Why Your Small Business Must Budget Time and Money for Innovation

“The enterprise that does not innovate ages and declines. And in a period of rapid change such as the present, the decline will be fast.” — Peter Drucker

You must innovate. We have seen far too often that businesses that fail to look down the road and adjust their models for the future will ultimately get left behind. As small business owners, we somehow think that this does not apply to us or that it is too grand an idea to really effect us. It is not.

One of the benefits of being small is that we can be agile. One of the disadvantages of being small is that we are often working so hard in the business that we fail to see the forest for the trees. In order to leverage our size and to use new technology to our advantage we must set a priority of research of development in overall business strategy.

Most large companies know that in order to remain competitive they must budget for research and development. Apple and Amazon each spent over $10B on research and development this past year. You are not Apple or Amazon working with billion dollar budgets. How are you supposed to budget or even conduct research and development?

“If you have one main service or product, you must devote time and money to research and development in your small business.”

How should your small business conduct research and development?

1. Look for pain points. What are the pain points that effect either your customer or delivery of your products or services? Where are the bottlenecks in your business?
2. Make a list. Take one of those pain points and come up with a list of 20 potential solutions. Why 20? The first few answers you come up with are going to probably be obvious. If they are not obvious, you probably would have tried them already. If you stretch yourself to come up with 20 potential solutions, you will probably come up with something truly innovative and out of the box.
3. Narrow the list. Choose one or two that you can apply now and test.
4. Create a wish list. If there is one that you think will be helpful as technology evolves or becomes more available, table it, but don’t forget it.
5. Plan your research. Make a system for implementing your idea, choose reliable metrics like conversion rates, timing, dollars, etc. to determine whether this idea really works. Implement and review.
6. Create a budget. Innovation can become expensive, but it doesn’t have to be. In small businesses, it is really about taking the time to learn what is out there. Your budget will depend on the type of business you have and the type of innovation you are looking to create. Take this all of this into consideration.

Here’s a few extra tips:

1. Don’t stay within your discipline. There are a lot of transferable skills, methods, and services from different industries that can help you. Figuring out how the dentist down the road is using an online calendar and payment system for his patients may help you in scheduling your clients’ appointments. If you have received excellent service from a vendor, investigate how you can use similar technology to create excellent service in your business.
2. Block off time to think. If you are your research and development team, it’s important that you allow yourself time outside of your business to see where your business, your industry, and your specific services or products are headed.
3. Stay current. Know what’s going on in your industry. Subscribe to trade magazines, attend conferences or trade shows that focus on the future of your industry.
4. Mastermind. Meet with other people both inside and outside of your industry who are dedicated to the future of business. These groups can help you brainstorm new perspectives on how to do business.

When you raise children you are not just thinking about them as a baby or a toddler. You are often looking down the road to high school, college, and their futures as a healthy, self-sufficient, and well-rounded adults. You understand that as a parent, the choices you make now will effect how well they do in their lives. Your business is the same. You cannot be fully engrossed in the current stage of your business, ignore its life cycle, and expect to have a long-lived thriving business. You must innovate.

Remember, “there is no good idea that cannot be improved upon.” — Michael Eisner