How relevant is R&D to SMEs?

The Indian market is developing at an accelerating rate and with rapid globalization, the contribution of technological potential is critical for any firm’s survival or growth. R&D is required to develop distinctive technological competencies and is vital to imbibe external technologies. Relying only on the strategy of reverse engineering and innovative cost-effective processes would simply be insufficient to support under the new technology policy regime.

While initiating an R&D project, Small and Medium Enterprises (SMEs) have to consider thoroughly whether the particular research is necessary for their business and if it would deliver the expected results. They also need to examine what is their exact purpose from the research which can dictate its methodology and also clarify the kind of partners required for the project. 

In SMEs, research helps in a number of ways including bringing innovation to existing products or developing new ones. It helps the company in accessing new customers and entering new export markets besides offering an unparalleled edge over the competition by increment in sales, turnover and growth in business. R & D also facilitates global collaboration leading to an intensification of international contacts between SMEs and other companies involved in the field. 

 Indian manufacturing firms of various sizes (small, medium or large) are often found to have a low incidence of in-house R & D and have very less budget allocation for the same. Some of the industries, such as chemicals & chemical products, electrical & optical equipment, drugs & pharmaceuticals and machinery & equipment control about 80 per cent of the entire SME R & D of the country (as per a research by Jaya Prakash Pradhan, SPIESR). Incidentally, these industries are also in the top four across the various SMEs, in India and worldwide in their share in the R &D sector.

Initiatives such as EU-INCOOP-Inter-institutional Cooperation in EU are gaining prominence by bringing together experts from key areas of computing technology from India and EU. This association is expected to boost the IT industry and benefit SMEs in gaining valuable data for entering new markets and also help in understanding details about market dynamics in a developed economy.

Many countries also offer tax relief to SMEs conducting R & D supporting the fact that creation of innovative, high-value-added products and services boosts profitability and growth of such companies and economy of that nation.

Indian SMEs are supported by schemes such as SIDBI’s Technology Development and Modernization Fund, ISO-9000 Reimbursement Scheme and Credit Linked Capital Subsidy Scheme for Technology Upgradation, among others. The government also supports SMEs through direct incentives for promoting in-house R & D activities. Any industrial unit which has received recognition from the Department of Scientific & Industrial Research (DSIR) is given tax deduction equivalent to the revenue and capital expenditure spent on R & D. 

With a variety of tax initiatives by the government and the global market knocking at our doors, SMEs are safe in opting for a bigger budget allocation for R & D activities which could substantially improve their businesses.

Are You Spending Resources Innovating Against Customer Needs that are Already Well Satisfied

Are You Spending Resources Innovating Against Customer Needs that are Already Well Satisfied, this seems like an absurd statement! How can any company do this? You don't start a venture spending your resources to innovate against already satisfied customer needs.

That's what we also thought
Through continuous interaction with many Small and Medium Enterprises, IndiaMART Knowledge Services' team has gained key insights. This has helped us to arive at the core issue of innovation, which is very crucial for SME growth and needs to be addressed.

Innovation: we all define it differently
Many emerging enterprises we interviewed defined the word innovation in their own unique ways. Some even played it down as just another word, thinking, 'at the end its pure business what matters.'

The business environment is evolving at a rapid pace setting new rules of the game. One of them is constantly evolving with the changing ecosystem. Many of us consider innovation as quick adaption to the needs of changing environment, quick turnaround of the business/ scaling up. To ensure the adaption with  incoming changes, many enterprises deploy focussed groups/teams within the organisation.

But what's with innovating against already satisfied customer needs?

"We are good at improving the service in this way, so let's do more of it."
"Our competitors are trying to improve the service in this way, so let's beat them at it."
"We know from the past that customers wanted improvements in the service in this way, so let's continue to do it."

How many of us while working have thought of the same lines before? Many!

Source: http://startupramp.typepad.com/marketissimo/images/2008/02/20/customer_need_2.jpg

Focus on this question and ask yourself:  do all these statements not show the lack of customer understanding?
There are a few structured ways of gathering key data inputs to understand your customers and markets. Especially in the case of SMES,  its a whole new experience of setting up strong processes to capture key customer insights.

If this is so, how can a company lead to structured approaches to understand their customers?
The first things you must do is keep the focus on the 'Job' which is done in the company while you are looking at innovating the set of core services. Job which actually satisfies the customer's needs. This methodology will help you identify and establish key distinguishing factors resulting in the real distinction between what your company offers today and what it will offer in future.

The goal here is to arrive at a structured approach of getting key customer insights and hence innovate in our businesse's service offerings.

While focusing on the job, you can also discover new dimensions of arriving at results which the customers essentially are looking at achieving. This will help you understand the real needs of the customers and hence tune your services accordingly.

What companies do?
Companies generally keep focusing on the customers needs but they fail to keep a strong focus on the Job that actually needs to be done.

Establishing a thought process focussed around the job and aligned with the customer needs is the key driver of real innovation in emerging companies. This will help them to deliver real value to the customers and evolve according to the market expectations.

IndiaMART Knowledge Services is committed to deliver the best knowledge resources to Small and Medium Enterprises. To know more, drop in a comment to this post and our experts will get back to you!