Small business is the leader in R&D
May 8, 2007
Although large organizations make national headlines and serve as Wall Street indicators, small organizations are making the kind of innovative strides that lead to business growth and robust financial performance.
Editor's Note: This column was prepared by the staff of Winning Workplaces, a not-for-profit organization that helps small and midsized businesses create better work environments.
"Money is the great inhibitor of innovation," John Heaton, president of Pay Plus Benefits of Kennewick, Wash., told attendees at Winning Workplaces' Best Bosses Conference and Celebration in September 2006. "No one innovates when they have the money to buy something." Perhaps this is one reason most of today's innovations come from small business.
Heaton, named a Best Boss in 2004 by Winning Workplaces, told of putting a $500 limit on available money to solve a database software problem. An employee came up with a solution that cost less than the $500, while the lead software developer proposed a solution that would have cost thousands of dollars.
Linked to capped costs or not, innovation is a quality that continues to define the U.S. business model. Innovation is what led Becky Minard, wife of 2006 Best Boss Paal Gisholt, to develop what she calls a "TV dinner" approach to horse and small animal supplement feeding, which led to SmartPak Equine's profitable business model. It's also what led 2005 Best Boss Colin Angle, CEO of iRobot Corp., to find success pursuing his dream of building robots that would meet widespread consumer demand after his business failed 18 times beforehand.
New York Times columnist and author Thomas Friedman argues that innovation is the antidote to the trend of good jobs being sent overseas. "In a globally integrated economy," Friedman wrote in a December 2006 commentary addressing competition from China, "our workers will get paid a premium only if they or their firms offer a uniquely innovative product or service."
Although large organizations make national headlines and serve as Wall Street indicators, small organizations are making the kind of innovative strides that lead to business growth and robust financial performance. In a recent FORTUNE Small Business article, "10 big ideas coming from small businesses in 2007," John Jankowski, the director of the National Science Foundation's R&D Statistics Program, said that R&D growth rates among small firms have exceeded those of large firms.
Innovation is tied not only to new-product development. In business after business we see innovation in processes and delivery systems that lead to new ways to think about traditional businesses or better ways to serve customers.
This trend stems from the ability to "build a better mousetrap," according to Michael Mulqueen, former executive director of the Greater Chicago Food Depository, who copaneled another conference session, "Tips and Strategies for Internal Leadership Development."
In his 15 years at the food bank's helm, Mulqueen empowered his people to help him improve the food bank's inventory management system and make the volunteer experience seamless and positive. When he retired from the food bank last summer, he had built up a corps of 8,000 committed volunteers who handle nearly a quarter of the food bank's annual production. As with Heaton's firm, Mulqueen's resourcefulness strengthened the bottom line—to the tune of $1.2 million a year.
So far we've received 800 nominations for the Top Small Workplaces recognition project that Winning Workplaces is conducting with The Wall Street Journal. The vitality of the small-business community is a source of optimism for the future. It's these workplaces that challenge employees to make a difference through their work, which is encouraging innovation.
We're unapologetically bullish on them!
Winning Workplaces' inaugural Top Small Workplaces recognition for exceptional small organizations will be held Oct. 4, 2007, in Chicago. For more information, visit www.winningworkplaces.org.