Innovation management technique (IMT) for very small-enterprises ...

Int. J. Innovation and Regional Development, Vol. 3, No. 6, 2011

Innovation management technique (IMT) for very small-enterprises: concept, development and application Dimitris Skalkos* Department of Food Science and Nutrition, University of The Aegean, Myrina, Lemnos, 81400, Greece Fax: +302254029914 E-mail: [email protected] *Corresponding author

Ioannis Bakouros Department of Mechanical Engineering, Mater Lab, University of Western Macedonia, Kozani, 50100, Greece E-mail: [email protected] Abstract: Open innovation suggests that the ability to absorb external knowledge has become a major driver for competition among enterprises. However, little attention has been paid to how very small enterprises (VSEs) deal, and handle innovation. In fact, most of the VSEs are not capable to implement innovation themselves. Innovation management techniques (IMTs) are methodological approaches aiming at the improvement of enterprises’ competitiveness by means of knowledge management. In this paper, we develop, test and evaluate a new methodology of IMT indented for VSEs of less developed regions such as the region of North Aegean of Greece. The method developed includes five phases of implementation and a plan for each VSE actions. The results of the pilot IMT application showed that there was a positive react by the entrepreneurs. This study proves the theory that the application of innovations depends on the human innovative resource rather the size of the company. Keywords: innovation; innovation management techniques; IMTs; small and medium enterprises; SMEs; very small enterprises; VSEs; product innovation; process innovation; incremental innovation; radical innovation. Reference to this paper should be made as follows: Skalkos, D. and Bakouros, I. (2011) ‘Innovation management technique (IMT) for very small-enterprises: concept, development and application’, Int. J. Innovation and Regional Development, Vol. 3, No. 6, pp.573–603. Biographical notes: Dimitris Skalkos is currently an Assistant Professor of Food Business Management at the Department of Food Science and Nutrition, The University of The Aegean, Greece. He has been a Visiting Assistant Professor at The University of Toledo, Ohio, USA, and Teaching Assistant at

Copyright © 2011 Inderscience Enterprises Ltd.

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D. Skalkos and I. Bakouros The University of Ioannina, Greece. He has worked as the first Director of the Business Innovation Center (BIC) of Epirus-Greece, and also as a Business Consultant for more than 20 national and multi-national companies of various sectors of activity. He has also worked as a Project Manager for various EU funding programmes involved with the promotion of innovation, the innovative pilot actions, and the establishment of academic spin off companies at the Greek regions (RITTS, RIS, Innovative Actions etc.). His research interests focus on the development of innovative medicinal herbal products, on the promotion and management of innovation, on knowledge transfer, and on regional innovation strategies. Ioannis Bakouros received his PhD in Management and Administration, in 1988, from Bradford University, UK. He has been a Visiting Assistant Professor at AUTH and University of Thessaly. He was responsible for Thessaloniki Technology Park development. Currently, he is an Assistant Professor at the University of Western Macedonia, Coordinator of the initiative for technological cooperation with Balkans, Advisor and Head of Regional Innovation Strategy in Thessaly and Western Macedonia, and member of the board of directors of Thessaloniki Innovation Zone. His main research interests are innovation, technology management, regional development strategies, information management networks, reliability, maintenance, industrial health and safety.

1

Introduction

1.1. Innovation process Because of the importance of the small and medium enterprises (SMEs), including the very small enterprises (VSEs) in creating growth, governments of developed, less developed and developing countries are very interested in finding ways to stimulate these enterprises in realising innovations. According to the current classification, European Union (EU) considers as very small all companies that employ up to ten employees (European Commission, 2003). Indeed, VSEs of the EU definition are equivalent to micro firms. These are the enterprises considered to be the engine of economic growth and employment too. One of the primary means through which SMEs are expected to accomplish this goal is by developing and commercialising innovations (European Commission, 2009). Innovation may be even more important for SMEs than for large firms. In fact, some authors deem that SMEs use product innovations as a means to becoming competitive to a higher extent than their large counterparts (Sweeney, 1983). In this paper by innovation we mean a new or significantly improved product (good or service) introduced to the market, as well as new or significantly improved process introduced within the enterprise. We investigate both incremental and radical product innovations. Incremental innovation refers to product line extensions or modifications of existing platforms and products, while by radical innovations we mean products that are new to the market as well as for the company. The questions which this paper deals with and tries to provide answers are in which ways can SMEs, or more precise VSEs, be helped to innovate? What is the best way for policy makers to encourage innovation? Many efforts have been made in that direction during the last few decades (Keizer et al., 2002). Despite the strong commitment to supporting SMEs the actual process by which

Innovation management technique (IMT) for very small-enterprises

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such firms undertake innovative activity remains unclear (Hoffman et al., 1998, Arundel et al., 2008). Therefore, the first step should be an investigation into which factors impact the innovation efforts of SMEs and in which way (Keizer et al., 2002). Since small companies are integrated part in the region they exist to much larger extent than large firms, the determinants of innovation for SMEs depend on specificities of that region (Kaufmann and Todtling, 2002). Most published research studies, which deal with determining factors significant for SME’s innovation, come from developed economies. The study of innovation, including the obstacles to its successful implementation, while relatively well researched in the industrialised countries, is rather neglected in less developed countries (Hadjimanolis, 1999). While firms in less-developed countries, in the recent past, were operating within a relatively protected environment, they must now face the global forces of competition. The globalisation of the markets requires the adaptation of firms in order to survive. Relevant firm characteristics considered to be key factors of innovation in the less developed economies include: market scope, presence of organisational and strategic changes in the firm, and market orientation (Radas and Bozic, 2009, Salavou and Lioukas, 2003). Innovation management techniques (IMTs) are tools developed to diagnose the firm’s capacity, and provide innovation into its structure. Thus, IMTs are instruments that can indeed be used to promote and apply innovation to SMEs and VSEs in less developed regions. In this paper, such an IMT methodology for VSEs has been developed, tested and evaluated in the firms of North Aegean Greece.

1.2 Innovation management techniques (IMTs) IMTs are research methods which evaluate a

the technological ability

b

the procedures

c

the needs of an enterprise or an organisation, and propose specific actions (Thom, 1990).

The basic steps of each IMT methodology are: a

the collection of data

b

the analysis

c

the composition

d

the report (Hidalgo and Albors, 2008).

IMTs usually are implemented by external consultants in close collaboration with the management and the staff of the company (European Commission, 2000). A successful IMT application concludes with a plan of specific actions proposed to the company, aiming at the technological improvement and the possession of the required tools for the improvement of the overall company’s innovation level. IMT is a good starting point for the company’s further progress and development, since it is conducted by experienced consultants able to recognise the real conditions and needs of the company (European Commission, 2005). IMT alone cannot solve the problems, ensure direct financial improvement, and correct the mistakes and the organisational problems of any company.

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It is only the first step in a series of methodologies that may needed afterwards for the company’s successful improvement. Through the IMT process, the company’s ability to use new technologies, to collaborate with experts, to identify the actual needs, and to improve its position is supported and evaluated (European Commission, 2004). IMT gives the opportunity to a company to understand its various needs required in order to apply innovation and knowledge in its structure. For the implementation of an IMT practice there are not solid reported international methodological approaches to be used. The basic structural framework which is followed by most IMTs in practice includes steps (European Commission, 2000) such as: data collection, general-brief diagnosis, data collection on specialised subjects, report on the overall findings and proposed plan of actions and implementation and follow up of the proposed plan. The implementation of the proposed plan is sometimes supported by the IMT team through scheduled visits at the company, and productive communication with the managers of each department. Alternative IMT methodologies include approaches (European Commission, 1996) such as: 1

Auto diagnosis: This approach can be applied by the company itself without the assistance of external experts. Many times auto diagnosis is the first step before the request for external assistance.

2

Competitive evaluation: It refers to an analysis of the company’s strong and weak points leading to the formulation of its technological and managerial profile which is then compared with the profile of the leading companies in the sector. This way, the proposed solutions and actions are derived by comparison.

3

Diagnosis of the innovation management: It refers to a methodology that leads exclusively to the identification of the managerial problems and their proposed solutions (business planning, use of human resources available, marketing plan, etc.).

The expected results from every IMT application, assuming careful implementation of the steps described above, are the following (Afuah, 1998): •

comprehensive, brief analysis and evaluation of the company’s needs required for the constant development and growth

•

complete and bias SWOT analysis (strong-weak points, and opportunities-threats) conducted by external experts

•

identification of opportunities for new products, new services, new technologies and new markets

•

networking with other companies, suppliers, technology sources, know how provider

•

evaluation of the company’s technological portfolio, patenting abilities and intellectual rights


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•

evaluation of the financial capacity to support the required expansion and development

•

placing of the company into key international, innovation networks which will ensure the constant transfer of new technologies and processes into the company’s structure.

The successful IMTs are those for which knowledge is a relevant part of the innovation process. The traditional idea that innovation is based on research (technology-push theory) and interaction between firms and other actors has been replaced by the current social network theory of innovation, where knowledge plays a crucial role in fostering innovation (Bullinger et al., 2004). Taking into account the previous considerations, innovation management has been associated with knowledge management (Coombs and Hull, 1998). It is from this basis that innovation management has been approached in a holistic way. The holistic model includes six specific areas in the management of innovation (Dogson, 2000): 1

R&D

2

new product development

3

commercialisation of innovation

4

operations and production

5

technological collaboration

6

technology strategy.

In innovation management, there is a wide range of IMTs available on the market. The IMTs that better suit SMEs are ten groups of IMTs called ‘IMT typologies’ identified worldwide. Table 1 summarises the ten IMT typologies and their associated methodologies/tools developed by authors based on various sources (Thom, 1990; European Commission, 1996; Ram, 1996; Libutti, 2000, European Commission, 2005; Scozzi and Garavelli, 2005; Phaal et al., 2006). There is no one-to-one correlation between one firm’s specific business problem and the methodology that solves it. As a result, it cannot be claimed that there is a closed set of developed and proven IMTs for solving, one by one, the challenges faced by business as a whole. For this reason any IMT is not considered in isolation. The usefulness of one IMT for a particular business challenge is normally measured in combination with other IMTs, this combination being adapted to varying degrees for each specific case. The benefit gained by the company depends on a combination of IMTs and the firm itself, and the mix of these two elements is what determines an effective outcome. To achieve the best fit between IMT and the company, an understanding is needed of the firm and its business (Becheikh et al., 2006). This understanding is necessary to support the definition of clear objectives, and the criteria for knowing when those objectives have been achieved. The criteria can be framed in terms of survival, new product introduction, competitiveness etc. (Amara et al., 2008). All the reported IMTs in the literature so far refer to SMEs or larger enterprises. No study on IMT methodology for VSEs has been reported so far.

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Table 1

IMT typologies and associated methodologies

IMT typologies Knowledge management tools

Methodologies and tools Knowledge audits, knowledge mapping Document management, IPR management

Market intelligence techniques

Technology watch, technology search Patents analysis, business intelligence CRM: customer relationship management Geo-marketing

Cooperative and networking tools

Groupware, team-building Supply chain management, industrial clustering

Human resources management techniques

Teleworking, corporate intranets Online recruitment, e-Learning Competence management

Interface management approaches

R&D – marketing interface Management, concurrent engineering

Creativity development techniques

Brainstorming, lateral thinking TRIZ, scamper method, mind mapping

Process improvement techniques

Benchmarking, workflow Business process re-engineering, just in time

Innovation project management techniques

Project management, project appraisal

Design and product development management tools

CAD systems, rapid prototyping

Project portfolio management Usability approaches, quality function deployment Value analysis

Business creation tools

Business simulation, business plan Spin-off from research to market

2

Methodology

2.1 Adapted research model The IMT methodology, its pilot application and the following study presented in this paper, was financed by the North Aegean Innovative Action and Support (NAIAS, 2004) project of the European Commission, DG Regio: Innovative Actions programme 2000–2007. The objective of the project was to become the main tool for the application of innovations to the firms of an islanding region such as the less developed region of North Aegean. Regarding employment, the overwhelming majority of the Aegean regions’ companies (about 90%) employ up to ten workers, while the average number of employees is about 4.5 (Nikolaidis and Bakouros, 2009). Half of these companies depend exclusively on the owner’s work, while three out of four employ less than five persons. This fact shows the very small size of North Aegean companies. Consequently, the vast


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majority of North Aegean companies are characterised as VSEs, while the companies that employee more than 50 employees are a minority of less than 1%. The IMT methodology designed in this project for the companies of North Aegean was intended for the vast majority of the region’s companies which are VSEs. All the studies related to the innovation capacity of the Greek, and particularly the islanding regions, were studied (European Trend Chart on Innovation, 2004, European Commission, 2009, Mohnen et al., 2006; Nikolaidis and Bakouros, 2009; Souitaris, 2001; Salavou and Lioukas, 2003). The researches have shown in these studies that organisational innovation is the most common, while companies innovate less at the product level, i.e., technologically. Companies in the Greek regions still consider internet and PCs a luxury, and they do not realise that these are very important tools that influence every firm’s daily activity. Crucial economic, institutional, and bureaucratic problems are blocking the efforts for development and flexibility. At the regional level, all authorities, organisations, structures and mechanisms serving entrepreneurship, as well as innovation, act in a haphazard way. According to these studies, it is more efficient and, consequently advisable to first bridge the gap between the various companies of the region as to organisational innovation, in which performance and comparative readiness of companies are much better, and then deal with product and process innovation (Nikolaidis and Bakouros, 2009; Ali, 1994; Banbury and Mitchell, 1995; Cooke and Wills, 1999). From these studies, the need for the introduction of simple, well understood, conventional criteria of entrepreneurial practice into the IMT proposed method, applied to each company’s daily needs and problems became clear, in order to make the technique better understood, and applicable by the participating firms. Despite this ‘alteration’ from the conventional IMT approaches, special attention was given in order to ensure that the methodology developed met the worldwide accepted standards for any IMT procedure. For example, VSEs many times need to adapt changes which are common practice for larger companies. In this case, the IMT developed included also such a set of actions into the package of changes proposed to the company in order to ensure efficiency of the intervention. The research model developed in this study, its approach and philosophy is shown in Figure 1. Based on the above described regional entrepreneurial conditions, common to many regions of East European countries and other non-EU countries ‘stuck in the past’, three main priorities were considered in the development of the IMT model: 1

The application of any innovative act into the operational system is effective only when it is part of an overall package of strategic innovations adapted into the company’s system.

2

The application of a suitable IMT method in the company is most effective when it is applied at the initial phase of any innovative pack of actions proposed.

3

The majority of companies do not have the internal capacity to design and implement an IMT method using their own human resources, and know how. An external support by experienced consultants or suitable organisations is required.

The research model considered also the following three assumptions: 1

There is no best IMT methodology, but the one which is suitable for the profile of the companies to which it is intended to.

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2

The right IMT methodology is the one that responds to the actual needs, and requirements of the selected companies at the current moment of time. It is up to the expert’s ability to realise the real needs of the companies for innovation.

3

The right steps for the proper IMT methodology are the ones that respond first to the entrepreneur’s request for specific assistance. That is the identification of the company’s deficiencies and the effort primarily to resolve the mistakes and wrong doing within the company.

The IMT methodology developed, examines each company’s operation from three different points of view, namely: •

Inward looking: Analysis of the company’s internal environment, such as the production, the management, the planning, the quality control, the self evaluation procedures, etc.

•

Outward looking: Analysis of the company’s external environment, such as the promotion of its products, the customers, the available technologies, the competition, market shares, etc.

•

Forward looking: Analysis of the company’s future, its goals, objectives, and potentials for development, improved management, new products, new technologies, new production processes, uses of ICT, and other innovative actions to be adapted in short and long term.

Figure 1

Conceptual model of the IMT method for VSEs Assumptions considered

Priorities adapted

(for the IMT methodology)

(for the IMT methodology)

IMT methodology Developed for VSEs

Pilot application (in regional VSEs)

Evaluation (of the results)

Conclusions

This kind of ‘auditing’ concludes with a set of short term and long term actions for each company, proposed to be implemented. When these actions are implemented, the results and the effectiveness should be evaluated based on the company’s performance, i.e.,


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gross sales increase, profitability, new products produced, new markets introduced, etc. after a certain period of time (average of five years). Such a long time is required in order to have accurate and valuable measurements of the different parameters. In this study, the IMT model was applied to 50 selected regional VSEs in a year period. Because of the time constrain, the results were not evaluated based on companies’ performance, but on the percentage of proposed actions implemented by each company. Even though this evaluation process does not reflect the actual impact of the IMT method in the company’s operation by 100%, it reflects the overall response, attitude, and effect of the method to the company in this short period of time. Significant cost reductions, new product performance, significant changes in management style, etc. can only accurately be measured five years after the application of the IMT methodology. Such an evaluation was beyond this project’s capacity. Finally, the results of all 50 pilot applications provided data for key conclusions in terms of the effectiveness, and the efficiency of the IMT methodology developed. These conclusions are carefully evaluated in order to assess the IMT’s effect to the VSEs progress and growth, and finalise the method for common use, and practice by any VSE, and other regions.

2.2 Proposed methodology The IMT methodology developed for VSEs is described in details in this paragraph and includes the following five phases and actions:

2.2.1 Phase 1: awareness and promotion of IMTs In order to promote innovation, its use, and benefits, as well as IMTs into the region’s enterprises the following actions were implemented regionally: 1

‘Innovation management techniques’ a leaflet distributed to 3000 VSEs: The leaflet included brief data on the IMT methodologies at the European level, the proposed IMT its use, and benefits.

2

‘Innovation management techniques’ seminar conducted at the four main towns of the region. The seminar focused on: a the current knowledge – driven global economy, affected by the innovation process and approach b the use of IMTs as an effective tool for the insertion of innovation into the companies c the proposed IMT method for VSEs. The seminar included the following subjects: a global economy and its effects locally b innovation and its adaptation into the global economy c strategic planning and innovation d marketing and innovation e total quality management (TQM) f information and knowledge key to successful innovation

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innovation at every level of company’s operation innovation for new product development examples of innovative companies innovation and creativity laboratory of innovation conclusion and discussion.

More than 500 participants attended the seminars at the regional level. These were entrepreneurs and managers from 300 local companies.

2.2.2 Phase 2: selection of the participating companies From the group of 300 companies who participated in the seminars, 50 of them were selected to be used on the IMT pilot implementation process. The selection was based on the evaluation of specific questionnaire completed by the participating entrepreneurs, and managers. Based on the questionnaire each company’s capacity, background, and potential, as well the entrepreneur’s ability for innovation, improvement, and new ideas were assessed. The main ten criteria used for the selection of the participating VSEs were: 1

sector of activity and its contribution in the regional gross domestic product

2

position and dynamic among the companies of the same sector within the region

3

financial and managing condition of the company

4

potential of the company for development and employment of qualified, educated employees

5

potential of the company for further development outside the region

6

background, knowledge, and experience of the entrepreneur himself

7

potential for development of new products, and improvement for the existing processes

8

size of the company in terms of sales, net profit, number of employees, etc.

9

potential for cooperation in the form of clustering with other companies of the region

10 status of the specific sector of activity at the national and international level. The overall regional characteristics such as demographics, isolation, available technologies, research capacities, together with the regional entrepreneurial characteristics in association with the key factors for possible regional progress and development were carefully considered in order to identify the above mentioned ten criteria used to select the 50 companies. This way the selected criteria provided a process leading to those 50 regional companies with significant capacity for innovation and growth, therefore potential for significant contribution to the regional development and employment. The companies were selected from as many as possible key regional sectors of business activity. Firms of the primary sector were excluded due to difference in the


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nature of business activities as compared with the rest of the sectors. The distribution of the 50 companies in the different sectors of activity is shown in Table 2. Table 2

Participating regional companies to IMT pilot application vis-à-vis sectors of activity

Sectors of activity

No. of companies*

Percentage

Secondary sectors

15

30%

Production of sweet traditional products (cooperative companies)

3

6%

Production of traditional products

7

14%

Production of dairy products

4

8%

1

2%

Trading sectors

Production of construction products

21

42%

Food trading

5

10%

Construction items trading

4

8%

Car dealers

3

6%

Different kinds of trading

9

18%

Tertiary sectors

14

28%

Cooperative bank

1

2%

Hotels

7

14%

Food service

3

6%

Consulting

1

2%

Publishing services

2

4%

Notes: *Total of 50 participating companies.

For practical reasons the sectors of activity were categorised in three main groups namely: a

secondary sector (30%)

b

trading sector (42%)

c

tertiary sector (28%).

The manufacturing companies were grouped as cooperatives producing traditional sweats (6%), as companies producing traditional regional products (14%), dairy companies producing traditional regional products (8%), and finally companies manufacturing construction items (2%). From the trading companies, 10% were from food sector, 8% from the construction sector, 6% from the car trading sector, and the rest 18% from various sectors. The service providing companies were 10% hotels, 6% food service, 2% consulting, and 4% printing companies. In addition, the only regional bank, that is the cooperative bank of Lesvos – Lemnos, was included in the group of selected companies, even though it is not VSE (18 employees). The bank was selected because it is the major funding organisation for firms in the region, and a key factor for the region’s economy. The results from the IMT application in the bank are included into the overall evaluation presented below. The VSEs chosen, according to the numbers employees were 10% with one to five employees, 40% with three to six employees, and 48% with seven to ten employees (Table 3).

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Table 3

Participating regional companies to IMT pilot application vis-à-vis the number of employees

Number of employees in the companies

No. of companies

Percentage

Very small companies 1–3

5

10%

3–6

20

40%

6–10

24

48%

1

2%

Small company 10–20

The average number of employees, based on the total number of employees divided by the number of companies, was 5.5 employees. Such a number was considered adequate for the application of the proposed IMT, since it represents an average VSE.

2.2.3 Phase 3: diagnosis of existing innovation capacity and needs of each company This phase of the IMT was implemented at the first visit to each company by an experienced consultant. During the visit: a

the daily operation of the company was carefully studied

b

the owner and the key employees were interviewed

c

the main company’s data was collected

d

the problems, the difficulties, and the mistakes were recorded

e

the regional market for the specific sector of activity was analysed.

All collected data was based on the sources available within the company. The following seven discrete parts of operation for each company were studied and analysed during this first visit constituting: internal environment of each company-external environment of each company-analysis of the data collected from each company. The seven parts of operation are: 1

history of the company and the entrepreneur

2

operation of the company, and the products or services produced

3

financial data

4

customers and suppliers

5

competition

6

sector(s) of activity

7

SWOT analysis.

A descriptive analysis of these seven parts of operation is presented in the Appendix.


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2.2.4 Phase 4: proposed plan of innovative actions for each company Innovation as a set of knowledge management practices is considered observable routine involved directly in the development and application of knowledge to each company (Dankbaar, 2003). From this basis innovation management has been approached in a holistic way leading to the proposed set of actions for each participating company. The set of proposed actions for each company, derived from the SWOT analysis, the global experience and know how, was formulated into two sets of actions, the first set was a short term one-year year plan, and the second set a long term three-year plan of actions. Each sub-plan included a package of concrete actions (average ten actions per company). Each action included the required budget, human resources, and time frame of implementation. The family type business feature identified in the majority of the participating companies was taken into consideration in the formulation of the proposed plan for each company, especially in the distribution of the responsibilities for the implementation of each proposed action. For example when there was young generation entrepreneur among the family business the assignment of the innovative actions’ implementation was directed to him since there was a better chance for the implementation of changes, new technologies, modernisation, etc., compared to the old generation father-entrepreneur. Each action plan was presented, analysed, and clarified to the entrepreneur(s) and the staff of each enterprise during the second visit of the consultant to the company. The comments, the remarks, and the suggestions of the participants were taken into consideration in formulating the final innovation management set of action plan for each company. This plan was delivered to the entrepreneur, and the managers for immediate implementation.

2.2.5 Phase 5: implementation and follow up of the proposed actions by each company The implementation of the proposed IMT action plan by each one of the participating 50 companies, and the follow up, and support for the first year of implementation was the key point to the success of the proposed methodology. It offered the opportunity to evaluate the success of the method not only by the proposed innovative actions, but also by the response, the feedback, and the impact of the IMT to each company’s successful development and growth. This part represents also the value and the contribution to science of the current paper too. The one-year support of every IMT action plan implementation was performed by monthly telephone communications with each company. During these sessions, the progress of each proposed action, the difficulties, and the impact experienced, were discussed, and analysed. Solutions, and suggestions for better, and more effective implementation were proposed. Other issues related to the company’s overall progress were also analysed. The IMT action plan’s impact to the company’s overall progress and development was assessed during the two one-day visits to each company every six months during the first year period. In these visits, emphasis was given to the importance of the accurate implementation of the proposed innovation plan, as the key to success in the coming years. Commitment, operation based on long term business planning, and marketing plan were the major educational themes to the entrepreneurs, and the managers of each VSE participating in the pilot IMT application.

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The results of this evaluation process and the overall effects of the IMTs to the companies are presented in the coming paragraph below.

3

Results and discussion

3.1 Analysis of the audits The main objectives of each IMT action plan formulated and implemented in each company were: •

the clarification of the goals and objectives of each company into the global sector of the specific activity, enabling thus a better understanding and vision of the progress and future pathway for the company

•

the development of a well defined business strategy for each company possessing the right questions for the future regarding the subjects of interest

•

the guideline for the adoption of specific and concrete objectives for the future, in order to be able to evaluate and measure the progress of the company

•

the provision to the company with the required convincing arguments, regarding the company’s optimistic future, required for the finance by external sources of its expansion and growth

•

the development of an open, and productive line of communication with all the collaborators, the staff, and the customers of the company in order to ensure the common understanding of the same vision for the company’s future, which will enable easier achievement of the targeted objectives.

The results of this study are based on each company’s innovation capacity recorded during the diagnosis phase of each IMT, and each company’s response to innovation based on the implementation of the proposed actions by each IMT. The results on the innovation capacity of each VSE have been categorised based on the following six parameters: 1

the history

2

the operation and the products

3

the customers and the suppliers

4

the competition

5

the response to the proposed actions

6

the 1st year implementation results directly connected with the seven discrete parts of business operation used in the proposed methodology above.

The main findings in the section ‘History of each company and the entrepreneur’ are presented in Table 4.

Innovation management technique (IMT) for very small-enterprises Table 4

587

Main findings on the history of the companies and their entrepreneurs

Main characteristics

No. of companies*

Percentage

1

Entrepreneurs with higher education

5

10%

2

Entrepreneurs with business family occupation in the same sector of activity

15

30%

3

Entrepreneurs with business experience in other sectors of activity as well

20

40%

4

Entrepreneurs with previous experience as employees in other companies

11

22%

5

Entrepreneurs who have been trained on subjects of business development such as management, business planning, marketing plans, financial management, etc.

2

4%

6

Entrepreneurs who are attending business training programs constantly

13

26%

7

Entrepreneurs who follow up and are aware of the changes, the movements, and the progress that takes place in their sector of activity internationally

10

20%

8

Entrepreneurs who manage, and develop their businesses based on a well defined three-year business plan

10

20%

9

Women entrepreneurs

5

10%

10

Companies with less than five years of operation

16

32%

11

Companies with operation from five to ten years

18

36%

12

Companies operating more than ten years

16

32%

13

Companies managed by the members of the family owning the enterprise

16

32%

14

Companies with cooperative management, and joint ownership

6

12%

15

Companies operating as joint ventures

14

28%

16

Companies with more than one business activity

0

0%

17

Companies which transferred their operation to a more advanced and bigger establishment, over the last five years, at least once

3

6%

Notes: *Total of 50 participating companies.

The profile of the participating entrepreneurs is that of a talented person, who developed the company himself, is devoted to his work; operate his business based on his experience and his knowledge, without seeking external assistance. The devotion and love to his work, and the commitment to the company’s success was proven to be a plus for the successful implementation of the IMTs. Even though only 10% of the entrepreneurs posses an academic degree, this was not a problem in the communication and the transfer of the new ideas, the new technologies, and know how to them. The same was true for the understanding and comprehension of the innovations, and the new ideas. The majority of the entrepreneurs had previous working experience either in their family business (30%), or in other businesses (40%), or even as employees in other companies (22%). This past experience gave them the advantage for a successful new business venture. The entrepreneurs with the better understanding of the IMT process

588


were those who had special knowledge on modern entrepreneurial subjects either by attending training programs (26%), or business management programs (4%), or by following international business events (20%). The lack of operation, up to now, based on a well formulated business plan, as it was the case with the majority of entrepreneurs (80%), was the main obstacle to the adaptation of innovation. Special efforts were taken in order to strengthen the importance and the need for business development based on a solid well structures business plan (BP) which was included in the proposed IMT, in most of the cases. In terms of years in business, the participating VSEs were distributed almost equal in the three main groups such as less than five years (32%), five to ten years (36%), and more than ten years (32%) in business. The results based on the IMT performance indicated that the years in business did not have a significant effect on the companies’ innovation capacity. However, the employees of the companies with less than five years in business were more keen, and eager to adapt and materialise the proposed innovations compared with the rest of the participants, due to their eager, and fresh enthusiasm to succeed. Furthermore, the companies with women entrepreneurs (10%) did not show any different attitude or characteristic on innovation compared with the companies with men entrepreneurs. Drawbacks on innovation capacity were recorded when another family member participated in the management, as it was the case with 32% of the participating VSEs. In this case, the obstacles to innovation were encountered due to difference in the managerial attitudes, and prospective, between the two family members. The same obstacles were recorded when there was any form of cooperative management within the company (in 12% of the participating VSEs). The companies which were used to changes, such as the transfer of operation in more advanced, new units, recorder to 6% of the firms, showed increased capacity for innovation. All participating companies had one, single business activity concentrating into only one business sector. No significant differences in the firms’ innovation capacities were encountered between the groups of companies from the different sectors of activity (Table 2). The balanced distribution of the companies among the secondary (30%), the trading (42%), and the tertiary sector (28%) of activity ensured the acquisition of more representative results. The main findings recorded in this part of the evaluation are represented in Table 5. Table 5 Main findings on the operation of the companies, and their products or services produced Main characteristics

No. of companies

Percentage

1

Companies that produce new products or services every two years (the trading companies are excluded)

10 out of 29

34.5%

2

Companies with effective, updated management

5 out of 50

10%

3

Companies with distribution of managerial responsibilities among the employees (when it is feasible)

10 out 37

27%

4

Companies which are using the new technologies, especially ICT effectively

15 out of 50

30%

5

Companies with adequate knowledge on their sector of activity

20 out of 50

40%

6

Companies that manage knowledge effectively

15 out of 50

30%

7

Companies with increased productivity over the last three years

15 out of 50

30%


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The criteria and the methodology used for the evaluation of the firms in terms of their operation and products / services produced are based on the criteria developed by an early work (Ettlie and Rubenstein 1987), and a recent similar use of them at the Greek entrepreneurial condition (Salavou, 2002). From the companies of the secondary and tertiary sector only 10 of them produced new products or services in the last two years (34.5%). From the companies with adequate number of employees, only 27% of them were distributing responsibilities among them. Overall, only 10% of the companies had effective, modern, updated management based on the international standards, before the proposed IMT application. The use of new technologies, internet, other ICT tools, etc. was encountered only in 30% of the enterprises. A fraction of 40% of the firms had adequate knowledge on the events, the changes, and the progress of their sector of activity primarily at the Greek national level, and secondarily at the international level, before the IMT implementation. However, a smaller 30% of the companies were found to manage the knowledge effectively. Finally, increase in their productivity on a year basis was recorded in 30% of the companies, too. The application of the proposed IMTs improves drastically the performances recorded within this part. Proper financial management, using suitable software and in house accountant, was recorded in the 40% of the companies, as presented in Table 6. Table 6

Main findings on the finances of the participating companies


No of companies*

Percentage

1

Companies with solid, updated financial management

20

40%

2

Companies with decreased operational costs over the last three years

10

20%

3

Companies with existing, but not effective financial management and control

12

24%

4

Companies with profitable three year operations

35

70%

5

Companies with increasing gross sales in the last three years

10

20%

6

Companies with recorded overall financial loses in the last three years

5

10%

7

Companies with effective, controlled pricing of their products or e-services

20

40%

8

Companies with decreased operation costs in the last three years

10

20%

Notes: *Total of 50 companies.

These were the companies which had also an effective, controlled pricing policy for their products and services offered. Half of these companies (20%) managed to decrease their percentage of operational costs over the last three years. This piece of information indicates the key importance of the suitable financial management for every company today, especially when the right software is in place too. Unfortunately, 24% of the companies possessing the software for the financial management were not using it sufficiently, because of misuse. This indicates the importance of the proper know how for the use of new technologies. A total of 70% of the participating firms indicated profits over the last three years, which means that the majority of the participants were healthy, sustainable business operations. In fact 20% of these companies showed significant sale

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increases in the last three years. Only 10% of the participating firms had significant losses in the last three years. In these companies, the IMT application’s main objective was to stop the losses and generate profits within the coming three year period. The losses were encountered primarily due to mismanagement, and lack of knowledge of the products’ market. The findings of the section related to customers and suppliers of the companies and to the innovation audit are based on the bias opinion of the expert consultant involved in each IMT application are presented in Table 7. Table 7

Main findings on the customers and suppliers of the companies


No. of companies*

Percentage

20

40%

12 out of 15

80%

Companies with a well defined, and diverse customers’ data

25

50%

4

Companies with a well defined, and broad supplier’s data

25

50%

5

Companies with efficient communication with their customers

15

30%

6

Companies using customers’ relation management (CRM) software

2

4%

7

Companies using new technologies for the communication with their customs, and suppliers

20

40%

8

Companies using marketing tools for the recruiting of customers i.e. advertisement, promotion etc

30

60%

9

Companies with use of certain policies, and strategies towards the different groups of customers

10

20%

10

Companies with certain policies and agreements with their suppliers

15

30%

1

Companies with customers outside the island of operation

2

Manufacturing companies with customers outside the island of operation

3


The majority of the participating companies were found to sell their products only within the island they operate in (60%). This is so because the majority of companies are trading companies importing goods into the region, rather than exporting from the region. The majority of the manufacturing companies (80%), export their products outside the island. However, most of them do not have a well developed network of customers outside the islanding region. As a result, the majority of them still sell most of their products into the region of North Aegean, despite the increased preference of the customers at national level for traditional Aegean’s products. Well defined catalogue of customers updated at constant intervals and watched by the management was recorded only in 50% of the companies. The same companies possess similar catalogues for their suppliers of raw materials or goods. However, the percentage of companies with sufficient, effective communication with their customers dropped to 30%. Unfortunately, only 4% of these companies possessed a customers’ relationship management (CRM) programme for


591

effective follow up and watch of their customers and their sales prior to the IMT application. The percentage of firms using new technologies for the communication with customers and suppliers was found to be 40%. The majority of the companies (60%) were using basic marketing and sales tools such as advertising, promotion, special offers, etc. for the promotion and sale of their products. However, only 20% of the firms were using these tools effectively and under a certain strategic marketing plan. The percentage was slightly higher at 30% for the companies which had certain policies and agreements with their key suppliers. The main results in this part of the innovation capacity recorded was that the majority of the companies found to operate with a certain degree of internal focus, without an outward direction which would enable them to understand better the market, the customers and the suppliers and therefore cooperate with them more effectively and accurately. This attitude did change in most of the companies, following the IMT application. The most discouraging results on the firm’s innovation capacity were recorded in this part ‘Competition and sector of activity at the regional market of each company’, as presented in Table 8. Table 8

Main findings on the companies’ competition at the regional market


No of companies*

Percentage

1

Companies with knowledge of the regional market

10

20%

2

Companies with knowledge of the competition at the regional market

10

20%

3

Companies with deep knowledge on the history, the progress, and the expectation of the regional market

10

20%

4

Companies which are watching in close proximity the business moves and transactions of the competitors at the regional market

5

10%

5

Companies implementing certain business actions in order to tackle the competition

5

10%

6

Companies that gather online marketing information for the national or global markets

5

10%


Only 20% of the companies had a good knowledge of the regional market in their sector of activity. It is the same companies (20%) which had a good knowledge of their competitors regionally. The same companies (20%) were aware of the market’s history and could make predictions on the market’s future development. However from these companies only half of them (10%) were carefully attending the competitors’ business moves into the market such as their special offers to the customers, their major purchases and sales of products, their collaborations, join ventures, etc. It was the same companies (10%) which were implementing certain business actions in order to tackle the competition regionally, i.e., offers to the customers, actions to prohibit competitors’ expansions, etc. The same companies were the ones that were gathering online information on the national and international corresponding markets in order to have a picture on what is going on abroad. A complete set around 30% of the proposed action in all IMTs intended to introduce a better understanding of the market(s), the competition, and the foreseen opportunities and threats risen within.

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3.2 Proposed actions The SWOT analysis of each company resulted in the formulation of the set of the proposed innovative actions. The main findings of each SWOT analysis, related to the innovation capacity, were based on the results of the previous sections described above. In addition, the results were based upon special characteristics identified in each company such as a

general working conditions

b

collaborative culture among the employees and the managers

c

the customers’ opinion for the company and its products, etc.

The main drawback for the majority of the companies was the lack of a well developed, clear BP for the daily operation, the development, and the progress (Table 4). For the majority of entrepreneurs, BP was considered the document that the banks, or the public organisations are asking for in order to approve a loan or incentives for business expansion. The lack of BP did not refer, however, to the lack of objectives, vision, and future for the majority of the companies. In fact, 47% of the companies did have clear vision and plan for the future, prior to the IMT implementation. The main categories of innovative interventions proposed, in order of significance are the following: 1

Business planning Based on the above results, the first proposed action within most of IMTs was the formulation and the follow up of a three-year BP from the first year of each IMT application. The IMTs focused first on the training of the entrepreneurs and their staff on the development and use of their BPs. The rest of the innovative actions proposed in each company were incorporated in the BPs as part of the actions to be implemented either at the first year or until the end of the three-year period. Every BP had certain major objectives in term of gross sales, net profit, cuts in operational cost to be achieved during the three-year period, developing thus certain achievements and awards for the entrepreneur and his employees to be accomplished. The rest of the IMT application became part of the overall business development and growth as well.

2

Managerial and organisational changes The second major drawback encountered was the lack of advanced management. The very small firms were small enough so that informal and more horizontal management styles proposed and developed through the IMT, were quite effective. In fact, the proposed 10% to 15% IMT actions of this section, significantly changed cooperative managements and had a positive effect on radical innovation. For example, the proposed entrepreneurial managements and financial administrations supported proactively the new product development that favours novelty in contrast to defensive strategies that favour imitation. The devotion of resources to radical innovation was indeed the deliberate decision made by the ‘new form’ of management developed. In addition, significant changes on organisation structures were proposed and adapted in order to support other types of innovation. The scope was to move from the me-too innovations, copies of competitors’ products, to


593

creative and proactive stance for new development and growth. The efficiency of these changes was directed towards to produce the product or service at the lowest cost and to deliver it to customers in the shortest time. 3

Marketing plan The third major drawback recorded in most of the companies, was the lack of experience in outward-looking, that is lack of benchmarking, clear market scope, innovations in marketing, technology watch etc. In this direction, a major set of proposed actions in each IMT was directed as well, included in the form of a marketing plan, encountered for the other 10% to 15% of the proposed actions in each IMT application. They were included in the three-year plan since they were action to be followed after the immediate one-year actions.

4

New products and services The fourth drawback recorder, directly linked to innovation was the development of new products. Changes in firm’s marketing concepts or strategies had no effect on the probability to innovate especially to product innovation. In this direction, a set of actions, 10% to 15% towards aesthetic appearance, product design were initially proposed. Efforts were made in order to make firms to pay serious attention to all aspects of their product portfolio, not neglecting the ‘superficial’ changes in products affecting the customers’ concept and believe for the quality and the price of each product.

5

Use of new technologies Another major deficiency recorded in the majority of the companies was the lack of effective utilisation of all the technological advances available today such as internet, Skype communication, teleconferences, various software, CRM, ICT, etc. All the IMTs proposed included actions for the use of new technologies in all the various operational levels of each company. The use of available new technologies encountered for the 20% to 25% of the proposed innovative actions in each company.

6

Collaboration with other companies and external expertise Most of the very small firms did not have experience in utilising external assistance neither for the business development nor for the required technological know how. A major lack of external links with other companies, consultants, business providing centres, and most important with academic and research institutions was recorded to all the companies. The concept of business to business (B2B) know-how was out of the entrepreneurs agenda. A number of proposed IMT actions, around 10% to 15%, were proposed and implemented in this section of process innovation.

7

Use of educated human resources The lack of competent, qualified staff was recorded in many of the firms. This was connected to the lack of education of the existing human resource. Actions towards the hiring, and proper use in management of high education employee were implemented in most of the proposed IMTs. The regional university of Aegean was indeed used as the source for the different majors of graduates required such as environmentalists, accountants, business management, etc.

594 8

D. Skalkos and I. Bakouros Use of innovation incentives The participating firms had never before used innovation subsidies offered by the Greek Government for SMEs. The perception was that these offers were for bigger, and more advanced enterprises. Whenever feasible, a set of actions was inserted to each IMT proposed for the utilisation of such incentives by the firm. Our data proved the theory that subsidies are indeed significant drivers of innovation for the firms. Unfortunately, the innovation subsidies are not sufficiently large to enable a firm to make significant investments in innovation activities.

9

Development of R&D capacity These very small firms by no means can have their own R&D departments in house. However, in many case the development of R&D capacity was feasible through the cooperation of specific research unit such as department of the regional University of Aegean. Such collaborative actions were part of many IMTs proposed for the corresponding manufacturing firms.

3.3 Response to proposed actions The response of each VSE on each category of innovative intervention proposed is shown in Table 9. Table 9 Results of the IMT implementation based on the VSEs responses to the proposed actions Main categories of innovative interventions (in each company)

No. of companies adapting proposed actions*

%

1

Business planning

38 out of 40

95%

2

Managerial and organisational changes

45 out of 50

90%

3

Marketing plan

35 out of 50

70%

4

New products and services

45 out of 50

90%

5

Use of new technologies

40 out of 50

80%

6

Networking

40 out of 50

80%

7

Educated human resources

30 out of 45

66%

8

Use of innovation incentives

5 out of 7

71%

9

Development of R&D capacity

5 out of 5

100%


Out of the 50 companies, business planning actions were suggested to 40 companies, and 38 of them responded positively (95%). The two out of the 40 companies are the two of the five companies with recorded overall financial losses in the last three years as shown in Table 6 (item 6). These companies ignored the IMT intervention completely as shown in Table 10 below (item 6). The rest ten out of the 50 companies did have such a plan in place before the IMT (item 8, Table 4). Managerial and organisational changes were suggested to all companies and 45 of them responded positively to the suggestions (90%). That is because some of the companies with BP considered proposed suggestions not suitable for their cases.


595

Marketing plans actions were suggested to all companies and 35 of them responded positively (70%). The low response (70%) is attributed to the fact that these changes required first the internal organisation structuring changes in order to be implemented, and therefore were not adapted in time. The actions proposed on new products and services to all companies, according to the description stated above, were adapted by 45 of them (90%). The need for product and service reforms became more clear to the companies and they were more keen to implement them. The actions on the use of new technologies directed to all 50 companies were indeed adapted by 40 of them (80%). The actions proposed related to collaborations of any kind, networking, were suggested to all companies, and 40 of them responded positively (80%). Of the ten companies which did not adapt the proposed actions for new technologies and collaboration, the two companies are those which ignored the IMT package completely because of financial problems (item 6, Table 10), and the remaining eight are from the list of companies which had to implement first main internal structuring reforms. Actions related to the use of better educated employees hired, were proposed to 45 companies but only 30 of them responded positively (66%). Unfortunately, in this case, the low percentage of positive reply was due to the entrepreneurs’ lack of competence leading to lack of trust for his employees and inability to effectively diversify responsibilities. This is the major drawback of the pilot application because it leads to non-effective human resource available within the VSEs in order to implement constantly innovations and changes. The use of incentives available for innovations was suggested only to seven VSEs with such capacities and five of them showed a positive response (71%). That is because only seven companies were able to implement product innovations using available incentive programs, and only five of them were able to catch up the deadlines available to do so. Finally, R&D actions were proposed to five VSEs only and all of them responded positively (100%). Again, the low number (five out of the 50 VSEs) is because only these companies were able to implement such actions. The term ‘positive response’ or ‘adaption’ in this study refers to complete use and implementation of the suggested actions. Table 10

Results of the IMT implementation after the first year period

Main results

No of companies*

Percentage

1

Companies which started the implementation of actions immediately and completed the first year set of actions in time

10

20%

2

Companies which delayed the start up process, but completed the set of actions at the end of first the year

20

40%

3

Companies which completed part of the proposed actions at the end of first year

10

20%

4

Companies which implemented only part of the proposed actions

5

10%

5

Companies which started the implementation of the action at the end of the first year

3

6%

6

Companies which ignored the IMT proposed action plan

2

4%


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The results of each IMT application in each company, assessed through the next two visits of the consultant in each company, during the first year of implementation are shown in Table 10. This follow up process showed that the first six months was a very short time period in order for the actions to be implemented. This was a preparatory period for the majority of companies and the entrepreneurs in which each company: a

understood and comprehended the suggestions, the views and the proposals of the IMT

b

prepared the structure internally for the implementation of the actions

c

started to implement the easier and less expensive actions.

During this time period, the support by the IMT consulting unit, during the telephone monthly communications was a catalyst for the overall process of actions to be implemented. The second half of the year was the time in which most companies fully initiated the implementation of the IMT proposed actions. The companies which started the IMT implementation right away (item 1) were those with a BP in place prior to the IMT intervention (20%). In this case, the implementation of the actions was easily inserted into the existing BP. From the rest 40 companies, 20 of them (40%) had to restructure their internal structures in order to be able to put in place the proposed BP and this cause their delay in the start up of the IMT implementation process (item 2). This required internal reform caused an additional delay to ten out of the rest 20 companies (20%), which were not able to complete the one year actions in time (item 3). They did complete the actions, but with a delay from 6 to 12 months. Overall, despite the certain delay, an average of 80% of the participating companies was indeed able to complete the proposed first year actions. A 60% of these companies started either right away or with a delay the implementation of the IMTs, but managed to complete all first year actions on time. From the rest ten companies, 10% of them chose to implement only part of the proposed first year actions, which were indeed completed on time (item 4). They argued that not all actions were useful for them at the specific time and place. These were companies with limited vision, and strategic planning for their future and prosperity, despite their better potential and dynamic. A dramatic delay on the IMT implementation was recorded in the rest 6% of the companies (item 5). Special effort by the consultant was made, during the one-year period to make them to move on in time with the implementation. They were companies with major internal structural and managerial problems in prohibiting changes, and new ideas. These were the companies in which their BP implementation just started at the end of the first year. These companies, following major efforts, did start to adapt some actions at the end of the first year period. Finally, the rest 4% of the companies, that is two out of the 50 VSEs, did not implement any action, ignoring the whole IMT pilot application, despite their initial commitment, and agreement. These were the two companies which rejected the BP proposal for them as well (item 1, Table 9). Despite the fact that the proposed IMT was intended to assist them to improve their financial conditions, because of their very bad situation they did not want to make any changes or alterations, since they didn’t actually believe in their own survival and prosperity.


4

597

Conclusions

The systemic approach to innovation recognises that innovation and knowledge generation takes place as a result of a variety of activities, many of them outside the formal research process (Liyanage and Poon, 2002). Knowledge is thus generated not just in universities but also in a very wide variety of locations within the economy, and notable as product (learning-by-doing) or consumption (learning-by-using). In the current economic conditions, growth must mainly originate from increasing the productivity of knowledge work which is the most important contribution management can make. The most valuable assets of a 21st century firm are its knowledge workers and their productivity. Innovation and knowledge generation have been analysed by Popadiuk and Choo (2006) from a specific systematic approach considering the market role, the knowledge architecture, etc. and the innovation alternatives (process, product, radical incremental) outlining a parallel comparison between both processes (knowledge and innovation). A knowledge-based economy is defined as an economy directly based on the production, distribution and use of knowledge. In such economies, there is a high degree of connectivity between the agents involved. Knowledge is widely used and exploited in all manner of economic activity. We have indeed progressed from the knowledge-based economy to the knowledge-driven economy, emphasising the fact that the current contribution of knowledge is very much as the dynamo of our economies. In this context, the developed IMT methodology for VSEs uses the knowledge as a relevant part of the innovation process. The contribution of knowledge to innovation is achieved in part by reducing transactions costs, utilising better existing resources, exploring new areas of research and development, and providing the pathway to the companies to become international from regional legal entities. In comparison with traditional mechanistic command and control management, the proposed innovation management entails a fundamental change in the strategic perception of the company which accordingly has to consider the following management changes, such as: manage human capabilities in a strategic manner, networking with partners, create adaptive and interactive organisational structures, balance process efficiency versus destructive innovation, balance individual versus corporate motivation, etc. The proposed IMT methodology is associated directly with knowledge management defining “knowledge management practices for innovation” as those “observable routines involved directly in the development and application of knowledge”. The proposed IMT innovates from the new way of thinking which dictates that: innovation is not necessarily due to technology, but more to the capacity of firms to apply their knowledge to improve their businesses internally and their relationships with external actors. This is vital for VSEs as well as for the other categories of companies, as innovation is vital to their survival in a competitive changing market place. In the IMT method developed, innovation is less a question of technology and more a way of thinking and finding creative solutions within the company. This is indeed the core of the innovation concept of the proposed methodology. The objective of the IMT method applied to the each VSE is to ‘teach’ the company to innovate itself, rather than to pump in new technologies, and specific know how. The present project demonstrated that the structural characteristics of VSEs in less developed business environment are particular restrictive for innovation and changes. Innovation at the ground level is what is most needed in these firms. The results presented in Tables 9 and 10, and in Section 3.3 above, prove in a very clear manner, that the first priority for any intervention to the VSEs is a simple, well structured business

598


plan which leads the way for an overall organisation restructuring (organisation innovation) within the company. Only the companies with a BP in place prior to the IMT intervention were able to move on fast with the implementation of the IMT proposed actions. The study proves also that the implementation of innovation in VSE is feasible only when it is part of an overall business plan. The participating companies first adapted the proposed BP and then moved on with further changes. The data in Table 9 proves that innovation, which for VSEs is connected with major changes, is feasible only when it is implemented in the order of: a

organisational innovation

b

marketing innovation

c

process innovation (new technology, human resources, R&D, new methods, etc.)

d

product innovation (new products in the market).

The order of reforms in VSEs can only follow the above order to be effective for VSEs. If the proper organisational structure capable of handling changes, new ideas, and new strategies is not in place no other type of innovation can be prosperous for the company. Implementing corporate changes had a positive impact on radical product innovation while implanting new organisational structures had positive effect on incremental innovation. Many of the entrepreneurs admitted that the IMT process changed their ‘old’ concept of innovation, and new technologies as tools and means for improvement only for big, international companies. We have shown that the process of innovation management is something that can be built into the culture of a VSE, through the IMT process. It can be promoted by using special techniques, and by building a prevailing atmosphere of encouragement for new ideas. The goal is to change the firm, to achieve a metamorphosis from a group of people doing a job to a highly energising team that is constantly searching for new and better ways of making the vision reality. The current study shows that proper application of IMTs for VSEs, facilitates the company’s ability to build up an innovation culture, and to introduce appropriate new technologies in processes, as well as the necessary changes to the organisation for constant applications of new ideas, new actions, etc. Most of the VSEs do not have by themselves such an innovation culture that favours the introduction of changes within the organisation. More often, there is a strong resistance from staff and sometimes from management for innovation. We find that our findings confirm those reported earlier on the innovation status and capacity of SMEs in less developed countries (Hadjimanolis, 1999; Radas and Bozic, 2009; Salavou and Lioukas, 2003, Salavou, 2002; Salavou and Avlonitis, 2008, Avlonitis and Salavou, 2007). However, this is the first report which provides evidence that the same status is valid for VSEs as well. Most VSEs do not have the necessary in-house knowledge of what an IMT is and how it is implemented. The study shows proves that there is an effective IMT methodology that can successfully be used for the insertion of innovations in such small firms. The study proves also that the proposed IMT is extremely useful for the survival and the futures of the VSEs. Few national or regional programs specifically address the promotion of IMTs, or consider business innovation and technology management techniques as strategic aim to increase industrial competitiveness.


599

The presented project leads to the following suggestions in order to promote an innovation culture, to assist companies to increase their competitiveness through innovation, and to help take advantage of the opportunities of the knowledge-driven economy: 1

Promotion of the global networking development among various actors to encourage the exchange of knowledge and experience working with VSEs.

2

Promotion of innovation management through a scheme of partnership between the private sector and the national or regional governments. The objective will be to improve the know-how of actors promoting IMTs within firms in particular the VSEs.

3

Promotion of awareness initiatives at the regional levels to enhance citizens’ confidence in innovation as a vehicle to foster competitiveness in VSEs and well being, and improvement in the societies.

4

Promotion of awareness initiatives for the improvement in the process of manufacturing design, and product development of the regional key products.

5

Definition of practices and standards for IMT development for VSEs based on preparatory work such as studies, consultation with national associations, etc.

6

Development of common certification systems in the management of innovation for VSEs. Certain preparatory work (e.g., studies, consultation with national associations on various IMTs, etc.) would be necessary to define practices and standards in this area.

Based on the above, the current study arrives to the following policy proposals for strengthening the competitiveness position of VSEs, especially in islanding regions: 1

Developing appropriate regional innovation policies which will encourage the adaptation of innovation strategies by the enterprises.

2

Identifying and solving the regional obstacles which prohibit the innovation development by the private sector.

3

Fostering innovation culture at the regional level through the initiation of suitable, dissemination and awareness activities.

4

Promoting interregional collaborations of the private and public sector with regions with the same characteristics.

5

Developing incentives for the implementation of organisation, and marketing innovations by the local VSEs.

6

Developing incentives for the production of new, innovative products utilising regional resources.

7

Funding the IMT applications by the VSEs as a common vehicle for reforms, restructuring, and constant innovations.

Future research will involve the application of the IMT developed to sectoral groups of VSEs such as food and beverage, tourism, trade, primary sector etc.

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Acknowledgements This research was financed by the North Aegean Innovative Actions and Support (NAIAS) project of the European Commission’s (DG Regio) programme of Innovative actions 2000–2007.

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Appendix Sources of information for the diagnosis of companies’ innovation capacity 1

History of the company and the entrepreneur: The historic evolution of each company was evaluated. The years in business, the possible family ownership, the start up of the company, the participation of the family in the overall business development were recorded and evaluated. The business structure, the products produced, the basic financial annual data, the number of employees, the participation into the regional market, and the main business changes during all years of operation were carefully examined. In addition, the career of the entrepreneur himself since high school or college graduation was also evaluated. His education, his prior involvement with other business ventures, his accumulated experience, his knowledge in management, his understanding of the global economy and the need for innovations as well as his ability to comprehend and implement new ideas was finally taken into consideration.

2

Operation of the company, and the products or services produced: The evaluation of all company’s departments, their function, and the collaboration with each other was completed in this part of the diagnosis. The production of each product or service was recorded step by step. The available machinery, technology, and other equipment and their use within the production process were also examined. The participation of each employee into the production process or the management was assessed too. The overall management and the financial control, as well as the rest of parameters constituting the internal environment of the company were also examined.

3

Financial data: The financial data available over the last five years was carefully examined in order to understand the actual financial evolution of the company, and its current economic condition. The gross sales, net profits, operational costs, salaries, costs of raw materials, production costs, marketing and promotion costs, other costs, and any other related data was recorded. Through this part of the diagnosis the overall actual economic position of the company was accurately estimated. This examination was the starting point for the IMT innovative interventions described below, since it was the first indication of the actual financial resources available for any changes, additions, or capital expenditures may required.

4

Customers and suppliers: The customers’ list of the company was examined. The distribution of customers per product or service, and the actual sales by customer were examined. The distribution network, the retails, and the wholesales were evaluated as well as the agreements and the deals with the customers. The suppliers of the raw materials were recorded in connection with the products or services produced. All the data accumulated in this part of the diagnosis was compared and connected with the data from the previous part (part 3). This way the company’s overall economics in connections with products/services produced were fully understood.

5

Competition: The companies of the same sector of activity primarily at the regional and secondarily at the national level were examined. The size of each competitor, the products produced, the capacity in technical, human, structural resources, and pieces


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of equipment available were examined, too. In addition, the innovation level and capacity was evaluated for all the sectoral companies and the main competitors of the enterprise under studying. 6

Sector(s) of activity: The progress of the sector of company’s activity throughout the last ten years worldwide, nationally and locally was briefly examined. The capacity of the sector, the use of innovations, its potentials for progress and development was examined too in order to predict the possible future of the sector for the coming years. Such prediction contributed to the prediction of the company’s study, and its potentials for expansion, growth, and other opportunities. Finally, the future of the specific sector at the regional level was analysed in order to assess the future at the companies in the close proximity.

7

SWOT analysis: The analysis of the company’s strong and weak points and the opportunities and threats that the market offers (SWOT) is the basis for every plan of action, therefore it has been the basic logic for the proposed IMT methodology, too. A successful plan of action should intend to maximise the strong points of the company, minimise the weak points, utilise the opportunities of the market, and protect the company from the threats foreseen in the market. In the proposed method, the SWOT analysis was based on the data collected from the previous six parts of the diagnosis. The SWOT analysis included all parameters of each company’s operation. In addition to the economics and to the data related to the available technologies, emphasis was given to the human resources available, their potential for more changes, as well as the talent, and the capacity of the entrepreneur as a manager and leader.