When most people think of innovation, they often imagine ground-breaking new inventions and revolutionary technologies.
The wheel… sliced bread… the iPhone… our minds usually race straight to the big famous inventions when we think innovation and yet history has repeatedly and consistently shown us that most innovations are small, but yield significant results – often innovations are more evolution, than revolution.
Here are three different ways that Australian SMEs can drive export growth through innovation.
1. Product and service innovation
Taking the time to learn the special needs of an overseas market and then adapting products or services to that market is a proven route to export success. Exporting also provides an opportunity to capitalise on innovative product features with unique appeal offshore, where these features may not resonate in the domestic market.
One such example is Astec Paints, an Australian company that exports to Japan. Astec Paints is a manufacturer of paints and acrylic renders and is known for its high performance products that can cope with the extremes of the Australian climate. But it is the ability of the company’s products to withstand the stresses of earthquake tremors (not an issue for the Australian market) that has underpinned its growth in the Japanese market.
Exporting can also help SMEs find a wider customer base for an innovative, niche product that may have a limited market domestically. Consider South Australian company FCT Flames, a world leader in creating flame effects for ceremonial and sporting events. Australia has a limited market for these kinds of products, so instead FCT has focused on exporting to markets around the world, most recently providing their product for the cauldron at the South East Asian Games in Singapore. This is a clear example of an SME exporter understanding and profiting from its appeal in certain markets.
2. Process innovation
Process innovation is another type of innovation that is often overlooked by SMEs. It can yield immediate results by reducing costs, improving customer service and increasing speed to market. Surprisingly for many SMEs, it can be relatively simple and inexpensive to execute, especially as new technologies become more accessible and affordable.
Where possible, SMEs should look for opportunities to automate and streamline their internal systems to increase efficiency and drive down costs. One example of this is connecting an online ordering platform directly to accounting, stock control and order management systems. This can help reduce data errors, cut administrative overheads and speed up delivery.
Another option is to consider upgrading or modifying equipment used to manufacture products, so that it is easier to operate, cheaper to maintain or less expensive to run. Or look at redefining job descriptions or up-skilling staff to reduce delays caused by handover and resourcing costs.
3. Finance innovation
For most SMEs, securing finance to export is one of the greatest barriers to business growth, so it is no surprise that innovative new finance methods are becoming increasingly popular, and creating new opportunities for Australian SMEs.
One innovative funding model that has gained traction with start-ups and SMEs in recent years is crowdfunding. Crowdfunding is where companies raise money directly from the public, normally via crowdfunding websites or through social media channels. It might sound unlikely, but it has proved successful for many SMEs.
A great example is Flow Hive, an Australian company that invented a new way to harvest honey. In 2015, Flow Hive set a new crowdfunding record for businesses outside the US, attracting $4 million in less than two weeks, and a total of more than $17 million. This was despite the company only targeting a goal of $70,000. The response also saw their order book spike to more than 25,000 orders from 148 countries, leaving the company scrambling to increase production and distribution capacity to meet this demand. According to co-founder, Stuart Anderson, “It was about attracting funding and marketing the product at the same time. Crowdfunding attracts all the people around the world that are interested in innovation. How else would you do that?”
All in all, Australian SMEs should consider ways in which they can encourage innovation by focusing on different parts of their business. Product and service innovation, process innovation and finance innovation are three types of innovation that can be just as effective as a new product in creating a lasting competitive advantage, increasing margins and unlocking profitable new markets.
Andrew Watson is the Executive Director, Export Finance, Efic