Is innovation the key to your SME's success?

An estimated 33 per cent businesses fail in their first year of operation. This number increases to 50 per cent by year two, and 75 per cent by the year five, according to a University of Technology Sydney report. Furthermore, Dun and Bradstreet found that in the first quarter of 2016, business failures were up by 7 per cent from the same time last year, meaning over 13,000 SMEs failed in Australia during this period. While these statistics are foreboding, they should not stop you from starting your own business, provided you are ready to plan thoroughly and look to the future.

I'm referring to innovation, the cornerstone of any successful small business. This strategy is particularly key for smaller enterprises as they may not have the capital to compete head-on with many of their competitors, necessitating a more unconventional approach.

Despite the importance of innovation, SMEs are falling behind in this regard spending $5 billion on research development compared to the massive $12 billion spent by large enterprises, as found by the Small to Medium-sized Business Association Australia.

Considering SMEs make up over 99 per cent of all trading companies in Australia, this is a worrying statistic, indicating that lack of innovation may be part of the reason for the high rates of SME failures in Australia.

Despite some negative economic indicators suggesting otherwise, SMEs are the the foundation of the Australian economy - so it's in everybody's interest that they succeed. Let's have a look at different kinds of innovation and how they could help your business, as well as some useful finance solutions that could help you make the changes necessary to succeed. Apply these tips to your SME, and you'll be on the road to innovative success in no time.

Smart innovation could be the key to unlocking the potential of your business.

Closed versus open innovation

Closed innovation involves keeping your business hand close to your chest. A Queensland Business and Industry report states that under this model, your business would perform all research and development internally and attempt to hire the best people in your field.

Essentially, committing to the idea that if your business comes up with and executes the best idea, you will succeed. This innovation model can be successful but requires massive capital to work, and is perhaps more suited to larger enterprises.

On the other hand, open innovation is more suitable for SMEs, requiring less capital and more agility. This model does not require hiring the best people, rather the openness to collaborate with leading innovators to improve the quality of your offering. It's a more intelligent model in that it means using all knowledge at your disposal, be it external or internal, to innovate, focusing on getting to the market first - by any means.

Open innovation involves collaborating with like-minded businesses to achieve results.

Open innovation is a strategy that all SMEs should attempt to adopt to some degree, as it will give them the edge in an ultra-competitive market. A lack of working capital is an often cited reason for not doing so, however this does not have to be the case with the right finance solutions in place.

Let's look a little closer at just two different sectors of business innovation to help further identify what strategies are right for your SME.

Product innovation

Increases in access to learning portals, high-tech materials and industrial manufacturing for the everyday Australian, has led to what Deloitte referred to as 'the maker movement' in a report on product innovation in Australia. This means it has become easier for Australian entrepreneurs and SMEs to bring their creative product ideas to life, and to the market. So how can Australian SMEs use this to their advantage?

During a recent chat with CNBC, developed entrepreneur Eric Ryan commented on the process behind product innovation, saying:

"Find a tired category that really is a sea of sameness, and then figure out what is the cultural shift that the category is missing. In between this space is the business opportunity."

When conceptualising, producing and shipping an innovative product to the market, it's essential that SMEs have the cash flow necessary to ride the incoming waves to success. Without assurances, it's possible that such innovative enterprises will stumble when unexpected production or design issues come up, damaging their ability to profit from their innovations.

In this case, prudent use of solutions such as invoice finance can help make sure your innovations aren't for nothing.

Marketing of the future

Marketing innovation includes the way that you take your products to market, gain new customers and promote your product, as well as your pricing strategies.

Marketing innovation can be an effective (and potentially cost-effective) method of differentiating your brand, product or service in the marketplace. Doing so will make your brand stand out in the minds of consumers, making them more likely to choose your offering instead of competitor's.

Optimising your content marketing strategy could take your business to the next level.

One innovative method that is gaining a foothold amongst Australian SMEs is content marketing. According to a recent Content Marketing Institute (CMI) survey, over 50 per cent of SMEs have a documented content strategy and 94 per cent use content marketing.

This strategy can involve anything from ads on your website to blogs, to managing your social media presence on platforms such as Facebook or LinkedIn. Content marketing generally focuses on building brand awareness as well as increasing lead generation and customer acquisition.

A 2016 Smart Insights survey confirmed the effectiveness of this strategy, finding that 21 per cent of marketers believe it is the most effective method of marketing.

These statistics suggest that content marketing is an essential innovation to help ensure your SME's success, however some are struggling to correctly implement the strategy.

According to A CMI report, 37 per cent of SMEs cited lack of budget as one of the main reasons they struggle with content marketing, a statistic that shows poor cash flow may be limiting your company's ability to grow.

If money's too tight to focus on marketing or product innovations, you may find that your business gets lost in a sea of competitors. Contact us today on 1300 760 205 to find out how Earlypay can shore up your funds, to ensure your SME has the ability to focus on innovation and success.

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].