Latest figures from the Federation of Small Businesses suggest that the total business population grew by 3.5 per cent between 2018 and 2019. Revealing that SMEs generate 51 per cent of all UK business turnover showing how important every company is, even down to sole traders without employees. The driving force behind this are the 5.8 million SMEs which make up a huge 99.9 per cent of all British businesses. With such a saturated market of start-ups and SMEs, it’s important that these companies use strategies in order to establish a clear USP. Innovation is key as those companies which rise to the top, and businesses which simply survive with such expansive competition, focus on doing things in new and exciting ways. Even in archaic industries, SMEs and start-ups should focus on innovation as a key investment strategy; it is insufficient to rely on previously established models of success.
A business that embodies this approach is online marketplace Airbnb. Airbnb grew by implementing a business model, based on the sharing economy, that managed to disrupt the traditional hotel and short-term rental industry. Airbnb took a concept previously only available at a personal/local level (letting your friend’s stay at your house) and upscaled it to a network of worldwide apartments, allowing consumers to access homes across the world and homeowners to profit in the process. Uber has similarly been driven by a form of innovation which takes past established business practices and adds disruptive elements, linked to technological advancements. These companies didn’t necessarily change the services or end product offered to consumers – taxis or holiday accommodation – but they did build successful enterprises that solved issues in a more efficient way than previous options available in the market. Using technology, Uber and Airbnb connect people with greater speed than previous business practices allowed, linking people with ease and ensuring transactions occur instantly.
Do not get intimidated
Generally speaking, innovation is a broad term and can be applied to businesses in a number of ways. For instance, household brands such as Apple and Microsoft aren’t particularly focused on truly disruptive innovation anymore, as their respective market dominance no longer requires this. Both tech companies were imbued with truly game-changing innovation in their early stages, creating products which vastly altered the relationship between consumers and technology, but this is no longer their sole focus. I would argue that both companies now practice a new form of innovation: to protect their business by focusing on providing sustained innovation in a more processed manner. For instance, neither brands bring out a radically new type of product but rather products that have new innovative features that are updated from past products. They’re still innovative but in a less radical manner, managing to excite customers but also manage expectations.
Even as these giants consistently practice novel modes of innovation, SMEs and start-ups must refrain from being intimidated by the big players in the market. Instead realising there is an opportunity to make waves in the respective sectors and take hold of opportunities that established brands may not have been able to grasp.
Success is far from a certainty for many companies. In today’s fiercely competitive business environment, it is crucial that start-ups entering the market are prepared through planning and research. According to The Small Business Association (SBA) 30 per cent of new businesses fail during the first two years, 50 per cent during the first five years and 66 per cent during the first decade. Aside from innovation, it’s crucial for new businesses to interact with customers with both clarity and transparency.
Businesses must adapt
Ignoring this has caused both small businesses and big brand names to collapse, with the recent failure of Thomas Cook highlighting one example of this. Did Thomas Cook nosedive because consumers stopped taking holidays? This is unlikely as 60 per cent of the population took a holiday abroad in 2018, up from 57 per cent the year before. It is the way in which consumers book and buy holidays that has changed, with the number of city breaks now significantly outstripping beach holidays. Thomas Cook, as a package holiday franchise, was unable to keep up with consumers’ changing habits as well as the increase in technology, that has meant that only one in seven consumers now book holidays via a high street outlet.
What is clear from the trends we have seen over the past decade is that innovation and disruption is required to establish and scale up a small business at pace but in order to remain competitive as an established player, regardless of the industry in which it stands, continued innovation is also essential. The way in which consumers absorb information, attain products and share information is transforming at a rate that many businesses are unable to match. Businesses must adapt, innovate and disrupt in order to survive in the landscape that consumers have created.
Mike Roberts, Managing Director, LegalShield UK