It is widely recognised that large organisations in Australia often encounter too much red tape to enable the rapid transformation required to innovate. It is also common knowledge that 80% of small businesses fail in the first five years, a statistic highlighted by Forbes, which alarmingly suggests an 80% failure rate in the first 18 months. With these beliefs firmly planted in our minds, along with recent insights into entrepreneurs being the biggest innovators (Accenture, 2013), what hope does Australia have of becoming a global leader in innovation?
Yet perhaps these beliefs are stifling creativity or leading to self-fulfilling prophecies for some organisations.
There is also a possibility that they may be incorrect. “If you’ve heard the statistic that 80% of businesses fail in the first five years, you can forget it, because it’s wrong.” Said Phil Kemp, Executive Director of Business Foundations, at the recent Hargraves annual conference on innovation, in Melbourne. “People start businesses, they run them for a while and then they choose to do something different. That is not failure.” Stressed Phil. It’s just part of being entrepreneurial.
Earlier in the conference, Grantly Mailes, the Chief Technology Advocate for Victoria, had impressed a room full of innovation leaders with his opening address. Mailes shared the Victorian Government’s plans for the state, including the facilitation of a Government sponsored, free Wi-Fi network, a fantastic opportunity for small businesses starting out. This opportunity presents a modern day equivalent to young Richard Branson’s telephone box office. Entrepreneurs will be able to sit in the comfort of their own apartment and make plans to conquer the business world. If Victoria achieves its goals it will dispel a few myths about the lack of agility within Government to engage in transformative work.
So what do small businesses have in the agility stakes that big organisations do not? Phil Kemp told Hargraves delegates that, ‘being nimble and quick as an entrepreneur is just what you do. It’s all about the culture of the business, which has to be inherently innovative. A small business is able spot where the opportunities lie and shift perspective (pivot). Additionally, the entrepreneur is very close to the customer; the CEO of a large company would never serve the customer. In the minds of the entrepreneur they are really pushing what the customer wants or needs. In every conversation they are learning something about the customer. That intimacy with the customer is gold.’
The Victorian Government has overcome this intimacy issue by engaging in business and community research, which has enabled it to understand the needs of its residents. The insights have enabled Victoria to create a technology innovation plan that best serves these needs. As part of the plan the Government aims to make Victoria one of the most digitally engaged communities and economies in the world. Plans include investment of $31m of funding into an ICT Skills Program, Digital Futures Fund and a Broadband-Enabled Innovation Program. Victoria has already launched a Technology Voucher Program, supporting the application of biotechnology, small Technology and ICT across industry sectors and a Driving Business Innovation Program, where Victorian SMEs have partnered with government agencies to develop innovative and often IT-focused solutions to public sector challenges.
Not all large organisations have this dexterity, however, and Phil Kemp offered a few tips for larger organisations, looking to become more agile:
- Spin out from corporate structures (create an entrepreneurial environment)
- Overcome the internal fear to fail and put yourself forward – entrepreneurs overcome that fear every day
- Develop an intimacy with the customer
- Seize opportunities – entrepreneurs step outside of the norm – they see an opportunity and go at it with everything they’ve got
Remember that, as a large organisation you have an advantage, taking a risk is not actually a risk because the effect of failure is minimal. For the entrepreneur, failure in one area could mean the end of the business.
Accenture recently wrote a report on how to create an entrepreneurial environment within a large organisation, warning that many entrepreneurial employees will leave if their ideas are not supported or encouraged. Accenture’s top tips were:
- Clarify the rules
- Reward entrepreneurial ideas, not just successes
- Designate time for entrepreneurial activates
- Ensure a top down tolerance to failure
‘The perils of not encouraging entrepreneurial activity’ by Accenture
Phil Kemp presented at Hargraves Conference 2014 and is Executive Director at Business Foundations, Hargraves' partner in WA.