Technology, Strategy and Innovation - Essay Example

In Europe, firms with less than 10-49 employees are termed small firms, whereas firms with 50 to 249 employees fall under the definition of SMEs. SMEs usually tend to have greater market power than small firms and constitute around 99% of the total global enterprises (Shapira, n.d.). Despite their strength in numbers, a heavily competitive and globalized business environment is causing SMEs to struggle in order to compete effectively with large corporate companies. Particularly so because large companies have greater resources to influence the market power of SMEs.

Their vast resources of manpower, materials, machines and money can be used to counter any competitive threat from SMEs. Under such circumstances, innovation in new products and business strategies becomes the only way for SMEs to survive. According to Fagerberg (2004), innovation is the process through which firms create and develop knowledge to develop new and improved products and services. On the other hand, Bordia et al. (2005) define innovation as the ability to define and develop new products and services and deliver them to market.

According to Susman et al. (2006, p.16), innovation usually takes place in products, processes and markets. This paper discusses the importance of innovation in SMEs and how it is practiced. Innovation in small enterprises Innovation in firms is usually practiced through six channels: product, process, activities, non-technological, organizational, and marketing. The chart below provides a comparison of the popularity of various innovation channels in SMEs and large organizations. (Shapira, n.d., p. 2) From the chart, it is evident that process and organizational innovation in large organizations is carried out on a larger scale than in SMEs.

In all other innovation channels, SMEs are not far behind large organizations. Product and process innovation together are termed as technological innovation because utilization of new technology is an essential characteristic of both. Product innovation utilizes new technology to develop innovative products. The iPhone is a good example of product innovation. When all other mobile phone manufacturers were concentrating on manufacturing traditional mobile phones, Apple came out with a touchscreen phone and created history.

Many people have the illusion that technological innovation is the sole monopoly of large organizations. However, such innovation is possible in SMEs too. Bennet (1994, p.147) points out that smaller organizations are even more technologically advanced than the larger ones. It should be noted that when Hotmail was first introduced by Sabeer Bhatia and Jack Smith it was an innovative service. After witnessing its popularity and realizing its potential, Microsoft acquired Hotmail later. Companies such as Google and Apple are busy acquiring the patents of many innovative products and services from SMEs.

In short, product innovation in SMEs is not facing any barriers. On the other hand, process innovation in SMEs is taking place at a slower pace. Process innovation refers to improvements in production and delivery methods. Six Sigma implemented at Motorola is an example of process innovation. The core of process innovation is to eliminate or reduce costs of production, reduce waste, improve marketing and logistics operations, etc. Process innovati