1 GUIDELINES FOR CAMERA

6ISPIM 2005

7Entering tailored innovation in small enterprises

02ENTERING TAILOREDINNOVATION IN SMALL ENTERPRISES

Javier Mendibil LABEIN Technological Centre jmendibil@labein.esCarlos Pea LABEIN Technological Centre cpena@labein.es Javier Ruiz LABEIN Technological Centre jruiz@labein.es

This document presents a new approach for introducing innovation in small enterprises. Developed in an EU-funded project called Entertain, this approach provides on-line questionnaires, analysis tools and good practice studies that encourage small companies to reflect on their management techniques and develop new working practices, so that good ideas become appropriate innovations. An integrated, user-friendly and multilingual web site supports the approach as a framework of collaboration and cooperative learning for small enterprises, innovation advisers and public agencies.

1. INTRODUCTION

Small enterprises (SE) are often so busy with their day to day work that they are unaware of basic deficiencies in their management skills. Also the penetration of business excellence models and innovation management tools is very low in the European SE sector and managers tend to lack understanding of the benefits of these models. Entertain is a three year development project under the 5th Framework Programme for Promotion of Innovation and Encouragement of SME participation, that finished in June 2004 and which aimed to help small enterprises to improve their innovation capabilities. The project consortium was made up of 14 partners including 10 small enterprises from Spain, Norway and the UK. The project results were developed in an interactive and iterative way with all partners contributing their knowledge and experience to produce a web based and robust package including innovation self-assessment, tailored templates, learning materials and good practices.

2. THE ENTERTAIN APPROACH

2.1 Background

During the period 1995-1998, 31 actions were supported under the EC Innovation Programme. In general, the projects aimed to strengthen the know-how of national and regional organizations in promoting innovation management tools among SMEs. However, such actions were predominantly focused on medium-sized firms (between 50 and 500 employees), but few initiatives were effectively implemented in small firms (between 5 and 50 employees). One of them was the FRAM initiative (Norway 1992-2005), an adaptation of the BUNT programme, which aimed at improving competitiveness and profitability in small enterprises (between 5 and 50 employees) in Norway. This initiative was implemented by TI Trondelag, a main partner in the Entertain project.The PREMIE initiative (Spain 1995-2005) developed by Labein Technological Centre and the Department of Innovation of the Biscay Government, has helped to the introduction of a culture of excellence in management in more than 600 small enterprises of Biscay in this period.Field experiences accumulated in BUNT/FRAM program, the PREMIE initiative and the European Foundation for Quality Management's (EFQM) Business Model of Excellence were the basis of the Entertain approach. EFQM began in 1988 and its management model has been adopted in around 20,000 organisations across Europe. However, where the EFQM model is a broad-based management model, the Entertain approach focused closely on innovation.Considerable research has been carried out into the format of the EFQM Model of Business Excellence and also into its use as a tool for self-assessment (Hakes, 1998, Van der Wiele et. al, 1996). However, little research had been carried out into the applicability of the model to the needs of small enterprises. This was an objective in the Entertain project.Analysis of the applications by the EFQM show that few small firms apply for the award. The reasons are that small companies find it difficult to apply the Model for Business Excellence of the EFQM and that the length of the awards application document is perceived as too long. Small enterprises recognise self-assessment could provide them with benefits, but they dont think the model suits them. They need a model which identifies and explains clearly its requirements and directs them in a specific path of development. Additionally, the language used should be adopted into their working practices, which tend to be different from those of large firms. (Dale and Wilkes, 1998). Thus, one of the challenges of this project was developing a framework for self- assessment for small enterprises in relation to innovation since a point of view of clarity and comprehensiveness for them. Management excellence models are of high value in fostering innovation in organizations as they have a holistic approach that SE need.

2.2 Key characteristics of innovation

Small enterprises sometimes confuse innovation with new product development and think it is not relevant to their business. As a result of the literature review done during the first year of the project, Entertain defines innovation as the development of new or modified products, services or processes and the key characteristics are shown here after.

Innovations are pushed forward by individuals and persons who see the world in a new way by creatively thinking of new possibilities.Innovation is a very uncertain science.Innovation is not based on science, but may make use of science and technology.Innovation takes place in all industrial and commercial sectors not merely in high technology industries or within specific technologies.Innovation is often the result of cooperation, both within the company and between companies and parties in the value chain - networks are important!Innovation is often cumulative, in other words, the ability to innovate is built on previous experiences.Innovation changes organisations from within - it redefines how things are being done!Innovation has occurred in the moment the customer (internal or external customer) has bought and made use of the new product or service.

2.3 Self-awareness

It is probably the main complaint of anyone working in a small enterprise: We are so busy working in the business that we have no time to work on the business. The daily routine is either taken up trying to fulfil contracts or making new ones. Survival has to come before strategic thinking.Javier Mendibil, a researcher at Labein, the Spanish technological centre that coordinated the Entertain project, says the pressures on small companies prevent them from developing their management techniques. Entrepreneurs recognise the dangers of neglecting the management side of business, but they lack the time and resources. They do not have time to reflect on how the business is run or acquire some of the management skills they lack.The purpose of the Entertain methodology is to offer small businesses on-line access to information, self training and advice on a management model that will improve their innovative activities, says Mendibil. The tools and templates are easy to use and should help small enterprises develop a robust innovation strategy.Entertain approach begins with a self-assessment of all the areas of business that may impact innovation, from innovation strategy to people, culture and financial resources. As soon as you submit the online questionnaire you receive a tailored report on the state of innovation and its management in your organisation. It uses complex scoring mechanisms, based on a technique called evidential reasoning, to produce a company profile that highlights strengths and areas where innovation could be improved. The report helps companies to decide where they will focus.

But Entertain does not stop there (see figure 1). It also provides templates for situation analyses, along with good practice examples. It is also possible to deliver consultancy services on-line, a more affordable option for companies seeking external advice. Together, these tools and services enable companies to produce clear business goals and outline the steps they need to take to implement better management practice.

Figure 1 Entertain process

Another handy tool is the Entertain Ideas Bank. This is simply an on-line store for all the innovative ideas generated within the company from the cleaner to the CEO. The novelty here is that it is on the web and anyone can log in, says Grace McCarthy, a researcher from UMIST in the UK. Many good ideas occur on the spur of the moment and are too easily forgotten, especially in small enterprises. If everything is logged they can all be reviewed and prioritised. The management cycle and innovation are closely linked, explains McCarthy. To get innovation you need lots of ideas, a buzz and excitement. You need a culture that allows these ideas to flourish. If someone at the top just says 'Do this. Do not do that!' you just will not get much innovation. People will have ideas, but they will not voice them. (see figure 2).

Figure 2 Management and Innovation cycles

2.4 Results of the trials

The four main research participants in Entertain worked with ten small businesses to develop and test the entire methodology, and evaluate the impact of EFQM on their innovative strength.Trials carried out in Spain, Norway and the UK indicate that this approach is appreciated by small enterprises. Yateson Stainless, a small UK manufacturer of stainless steel products, testifies to the benefits that clear innovation management processes can have for a company. Our work with Entertain has made us much more self-aware, says Richard Yates. We look at the way we do things and try to modify them. One aspect of our company that we have addressed is internal communication. So we have opened meetings up to everyone and created an open communications front to get people's ideas. We have come up with some exciting new product developments from brainstorming which we might not have done without getting involved with Entertain.Of course, even with the simplest on-line tools, business managers still must find the time to log on and follow through the Entertain process. McCarthy agrees, but she believes that companies will see a return on their investment. Once they start to improve their management they will see the benefits, and will change the culture. They will want to keep going. Entertain generates a virtuous cycle because, as you see the benefits of innovation, you free more resources to be innovative!With positive feedback from the ten trial companies, the Entertain partners have high expectations for their approach. Small enterprises will find two versions of the self assessment, one for manufacturing companies and the other for service companies, and the website (see figure 3) is available in four languages, English, Spanish, Norwegian and Basque.The Entertain website is a framework of collaboration and cooperative learning for small enterprises, innovation advisers and public agencies. It offers to SEs tools to analyse the situation of the company and to help them become more innovative, to the innovation advisers it offers an on-line consultancy environment to communicate with companies and to monitor their progress, and to a public agency it offers a set of tools to monitor and evaluate the progress of the companies and to administrate the platform.

Figure 3 Entertain website

The potential impact of improving innovation capability in European small enterprises, helping them to generate more ideas and bring those ideas to successful exploitation is huge. Although the project has formally concluded, the project partners are putting serious efforts into demonstrating Entertain to institutions/agencies who may be interested in exploiting the Entertain methodology. (Entertain Consortium, 2004)In this sense, key to success are the collaborative agreements between the project Consortium or individual partners and Business and Development Agencies at local /regional or national level.Further research is also seen as one way of use of the project results but also the commercialisation of actual results is an option for the partners. In all cases the funding of the customisation and further research and development of the actual results is recommended.

3. ACKNOWLEDGMENTS

The authors are grateful for the contributions of people within the Entertain Project Consortium, and thanks to the European Commission for its financial support. Entertain Consortium is formed by the following organisations: LABEIN Technological Centre (Coordinator), Manchester School of Management- UMIST, TI Trondelag-National Institute of Technology of Norway and Cmara de Comercio de Gipuzkoa as main research partners, and Scorpio Elektro XXI, Ramn Galarza, Construcciones Zabalandi, Imagine, Novel, Yateson, Zwoon, MEI Technologies, Ekren and Consult It as small enterprises.

4. REFERENCES

1. Dale B.G. and Wilkes N., Attitudes to self-assessment and quality awards: a study in small and medium-sized companies, Total Quality Management, v9, 1998; I8, p731.2. Entertain Consortium, Deliverable D8. Entertain website www.sme-innova.com/entertain, 2004.3. Entertain Consortium, Deliverable D11 Entertain Final Report, published in www.sme-innova.com/entertainWeb , 2004.4. Hakes, C. The Corporate Self-assessment Handbook for Measuring Business Excellence, 1998.5. Van der Wiele A., Beyond fads: Management Fads and Organisational Change with Reference to Quality Management, Eburon Publishers, Delf, The Netherlands, 1998.