The Future of SMEs and Innovation

The World Economic Forum recently produced a report analysing the key challenges and opportunities faced by CEOs and Founders of forward looking SMEs. This section of the market represents around 90% of all firms globally, which contribute around 70% of employment, and provide key roles in shaping innovation at a time where the world is changing in many ways.

Over 300 companies were surveyed and key trends were seen in how they view the top challenges they face. During the last 18 months most have been in survival mode due to the pandemic. The smaller firms tend to have weaker supply chain capabilities, lower uptake of digital tools, and therefore cite a very difficult period. The key areas of concern have been talent acquisition and retention (52.5% respondents), growth and expansion (43.8%), funding and access to finance (35.7%), non-supportive policy environment (21%) and difficulty maintaining a clear, strong company culture and purpose (20%).

However, given all of the above, the outlook is certainly not as bleak as it may sound. There have been fundamental changes in both working practices and trends that all feel play well into SMEs hands.

The first of these is down to the flexibility and dynamism of simply being smaller more efficient entities. SMEs have fewer layers in management, and leaders are closer to the front line, meaning they can respond to issues and change quickly as these arise. We have all seen the uncertainty brought about in the last two years, and those who did not adapt quickly and effectively simply did not survive. An acceptance that unexpected events will occur, and a structure and culture able to highlight, react and change, is therefore a key element in future proofing the companies of tomorrow.

The second key trend lies in the changes in working practices. The idea that many of the companies in the world could simply not have an office and work remotely, and that their productivity would not suffer as a result would have been laughed at in 2019. Fast forward to today, and while many want to return to the office in some form, all are agreed that this can be a very effective way to work for those in certain industries. This therefore reduces costs dramatically for those companies, and expands the talent pool for recruitment and for new clients, opening up markets previously closed.

The third and maybe most important trend is innovation. Innovation in all its forms tends to come from smaller companies, who have a growth mind-set and challenge industry norms. In today’s world the key movements are to societal and environmental progress, and in order to do this both innovative thinking matched with technological advances are crucial. It is on this basis that SMEs not only survive, but can look to compete and in some cases maybe even out manoeuvre larger organisations and the strongholds they have held for so long.

After a difficult period for all, it feels like now is the time for SMEs to transform themselves through innovation and dynamism to harness their full potential, maybe even changing the world for the better in the process.

Patrick McCreesh, Partner, Vantage Corporate