Innovation Nation: How successful start-ups, SMEs and investors cultivate innovation and promote national competitiveness

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Oct 26, 2016 · 3 min read

GUEST WRITER: Prof. Dr. Marc-Michael Bergfeld, Managing Director of Courage Partners, Professor of Global Entrepreneurship & Family Business at Munich Business School.

Innovation becomes a key success factor for a country that has very few raw materials, except for ideas. For this reason, public debates often circle around the topic of “innovation leadership”.

However, a real investigation into the question “Who actually drives innovation endeavours in a country?” is often lacking: In fact, it is often not the large, publicly listed companies but start-ups and SMEs that are the key drivers of innovation in an economy. The entrepreneurs and owners of private firms (start-ups and family businesses) hence play a key role in leading their companies in a tradition of continuous innovation, and hence building an innovative nation.

To become such an innovation champion, three prerequisites have to be fulfilled, especially once a new firm has taken off, or is transferred to the next generation:

Long-range planning. Sustainable diversification. And consistent execution.

These three factors are explanatory for successful start-up firms and SMEs, and often differentiate them in comparison to large entities.

First of all, innovative firms think in continuous progress into new technologies, international markets and areas of business.

They turn long-term visions into tangible products and perceive expenditures for research and development as investments into the future competitiveness of their firms. It is only in the second instance that they understand them to be cost positions that can be optimized or need to be cut. Further, these firms maintain a freedom to create and incubate radically new concepts, without accepting pressure to constantly report to the financial markets, e.g. on a quarterly basis.

Secondly, the owners and investors in these firms play an important role for successful innovation management in the firms they control. On the one hand, the incremental improvement of existing products and technologies is often made a key process.

On the other hand, however, radical innovation projects are often linked directly to the owners. They promote the unlocking of new markets and technologies through their direct involvement and decisions: They adjust corporate structures where needed and establish intra-company incubators to create new businesses outside the firms’ dominant logic. As patrons, they fuel collaborations with research entities and universities to assure direct access to future technologies and entrepreneurial talent. Hence, they bring about a diversification of innovation risks across numerous technologies and business fields. In addition, if these firms are owned by business families, members of the families’ future generations are often enabled to elaborate upon new business ideas and thus train their own entrepreneurial skills under the roof of the existing family firm.

Thirdly, these firms do not treat innovation projects as political issues. Continuous innovation is at the very core of their family identity and is essential raison d’etre of their firms: Warsteiner, a leading German beer dynasty, for example, calls it “Innovation as Tradition”. Prym, the olders German family controlled firm, advertises “Tradition and Innovation”.

Lastly, important decisions regarding innovation in these firms and dedicated projects are taken very quickly by the owners and investors. “Not deciding is often more harmful than taking the wrong decision and adapting it along the way”, is a famous quot.

Hence, “innovative nations” and their innovation-driving forms perceive constant innovation as a routine — on the businesses as well as one the national level.

Nurturing this spirit of entrepreneurship and innovation is not an easy task. In essence, it comes down to the owners, investors and top management teams to establish a passion and culture for advancement, innovation and collaboration.

Here, collaborating with external and business networks, which empower a “collision of ideas” can therefore be a smart move, and empowering them from a national standpoint is a valuable long-term investment in fostering innovation.

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