Earlier this year, Ford ousted CEO Mark Fields because board members doubted his ability to lead the company through industry changes like ride hailing apps, self-driving vehicles and electric cars. Although C-suite turnover in large corporations isn't earth-shattering news, Fields' exit offers some important lessons for small business owners and sellers.
Like CEOs at big corporations, small business owners face growing pressure to drive innovation. Creating a company culture that values change and innovation takes time. Yet, unless both the owner and employees embrace innovation, small businesses can't effectively compete - or rise to the top of the heap in the business-for-sale marketplace.
Why your small business needs to innovate
Some of the world's most innovative companies began as small businesses.
Steve Jobs and Steve Wozniak started Apple in Jobs' garage. Whole Foods began as a small natural foods store that also served as the owners' living quarters. Jeff Bezos launched Amazon as a small, online bookseller.
These mega-companies didn't suddenly burst on to the scene. They achieved phenomenal success by harnessing innovation to develop new products, processes and business models. Without innovation and a willingness to position their companies at the forefront of change, they couldn't have reached (and wildly surpassed) their goals.
Large corporations like Apple and Amazon aren't the only ones who can benefit from innovation. Whether you sell software or celery, there are several reasons why you need to foster a company culture that prioritizes innovation.
Innovation generates value.
The development of new processes, products and markets creates value by meeting a need in the industry or marketplace. In the business-for-sale marketplace, the resulting gains in revenue and business value translate to faster sale times and higher prices.
Innovation also makes your small business more competitive.
Your competitors are working hard to discover new ways to outperform your company. By aggressively pursuing innovation, even if it's limited to process changes that make your operation more efficient, your business stays competitive. In some cases, you may be able to convert innovation to exclusive market advantage.
Creating a culture of innovation in your small business
Small businesses are structured to function as incubators for innovation. Fewer decision makers, smaller workforces and leaner operating models give small companies an advantage over enterprises and medium-sized companies. When conditions change, small businesses can quickly pivot and adapt to new market realities.
So, why do many small business owners struggle to achieve innovation? Because innovation isn't automatic. To get ahead of the pack, small business owners need to proactively create and nurture a company culture that prioritizes innovation.
- Take risks. When faced with the need for innovation, some small business owners decide it's safer to follow the crowd. It's true - innovation is risky. But taking calculated risks and trying things that haven't been done before can also be the path to a strategic advantage.
- Encourage close connections with customers. Small businesses usually enjoy close, personal connections with their customers. Proximity to your customer base creates opportunities for innovation because good ideas frequently originate with the needs and preferences of the people your business serves.
- Keep decision making routines agile. Cumbersome decision making processes can kill innovative ideas. Although it's wise to seek the advice of multiple stakeholders in the organization, try to maintain agile decision making routines so you can quickly execute on new ideas when conditions change.
- Experiment and adapt. Innovation happens through a process of trial and error. If you expect every new idea to be a homerun, you're going to be disappointed. Instead, encourage your employees to experiment and adapt, incorporating the lessons you learn into the next generation of ideas.
- Hire for innovation. Smart small business owners don't wait for innovation to happen. They hire for it. By recruiting and retaining creative, forward-thinking individuals in key roles, you create the conditions for innovative ideas to emerge and thrive.
If you're a small business owner, you have a lot on your plate and it can be tempting to push innovation to the back burner. Yet, by setting aside time in your schedule to nurture innovative ideas, you can position your company for greater success both now and when you list it in the business-for-sale marketplace.