Risk Management and Competitive Innovation How do you Manage Risk through Business Innovation

I work with small companies in the southeast UK and for many, the current business climate gives these entrepreneurs two options: they can innovate today or they can fail tomorrow.

Costs of production are re-locating the work

Increasingly I notice that production by local firms is being outsourced to China and call centres have migrated from Folkestone to Leeds and Glasgow and even to Beirut and Mumbai. It seems that geographic barriers no longer favour proximity when suppliers compete on price.

Product introductions are accelerating

I also see people in far-off lands thinking up novel ideas, trying the innovative product in their own market and then making their second million selling it into our local market. When a new product is a clear success, it is being introduced into adjacent markets as quickly as the news hits the Internet.

Choose how you experience your future

This reduction in the cost of distance and increase in the speed of innovation gives small companies a clear choice: you can either hope that major change won’t happen in your market or you can invest in making the future for yourself.

Having made that gut-choice, I coach my clients to find a combination of four approaches to suit their business:

• Bet your future on creating value in new ways. Set a monthly budget of time and effort in your business to look for and develop bright ideas that will improve your future chances. Remember to include your staff and partners in this on-going activity since they are also committed to your future. Make the trawling for ideas and insights part of everyone's remit.
• Sell your new ideas for products and services to your best customers. Knowing the value you currently deliver, they will stick with you rather than looking at an enticing offer from a competitor. If you invest in listening to your best customers too, they will also give you solid feedback that will enable you to continually improve your offer.
• Make it difficult for competitors to copy you without sacrificing their profitability. There are several ways to do this such as offering new products in a "3 for 2" bundle with complementary goods, encouraging your customers to standardise aspects of their requirements to favour your design and developing the new product to retro-fit the replaced product.
• Take your biggest exposure (and source of weakness) and morph it into a strength. This might involve importing those ‘low price foreign goods’ and re-packaging them with a usage leaflet written in English and a solid guarantee of satisfaction.

It is clear to me that small businesses face risks in their market whichever way they look. If they turn away from making their own future, they will be buffeted by whatever waves of innovation their competitors create. Conversely if they invest in innovation, they can manage and reduce their risks and build a competitive future.

Adrian Pepper coaches people through business and personal difficulties, helping companies figure out what to do, how to move forward and what to get organised. You can contact him through Help4You Ltd, through his website at http://www.help4you.ltd.uk or by phone +44-7773-380133. At http://feeds.feedburner.com/help4you, you can listen to his podcast for small businesses.