify opportunities. Another company interviewed, also identified a gap in the
market from the demand of the company to provide another service. A new company
was then set up from the original organisation, which opened up new avenues of
