Free innovation and business performance in small enterprises case study example

– Context of the article
1. 1 Problem addressed
This article explores the effect of innovations on the performance of small business. It tracks the various types of innovations that are implemented by small businesses and their effect on various performance indicators such as profit, return on investment (ROI), sales per employee and sales. This research was done within a period of five years.
1. 2 Relevance of the research question
The research question is important as it seeks to shed light on the long term effects of innovations which have been termed as the new frontier in business development and are perceived to be a prerequisite for success. Innovations are both time and capital intensive and they should therefore be investigated very carefully before being implemented. This is especially true in the case of small enterprises which have small capital bases and are therefore more likely to suffer because of poorly thought out or implemented innovations.
1. 3 Theoretical concepts developed
This article investigates the two major types of innovations, radical and incremental. These types of innovation are further narrowed down to those that affect products or services and those that affect the internal processes of an enterprise. The concept of diversity in which the enterprises employ these innovations is also highlighted; some enterprises use radical product innovations while other use incremental product innovations. Conversely others use radical process innovations while others use incremental process innovations.
2. 0 Critical analysis of the article
2. 1 Possible impacts for firms’ innovation strategy
This article provides very useful insight for firms when they are choosing their innovation strategies, especially when they have to decide between radical and incremental changes. The advantages and disadvantages of both types of process have been highlighted and their effect on products and processes.
Firms can also gain a lot of insight on what kind of innovation to implement in the ever changing economic environments. Radical innovations do well in boom cycle of the economy as they boost sales and growth but they do not have a profound effect on profits since they are capital intensive. Incremental innovations, on the other hand, do not lead to a very high growth rate but create good profits. Radical innovations are normally hard hit by recessions while incremental innovations survive better. Managers are therefore advised to use a mix of these innovation types so as to be able to get the best out of the boom and recession cycles.
2. 2 Limitations (the author’s and yours) of the hypotheses tested
The fact that the research was done at the enterprise level makes it narrow and the researchers suggested further research at the industrial level.
In my opinion, the performance of the innovations cannot have been influenced by their nature alone (radical or incremental) as suggested by the researchers. Other internal factors such as proper execution and proper management must have also played a role. This is a limiting factor because all the prevailing conditions have not been taken into consideration.
3. 0 Practical implications of findings, give arguments and examples of situations or firms with regards to the findings
This study explains how some companies have a boom cycle where they are very popular and they make a lot of profit and then they are suddenly overtaken by other innovations or they simply fizzle out. This is especially true in the digital age, a good example being the social application MySpace. It started out as a radical innovation that was received very well but it stagnated due to lack of incremental innovations and was eventually overtaken by other radical innovations such as Facebook.
It is therefore important for small enterprises to employ a mix of both radical and incremental innovations so as to be able to succeed now and in the future.