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Creating an Innovative Environment for Your Small Business

1Making Innovation a Priority

In a recent paper entitled, “What Do Small Businesses Do?” University of Chicago professors Erik Hurst and Benjamin Wild Pugsley assert that only a small portion (less than 15%) of small-business owners intend to bring new ideas to market, or to improve existing services through the implementation of new systems.

The majority of small-business owners, according to Hurst and Pugsley, focus on providing an existing service to an established customer base, despite political rhetoric that tends to conflate entrepreneurs with genuine innovators and risk takers. In fact, only a handful of small-business owners acknowledge “significant growth” as a business goal!

Is this bad news for small businesses generally? Or good news for business owners focused on innovation and growth? Perhaps a little bit of both. Cumulative innovation is perhaps the single most important factor in broad economic growth.

Countries that fail to foster and promote innovation typically experience “brain drains” and “economic hollowing,” as promising young entrepreneurs move abroad in search of greater opportunities. If you’re an established or aspiring small-business owner, however, Hurst and Pugsley’s study suggests that you are well positioned to take advantage of the growing innovation gap.

Easier said than done, right? Maybe not.

Too many small-business owners regard “innovation” as an unattainable goal, or something to be tackled by larger firms with deep pockets and well-funded R&D labs. Not true. Small businesses can innovate in numerous ways, but in order to leap ahead of your competition, you must make innovation a priority.

Small businesses are powered by relationships—your clients feel a vested interest in the success of your enterprise; your employees feel like parts of a thriving organism, rather than cogs in a vast machine—and by leveraging the power of emotion, you can use your relationships to drive your company’s campaign of innovation. Here are a few tips.

Three Tips for Innovation

Most important: Listen. Keep your ears open. Innovation is always a collaborative process, and the most powerful ideas often come from unexpected corners. Listen deeply, and clear your mind of prejudgments and preconceptions.

Prove to your employees that you are committed to making innovation a priority. You have probably heard that Google allows every employee to spend up to 20% of their time “playing” with experimental ideas and emergent projects. Empower your employees to experiment. And make sure you allow some room for error. Innovation can be a messy process.

Learn to love “accidents.” The history of modern pharmaceuticals is essentially the story of accidental discovery. Drugs that are developed to meet a certain need often end up serving a totally different purpose. Accidents are the engines of innovation.


Marshall Walker Lee graduated Summa Cum Laude from the University of Michigan's Honors College with degrees in Writing and Philosophy. As a freelance writer and designer he has developed branding strategies and programming for J. Walter Thompson, Nike, the Kellogg Foundation, Spike TV, Sony Films, and General Motors. He is the co-founder and director of Poor Claudia, a 501(c)3 non-profit publishing enterprise based in Portland, Oregon.