Lack of innovation in SMEs turns growth sluggish

LAHORE: Inconsistent economic growth in Pakistan is mainly due lack of efforts by small and medium enterprises to improve their existing products. Most of the entrepreneurs limit innovation to bringing up new products.

Innovation is about coming up with solutions to customers' problems. The imported products are fascinating the local buyers due to their innovative designs, packing, colour or finish.

Consumers prefer products that perform multiple tasks. Instead of a simple juice extractor, they prefer machines that provide gadgets that convert the same machine into a blender and crusher.

SMEs are called engines of growth because they enlarge their markets through small innovations in design and ease of use that fascinate consumers. SMEs that lack innovation seldom grow.

Successful SMEs world over first strengthen by exploring both domestic and foreign markets that are not occupied by other companies.

Pakistan's narrow export markets reveal that all entrepreneurs small or big are concentrating their efforts in already discovered markets and are competing with each other.

Our SMEs can find better response for their products from clothing to home appliances in low developed economies.

According to innovation experts, the innovators must realise that an innovation has to meet either a customers' needs or wants. Any innovation addressing a stronger need or want desired by a large number of people stands a higher chance of success.

However, many innovations, which met either a strong want or need, still fail. This is because successful innovations additionally require triggers, specifically a market shift and the required technology.

Innovators have to ensure that both the technology and markets are ready. Companies that want to innovate also need to create a culture of innovation within the organisation.

Local home appliance industry wiped out foreign competition at the start of this century by introducing innovative designs and new features in television sets and refrigerators.

However, the foreign competitors have now started regaining their market by improving on the features introduced by local manufacturers that failed to continue innovation.

Pakistan's textile industry has failed to make its mark in the global textile market because the exporters do not make their own design nor fashion clothing but simply produce clothing for big chains at a low price.

Many companies particularly those eyeing export markets are adopting certifications such as Six Sigma or ISO 9001 which put in place standard processes for people to follow. These procedures do facilitate companies to achieve operational efficiency. However, these certification systems often end up stifling innovation. If the core management and staff are required to follow rules all the time, the entrepreneurs should forget innovations.

It is by responsibly breaking some rules that you are able to think out of the box and create. All companies face the tough balancing act between improving operational efficiencies and providing an environment and culture for innovations.

Companies that find the magic balancing formula emerge as winners in the game.

Innovators have demonstrated their ability to disrupt established companies. Kodak once a top name in global corporate sector exists no more.

Many big companies have been wiped out by the SME innovators. Pakistani entrepreneurs should take cue from experience of the developed economies.

It is worth noting that 60 percent of Fortune 500 companies disappeared from the list between 1975 and 1995 and the key reason for the high attrition rate was that those companies lacked sustained innovation.